The process by which a manager or consultant (1) examines and evaluates an employee’s work behavior by comparing it with preset standards, (2) documents the results of the comparison, and (3) uses the results to provide feedback to the employee to show where improvements are needed and why. Performance appraisals are employed to determine who needs what training, and who will be promoted, demoted, retained, or fired.
‘PERFORMANCE APPRAISAL IS A FORMAL, STRUCTURED SYSTEM OF MEASURING AND EVALUATING AN EMPLOYEES JOB, RELATED BEHAVIORS AND OUTCOMES TO DISCOVER HOW AND WHY THE EMPLOYEE IS PRESENTLY PERFORMING ON THE JOB AND HOW THE EMPLOYEE CAN PERFORM MORE EFFECTIVELY IN THE FUTURE SO THAT THE EMPLOYEE, ORGANIZATION, AND SOCIETY ALL BENEFIT’.
Performance appraisal is a process of summarizing, assessing and developing the work performance of an employee. In order to be effective and constructive, the performance manager should make every effort to obtain as much objective information about the employee’s performance as possible.
Performance Appraisal is a review and discussion of an employee’s performance of assigned duties and responsibilities based on results obtained by the employee in their job, not on the employee’s personality characteristics.
Personality should be considered only when it relates to performance of assigned duties and responsibilities.
It is 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
By the same token, appraisal results are used to identify poorer performers, who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay. HISTORY OF PERFORMANCE APPRAISAL
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. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management.
As a distinct and formal management procedure used in the evaluation of work performance, appraisal really dates from the time of the Second World War – not more than 60 years ago.
Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things historical, it might well lay claim to being the world’s second oldest profession!
There is, says Dulewicz (1989), “… a basic human tendency to make judgements 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 judgements made will be lawful, fair, defensible and accurate.
Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified. The process was firmly linked to material outcomes. If an employee’s performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order.
Little consideration, if any, was given to the developmental possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well. Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed.
For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance.
These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not the only element that had an impact on employee performance. It was found that other issues, such as morale and self-esteem, could also have a major influence.
As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 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.
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 counselling, 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.
TRADITIONAL METHODS OF PERFORMANCE APPRAISAL
1.Rating Scales Method
Rating Scales Method is commonly used method for assessing the performance of the employees and well-known traditional method of performance appraisal of employees. Many corporations and companies example in the country India, Telecommunications Company like airtel and US IT companies like Dell Corporation are using this method for evaluating the employees and subsequently take decisions on concerned employee.
Depending upon the job of employee under this method of appraisal traits like attitude, performance, regularity, accountability and sincerity etc,are rated with scale from 1 to 10. 1 indicates negative feedback and 10 indicates positive feedback as shown below.
Attitude of employee towards his superiors, colleagues and customers
Extremely Excellent poor
Regularity in the job
Extremely outstanding poor
Under this method of performance appraisal, employee may be assessed by his superiors, colleagues, subordinates or sometimes by his customers which all depends on nature of the company or job which is added where the employee. Appraiser is a person who appraises employee will give rating for every trait given by marking or choosing number basing on his observation and satisfaction. ultimately all numbers chosen or marked will be added to determine highest score gained by employee.
Employee who scored more points will be treated as top performer following descending scored employees will be treated as low performer and the least scored employee will be treated as non-performers.
2. ESSAY APPRAISAL METHOD
This traditional form of appraisal, also known as “Free Form method” involves a description of the performance of an employee by his superior. The description is an evaluation of the performance of any individual based on the facts and often includes examples and evidences to support the information. A major drawback of the method is the inseparability of the bias of the evaluator.
Under this method, the rater is asked to express the strong as well as weak points of the employee’s behavior. This technique is normally used with a combination of the graphic rating scale because the rater can elaborately present the scale by substantiating an explanation for his rating. While preparing the essay on the employee, the rater considers the following factors: Job knowledge and potential of the employee;
Employee’s understanding of the company’s programmes, policies, objectives, etc.; The employee’s relations with co-workers and superiors; The employee’s general planning, organizing and controlling ability; The attitudes and perceptions of the employee, in general.
Essay evaluation is a non-quantitative technique. This method is advantageous in at least one sense, i.e., the essay provides a good deal of information about the employee and also reveals more about the evaluator. The essay evaluation method however, suffers from the following limitations: It is highly subjective; the supervisor may write a biased essay. The employees who are sycophants will be evaluated more favorably then other employees. Some evaluators may be poor in writing essays on employee performance.
Others may be superficial in explanation and use flowery language which may not reflect the actual performance of the employee. It is very difficult to find effective writers nowadays. The appraiser is required to find time to prepare the essay. A busy appraiser may write the essay hurriedly without properly assessing the actual performance of the worker. On the other hand, appraiser takes a long time, this becomes uneconomical from the view point of the firm, because the time of the evaluator (supervisor) is costly.
3. RANKING METHOD
How do we use the ranking method? Under the ranking method, the manager com-pares an employee to other similar employees, rather than to a standard measurement. An offshoot of ranking is the forced distribution method, which is similar to grading on a curve. Predetermined percentages of employees are placed in various performance categories, for example, excellent, above average, average, below average, and poor,.
The employees ranked in the top group usually get the rewards (raise, bonus, promotion), those not at the top tend to have the reward withheld, and those at the bottom sometimes get punished. In Self-Assessment and Skill Builder 8-1, you are asked to rank the performance of your peers.
Why and when do we use the ranking method? Managers have to make evaluative decisions, such as who is the employee of the month, who gets a raise or promotion, and who gets laid off. So when we have to make evaluative decisions, we generally have to use ranking. However, our ranking can, and when possible should, be based on other methods and forms.
Ranking can also be used for developmental purposes by letting employees know where they stand in comparison to their peers—they can be motivated to improve performance. For example, when one of the authors passes back exams, he places the grade distribution on the board. It does not in any way affect the current grades—but it lets students know where they stand, and he does it to motivate improvement.
4. PAIRED COMPARISON
A better technique of comparison than the straight ranking method, this method compares each employee with all others in the group, one at a time. After all the comparisons on the basis of the overall comparisons, the employees are given the final rankings.
5. CRITICAL INCIDENTS METHODS
This technique of performance appraisal was developed by Flanagan and Burns. The manager prepares lists of statements of very effective and ineffective behaviour of an employee. These critical incidents or events represent the outstanding or poor behaviour of employees on the job.
The manager maintains logs on each employee, whereby he periodically records critical incidents of the workers behaviour. At the end of the rating period, these recorded critical incidents are used in the evaluation of the workers’ performance. An example of a good critical incident of a sales assistant is the following:
July 20 – The sales clerk patiently attended to the customer’s complaint. He is polite, prompt, and enthusiastic in solving the customers’ problem. On the other hand the bad critical incident may appear as under: July 20 – The sales assistant stayed 45 minutes over on his break during the busiest part of the day. He failed to answer the store manager’s call thrice. He is lazy, negligent, stubborn and uninterested in work.
This method provides an objective basis for conducting a thorough discussion of an employee’s performance. This method avoids recency bias (most recent incidents get too much emphasis). This method suffers however from the following limitations: Negative incidents may be more noticeable than positive incidents. The supervisors have a tendency to unload a series of complaints about incidents during an annual performance review session. It results in very close supervision which may not be liked by the employee. The recording of incidents may be a chore for the manager concerned, who may be too busy or forget to do it.
6. CONFIDENTIAL REPORT SYSTEM
Confidential report system is well known method of performance appraisal system mostly being used by the Government organisations. In this method of appraising system, subordinate is observed by his superiors regarding his performance in the job and on his duties done. Thereafter Superior writes confidential report on his performance, mainly on his behaviour in the organisation and conduct and remarks if any.
Confidential reports will be kept confidential and will not be revealed to anyone and finally confidential reports will be forwarded to the top management officials for taking decision against person on whom confidential report has made. Confidential reports are the main criteria for promoting or transferring of any employee mainly in the government sector. All governmental organisations example judiciary, police Department and other government departments in the India are using confidential reports method as a tool to know about the employee and to take any decision connecting to him.
Procedure of confidential report system
The superiors who appraise their subordinate’s performance, behaviour and other key issues will be kept in the form of writing on paper, which is called as confidential report. Confidential report should not be sent openly on a paper, it must be kept in a sealed cover to send it to decision-making authorities. Only authorised persons are allowed to open the sealed covers which consists of confidential reports. Confidential reports shall not be handed over in loose sheets to the subordinates.
Key factors assessed in Confidential Report writing
Character and conduct of an employee
Absenteeism of an employee
Knowledge of an employee
His nature and quality of work
Punctuality of employee
Unauthorised absenteeism or leave without permission
Behaviour of an employee with colleagues, superiors and with public Ability of supervision and controlling
His/her integrity and honesty
If any complaints against employee
7. CHECKLIST METHOD
The rater is given a checklist of the descriptions of the behaviour of the employees on job. The checklist contains a list of statements on the basis of which the rater describes the on the job performance of the employees. Another simple type of individual evaluation method is the checklist. A checklist represents, in its simplest form, a set of objectives or descriptive statements about the employee and his behavior. If the rater believes strongly that the employee possesses a particular listed trait, he checks the item; otherwise, he leaves the item blank.
A more recent variation of the checklist method is the weighted list. Under this, the value of each question may be weighted equally or certain questions may be weighted more heavily than others. The following are some of the sample questions in the checklist. Is the employee really interested in the task assigned? Yes/No Is he respected by his colleagues (co-workers) Yes/No Does he give respect to his superiors? Yes/No Does he follow instructions properly? Yes/No Does he make mistakes frequently? Yes/No
8. GRAPHIC RATING SCALE
Example of Graphic Rating Scales Method
Knowledge of Work
This is the very popular, traditional method of performance appraisal. Under this method, core traits of employee pertaining to his job are carefully defined like Attitude, Knowledge of Work, Managerial Skills, Team Work, Honesty, Regularity, Accountability, Interpersonal relationships, Creativity and Discipline etc.
These traits are allotted with numerical scale to tabulate the scores gained by appraisee (employee) in performance assessment relating to his job by appraiser (employer) and sum-up to determine the best performer. Appraiser ticks rating of particular trait depending upon his endeavour in his job. Score vary form employee to employee depending up on his performance levels and endeavour in his job.
This method is popular because it is simple and does not require any writing ability. The method is easy to understand and use. Comparison among pairs is possible. This is necessary for decision on salary increases, promotion, etc.
Companies like DELL, Maruti Suzuki India Ltd and airtel are using this graphic rating scale method to appraise performance of their employees in there jobs and to take decisions regarding the matters concerned to employees
9. FORCED DISTRIBUTION
A rating system used by companies to evaluate their employees. The system requires the managers to evaluate each individual, and rank them typically into one of three categories (excellent, good, poor). The system is thought to be relatively widely-used, but remains somewhat controversial due to the competition it creates, and also the reality that not all employees will fit neatly into one of the categories and might end up in a category that does not reflect their true performance. One of the first companies to use this system was General Electric, in the 1980s. ——–Businessdictionary.com
Forced ranking is a method of performance appraisal to rank employee but in order of forced distribution.
For example, the distribution requested with 10 or 20 percent in the top category, 70 or 80 percent in the middle, and 10 percent in the bottom.
The top-ranked employees are considered “high-potential” employees and are often targeted for a more rapid career and leadership development programs.
In contrast, those ranked at the bottom are denied bonuses and pay increases. They may be given a probationary period to improve their performance.
10. BEHAVIOURLY ANCHORED RATING SCALES: Statements of effective and ineffective behaviors determine the points. They are said to be behaviorally anchored. The rater is supposed to say, which behavior describes the employee performance. Advantages – helps overcome rating errors. Disadvantages – Suffers from distortions inherent in most rating techniques.
11. FIELD REVIEW METHOD: This is an appraisal done by someone outside employees’ own department usually from corporate or HR department. Advantages – Useful for managerial level promotions, when comparable information is needed, Disadvantages – Outsider is generally not familiar with employees work environment, Observation of actual behaviors not possible.
12. PERFORMANCE TESTS AND OBSERVATIONS: This is based on the test of knowledge or skills. The tests may be written or an actual presentation of skills. Tests must be reliable and validated to be useful. Advantage – Tests may be apt to measure potential more than actual performance. Disadvantages – Tests may suffer if costs of test development or administration are high.
Future Oriented Methods
1. Management By Objectives: It means management by objectives and the performance is rated against the achievement of objectives stated by the management. MBO process goes as under. Establish goals and desired outcomes for each subordinate
Setting performance standards
Comparison of actual goals with goals attained by the employee Establish new goals and new strategies for goals not achieved in previous year. Advantage – It is more useful for managerial positions.
Disadvantages – Not applicable to all jobs, allocation of merit pay may result in setting short-term goals rather than important and long-term goals etc.
2. Psychological Appraisals: These appraisals are more directed to assess employees potential for future performance rather than the past one. It is done in the form of in-depth interviews, psychological tests, and discussion with supervisors and review of other evaluations. It is more focused on employees emotional, intellectual, and motivational and other personal characteristics affecting his performance. This approach is slow and costly and may be useful for bright young members who may have considerable potential. However quality of these appraisals largely depend upon the skills of psychologists who perform the evaluation.
3. Assessment Centres: This technique was first developed in USA and UK in 1943. An assessment centre is a central location where managers may come together to have their participation in job related exercises evaluated by trained observers. It is more focused on observation of behaviours across a series of select exercises or work samples. Assessees are requested to participate in in-basket exercises, work groups, computer simulations, role playing and other similar activities which require same attributes for successful performance in actual job.
The characteristics assessed in assessment centre can be assertiveness, persuasive ability, communicating ability, planning and organizational ability, self confidence, resistance to stress, energy level, decision making, sensitivity to feelings, administrative ability, creativity and mental alertness etc. Disadvantages – Costs of employees travelling and lodging, psychologists, ratings strongly influenced by assessee’s inter-personal skills. Solid performers may feel suffocated in simulated situations. Those who are not selected for this also may get affected.
Advantages – well-conducted assessment centre can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in assessment centres. The tests also make sure that the wrong people are not hired or promoted. Finally it clearly defines the criteria for selection and promotion.
4. 360-Degree Feedback: It is a technique which is systematic collection of performance data on an individual group, derived from a number of stakeholders like immediate supervisors, team members, customers, peers and self. In fact anyone who has useful information on how an employee does a job may be one of the appraisers.
This technique is highly useful in terms of broader perspective, greater self-development and multi-source feedback is useful. 360-degree appraisals are useful to measure inter-personal skills, customer satisfaction and team building skills. However on the negative side, receiving feedback from multiple sources can be intimidating, threatening etc. Multiple raters may be less adept at providing balanced and objective feedback.
PROCESS OF PERFORMANCE APPRAISAL
ESTABLISHING PERFORMANCE STANDARDS
The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in measurable
In case the performance of the employee cannot be measured, great care should be taken to describe the standards.
COMMUNICATING THE STANDARDS
Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization.
The employees should be informed and the standards should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators.
MEASURING THE ACTUAL PERFORMANCE
The most difficult part of the Performance appraisal process is measuring the actual performance of the employees that is the work done by the employees during the specified period of time. It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work.
COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCE
The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the employees from the standards set. The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to the employees’ performance.
The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. The purpose of the meeting should be to solve the problems faced and motivate the employees to perform better.
The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotions, demotions, transfers etc.
THE 10 STEPS FOR CONDUCTING AN EMPLOYEE APPRAISAL EVALUATION
For managers, there’s no single path to conducting highly successful employee-evaluation sessions. At the same time, when you’re leading these appraisal discussions, 10 steps will help make the meetings more interactive and productive: 1. Let your employee talk.
Giving your employees the chance to discuss their actions, achievements, and competencies is rewarding to them because it further emphasizes your respect and trust, while also reinforcing your partnership with them. 2. Give an overview of the session.
After you’ve heard your employee’s thoughts regarding her performance, your next step is to give her a brief overview of overall topics that you’ll be covering in the session. 3. Focus on objectives.
This part of the discussion focuses on the agreed-upon objectives and the
extent to which your employee met them. 4. Focus on performance results.
The emphasis in this section is on the various additional performance-related outcomes that were the result of your employee’s actions and efforts, even if such outcomes were not directly attached to the overall objectives. 5. Focus on critical incidents.
Your comments in this area are focused on the way in which your employee handled particularly noteworthy situations, whether positively or negatively. 6. Focus on competencies.
This is where you discuss instances in which your employee applied his skills effectively to the job, shared his knowledge with others, or took specific steps to further build his competencies. 7. Focus on points of agreement.
Whether based on your employee’s self-evaluations or on her opening comments regarding her performance, your focus at this point in the session is on the areas in which your employee agrees with your ratings. 8. Focus on points of disagreement.
This is the time to discuss the areas in which you rated your employee lower than he rated himself, whether based on his self-evaluation or his opening comments. Your objective is to learn more about your employee’s rationale for giving himself ratings that are higher than yours and for him to understand the rationale behind the ratings that you gave.
9. Focus on the overall rating.
At this point in the process, you and your employee have discussed all the key performance-related issues and concerns, and it’s now time to discuss the overall rating. Your comments should focus on the steps you took to determine this rating. 10. Focus on raises.
There’s a good deal of debate among managers and management theorists as to where to place raises in the performance appraisal session. Some managers don’t even think that raises belong in the session at all. Here are your options:
* Bringing up raises in the beginning: Letting them know at the outset is supposed to put an end to their wondering and allow them to pay attention to the feedback you’re providing. * Bringing up raises toward the end: After giving glowing reviews, you’re ideally able to provide a direct reward for the employees’ stellar behavior, demonstrating the clear link between better performance and better rewards. * Eliminating raises from the discussion: The idea behind this approach is that raises don’t belong in the performance appraisal session at all. Instead, these sessions should focus exclusively and extensively on the employees’ past performance, while issues such as raises and objectives should be discussed in separate sessions.
Objectives of Performance Appraisal
Performance Appraisal can be done with following objectives in mind: 1. To maintain records in order to determine compensation packages, wage structure, salaries raises, etc. 2. To identify the strengths and weaknesses of employees to place right men on right job. 3. To maintain and assess the potential present in a person for further growth and development.
4. To provide a feedback to employees regarding their performance and related status. 5. To provide a feedback to employees regarding their performance and related status. 6. It serves as a basis for influencing working habits of the employees. 7. To review and retain the promotional and other training programmes.
Advantages of Performance Appraisal
It is said that performance appraisal is an investment for the company which can be justified by following advantages: 1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion programmes for efficient employees. In this regards, inefficient workers can be dismissed or demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation packages for employees. Merit rating is possible through performance appraisal. Performance Appraisal tries to give worth to a performance. Compensation packages which includes bonus, high salary rates, extra benefits, allowances and pre-requisites are dependent on performance appraisal. The criteria should be merit rather than seniority.
3. Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps to analyse strengths and weaknesses of employees so that new jobs can be designed for efficient employees. It also helps in framing future development programmes. 4. Selection Validation: Performance Appraisal helps the supervisors to understand the validity and importance of the selection procedure. The supervisors come to know the validity and thereby the strengths and weaknesses of selection procedure. Future changes in selection methods can be made in this regard.
5. Communication: For an organization, effective communication between employees and employers is very important. Through performance appraisal, communication can be sought for in the following ways: a. Through performance appraisal, the employers can understand and accept skills of subordinates. b. The subordinates can also understand and create a trust and confidence in superiors. c. It also helps in maintaining cordial and congenial labour management relationship. d. It develops the spirit of work and boosts the morale of employees. e. All the above factors ensure effective communication.
6. Motivation: Performance appraisal serves as a motivation tool. Through evaluating performance of employees, a person’s efficiency can be determined if the targets are achieved. This very well motivates a person for better job and helps him to improve his performance in the future.
LIMITATIONS OF PERFORMANCE APPAISAL
1.LACK OF CLARITY:
The objective of performance appraisal is to evaluate and develop employees. An organization should avoid using one appraisal system to achieve both objectives. The particular system of the appraisal system should clarify before it is designed and should be discussed with all managers and employees to gain their commitment. Any performance appraisal system, however good the design, is unlikely to succeed if the managers and employees are suspicious of its objectives.
It is extremely difficult if not impossible to device a system that will be able to satisfy both performance and reward. It happens because employees are likely to resist negative feedback and tend to be defensive when weakness in current performance is identified. It is because of this type of overlap in purposes that the appraisal loses it’s practically and increases the conflict between the manager and the employees.
2. APPRAISAL ERRORS: These are as follows;
Halo, Regency, Contrast effects: the Halo effect occurs when a manager rates an employee high or low on all teams, because of one characteristic. For instance; if an employee has few absences, his manager might give him high rates in all other area of work. The recency effect happens when a rater gives greater weight to recent occurrence when appraising an employee’s performance. This sort of effect is an understandable rater’s error. It may not be easy for the manager to remember all events that happened like for instance; six months ago.
Contrast error occurs when employees are rated relatively to other employees rather than to performance standards. For example; if everyone else in a group is doing mediocre job, an employee performing somewhat better may be rated as excellent because of the contrast effect. Rater biases: this occurs when manager values distort the rating. Reasons for bias differ, for instance, religion, age, sex, appearance or other arbitrary classifications. If a manager strongly dislikes a certain ethnic group, this will be negatively reflected in appraisal if the appraisal scheme is not properly designed.
3. UNEQUAL PERFORMANCE STANDARDS
People differ from each other in the way they perceive things. What is good for some may be bad for others. Therefore managers have different judgments in appraising their employees. Managers’ attitudes to their employees differ, so different managers will appraise the same people quite differently which could make appraisal system subjective and manipulative.
Culture has profound impact on the appraisal system as it should be in consonance with the organizational culture. A system based on the employee participation and openness would be non-starter if the organizational culture is authoritarian and non-participative in its approach to other employee related policies. ‘Readymade’ performance review system imported from other organization rarely function satisfactorily. Their failure is partly due to culture differences. Thus culture is a vital factor to look after CASE STUDIES
CASE STUDY 1
1) A sweet employee performance appraisal system for Jelly Belly Customer profile
Candy making is a fun business, and so it’s no surprise that it’s fun to work at the Jelly Belly Candy Company of Fairfield, California. But at this family-owned company, there’s no fooling around when it comes to promoting employee performance and job satisfaction.
So when Jelly Belly decided to overhaul and automate its antiquated employee performance and talent management process, it was looking for a serious solution to help give its employees across the United States fair, accurate performance appraisals. Herman Goelitz Candy was founded in 1869 by Albert and Gustav Goelitz, whose great-grandsons own and run Jelly Belly today.
The Jelly Belly Candy Company makes Jelly Belly brand jelly beans in over 50 flavors, as well as candy corn and other treats. Introduced in 1976 and named by former U.S. president Ronald Reagan as his favorite candy, the company’s jelly beans are exported worldwide. Like almost every smart company, Jelly Belly recognizes that employees are more likely to stay with their employer when they feel connected and recognized for their efforts. Programs for managing and evaluating employee performance are critical to aligning corporate and employee values and priorities. Challenge
Jelly Belly’s search for a new employee performance and talent management system began several years ago, when two branches of the family business were reunited into a single company. One branch was using an outdated performance management software program. The other was doing its employee performance appraisals manually, using paper forms.
Having a variety of jelly bean flavors is great — a variety of employee appraisal processes in a single company is not. The task of updating and consolidating the performance management process fell to Margie Poulos, HR Manager of Jelly Belly’s Midwest operations. She and a small team of Jelly Belly HR staff were charged with finding a single automated system that could be used for all of Jelly Belly’s 600 employees in three locations.
The driving factor behind Jelly Belly’s performance management automation was the belief that thorough, accurate reviews help employees to better understand what’s expected of them, so that they can set clear, measurable objectives. That translates into higher employee satisfaction, said Jeff Brown, Jelly Belly’s Director of Human Resources. “When employees feel they have gotten a thorough and accurate review, it boosts their morale,” Brown said. It also leads to improved talent management and makes it easier to retain valuable employees, which management experts know is a key factor in corporate growth and market leadership. Solution
To meet their strategic goals, Poulos and her team drew up a list of the criteria that a new system had to meet. Top on the list was ease of use. “We didn’t want to end up with a system that is so complicated that the managers wouldn’t use it,” Poulos said. A new system also had to save time. Because employees were in multiple locations, it needed to be web-based for accessibility.
And it had to be flexible, easily incorporating core competencies into different forms. Jelly Belly’s selection committee looked at products from different software vendors. “We eliminated right away those that were geared to very large companies and those that were not web-based,” Poulos said. “We also eliminated those that offered too many options for customization. It’s one thing to offer options, but another thing when the product requires so much customization that it becomes overwhelming.” The committee selected Halogen eAppraisal™, a web-based application for managing employee performance from Halogen Software.
“We liked the way it looked, and we really liked the user-friendliness of it. It’s easy for the managers to use and it’s customizable without overwhelming them,” Poulos said. After two days of training by Halogen staff, four members of Jelly Belly’s HR team set out to train the company’s supervisors on the new system. About 50 managers received a crash course in using Halogen eAppraisal, and then used it to complete annual employee evaluations in May.
Jelly Belly’s HR team is now customizing the software to include more relevant competencies and to respond to comments from managers and staff on the new system. “The feedback has been really positive, from both managers and employees as well. Some staff said this was the best appraisal they’ve had,” Poulos said, “They felt the evaluations were fair and realistic, and supervisors had the scope to provide more relevant and legitimate comments than they could before. Rather than just clicking on a bunch of canned comments, they were accurately reviewing the employee.” Results
The new automated employee performance appraisal system has completely formalized and organized Jelly Belly’s employee evaluation process. “It allows us to standardize competencies across job classifications, add signature and comment sections to make our process more interactive, and increase accessibility for remote managers,” Brown said. Under Jelly Belly’s old system, employees conducting reviews started from scratch once a year with new performance journals.
Halogen eAppraisal will let them log notes throughout the year and regularly update their on-line appraisals. Employees use one consistent employee evaluation form to add comments and to sign their appraisals.
The web-based product helps remote and traveling managers maintain access to the forms and the data they need to evaluate their staff. “In our old system, a few folks in Chicago would have access to the system. But we have managers in California with Chicago subordinates. It’s important that they can share the same forms across the board. And we have folks who are on the road a lot or are working out of home offices, so having them be able to access this is a huge point for us,” Brown explained.
Organizing and automating the appraisal process results in performance appraisals that are more accurate and fair, Brown noted. “This is important because, after all, an employee appraisal is a legal document,” he said.
The new system is also helping Jelly Belly track training requirements and development in its staff, Poulos added. “We’ve always had a separate training manual. Now we can go in to the evaluations and more easily monitor employees’ skills development, see what training is needed by individuals and check the due dates for training and renewal. That makes it much easier for us to keep track,” Poulos noted.
The new employee performance and talent management system has proven to be a big time-saver for Jelly Belly’s HR team. “Since this year was the first time using the new system, it took us a little longer than it will next year. But the process was a whole lot faster,” Poulos said. “It has already saved us a lot of time, and we got everybody’s appraisals done in one shot.” The new system is also helping Jelly Belly to better align employee goals with the company’s business objectives. And for one of America’s best-known candy companies, it doesn’t get any sweeter than that.
CASE STUDY 2
2) Saving $20 million with a new appraisal system
Most people enjoy having their performance appraised about as much as root canal treatment. Executives and HR professionals have a different view of these systems. Executives see Performance Management Systems (PMS) as a tool to help them achieve their companies’ business objectives, whereas HR professionals see them as an opportunity to assess and enhance performance of individuals.
Let us examine the multi-million dollar opportunity that an HR professional found in his company’s performance management system.
Yellow Freight System, one of the largest transport companies in the US, found itself competing with smaller companies on the basis of price and losing money for the first time in many years. The financial shock caused soul searching and strategy reformulation at the highest levels of the company. The top management concluded that only very large companies with the best talent would survive the newly introduced deregulation policy. This resulted in a programme of route expansion, employee reorientation and
reorganisation into a hub-and-spoke transport system.
Yellow Freight’s ‘s board of directors decided to train the entire workforce to take advantage of the realities of the deregulated environment. The head of HR was told to recruit a manager for Human Resource Development (HRD) who could provide employees state-of-the-art knowledge and development, which would help differentiate Yellow Freight from its competitors.
The HRD manager’s first step was to define the new department’s mission as “helping management manage and improve employee performance.” A needs analysis conducted suggested that branch managers, sales representatives and front-line supervisors needed to be trained.
The HRD department conducted a performance audit to identify the group, which had the greatest potential to improve performance. A sample of employees from each of the three groups was identified based on functional considerations. Individuals were drawn from each major geographic region, from different size terminals, from every job function, all levels of management, and with high, average and low levels of job performance. This type of sample allowed each group in the company to feel that they had been represented. It also allowed the HRD department to observe exemplary and poor performers, and provided excellent information on why some employees performed better than others.
Performance measures and standards were identified for each of the three groups. Actual performance data was collected, where available, and the value of the average performer’s results was compared to the value of the exemplar’s performance. A performance improvement potential was defined as the gap between the performance of the exemplar and the average performance of the group. The largest gaps coupled with the largest number of performers pointed to the areas with the greatest potential return on investment.
The HRD department also searched for causes for these performance gaps. Solutions that seemed to close the gaps were suggested to the performers. The main finding of the study was that while job responsibilities were not consistent from location to location for any given job title, the work that had to get done was.
Yellow Freight’s new performance appraisal system was designed as a performance management system. This meant that it was designed first as a tool for supervisors to use when managing employee performance, and second as a tool for evaluation and compensation.
The performance management aspect of the programme focused on how to write accomplishment-based performance standards, design feedback systems, and troubleshoot performance problems and reward employees. To make sure the new programme would succeed, Yellow Freight provided additional training to improve interpersonal and communication skills.
This case illustrates how a transport company responded to external deregulatory pressures and trained every manager and supervisor to manage more effectively and improve the performance of their employees.
Results showed that an overwhelming percentage of the trainees felt the programme was useful; they met the learning objectives and were using the skills taught. Performance changes grossed over $20 million in one year for Yellow Freight!
CASE STUDY 3
3) Case Study on the Performance Appraisal at Xerox
In the mid-1980s Xerox Corporation was faced with a problem—its performance appraisal system was not working. Rather than motivating the employees, its system was leaving them discouraged and disgruntled. Xerox recognized this problem and developed a new system to eliminate it.
THE OLD SYSTEM
The original system used by Xerox encompassed seven main principles:
1. The appraisal occurred once a year.
2. It required employees to document their accomplishments.
3. The manager would assess these accomplishments in writing and Assign numerical ratings.
4. The appraisal included a summary written appraisal and a rating from 1 (unsatisfactory) to 5 (exceptional).
5. The ratings were on a forced distribution, controlled at the 3 level or below.
6. Merit increases were tied to the summary rating level.
7. Merit increase information and performance appraisals occurred in one session. This system resulted in inequitable ratings and was cited by employees as a major source of dissatisfaction.
In fact, in 1983, the Reprographic Business Group (RBG), Xerox’s main copier division, reported that 95 percent of its employees received either a 3 or 4 on their appraisal. Merit raises for people in these two groups only varied by 1 to 2 percent. Essentially, across-the- board raises were being given to all employees, regardless of performance.
THE NEW SYSTEM
Rather than attempting to fix the old appraisal system, Xerox formed a task force to create a new system from scratch. The task force itself was made up of senior human resources executives; however, members of the task force also consulted with councils of employees and a council of middle managers. Together they created a new system, which differed from the old one in many key respects:
1. The absence of a numerical rating system
2. The presence of a half-year feedback session.
3. The provision for development planning.
4. Prohibition in the appraisal guidelines of the use of subjective assessments of performance. The new system has three stages, as opposed to the one-step process of the old system. These stages are spread out over the course of the year. The first stage occurs at the beginning of the year when the manager meets with each employee. Together, they work out a written agreement on the employee’s goals, objectives, plans, and tasks for the year. Standards of satisfactory performance are explicitly spelled out in measurable, attainable, and specific terms.
The second stage is a mid-year, mandatory feedback and discussion session between the manager and the employee. Progress toward objectives and performance strengths and weaknesses are discussed, as well as possible means for improving performance in the latter half of the year. Both the manager and the employee sign an “objectives sheet” indicating that the meeting took place.
The third stage in the appraisal process is the formal performance review, which takes place at year’s end. Both the manager and the employee prepare a written document, stating how well the employee met the preset performance targets. They then meet and discuss the performance of the employee, resolving any discrepancies between the perceptions of the manager and theemployee. This meeting emphasizes feedback and improvement.
Efforts are made to stress the positive aspects of the employee’s performance as well as the negative. This stage also includes a developmental planning session in which training, education, or development experiences that can help the employee are discussed. The merit increase discussion takes place in a separate meeting from the performance appraisal, usually a month or two later.
The discussion usually centres on the specific reasons for the merit raise amount, such as performance, relationship with peers, and position in salary range. This allows the employee to better see the reasons behind the salary increase amount, as opposed to the summary rank, which tells the employee
A follow-up survey was conducted the year after the implementation of the new appraisal system. Results were as follows: 81 percent better understood work group objectives 84 percent considered the new appraisal fair 72 percent said they understood how their merit raise was determined 70 percent met their personal and work objectives 77 percent considered the system a step in the right direction In conclusion, it can be clearly seen that the new system is a vast improvement over the previous one. Despite the fact that some of the philosophies, such as the use of self-appraisals, run counter to conventional management practices, the results speak for themselves.
1. What type of performance appraisal is central to new system at Xerox? Which, if any, of the criteria for a successful appraisal does this new system have? 2. Given the emphasis on employee development, what implications does this have for hiring and promotions? 3.How do you think, management feels about the new performance appraisal system? Why? 4. Are there any potential negative aspects of the new performance appraisal system
Organisations need some means of ensuring performance standards are being achieved and objectives are being met. They also need to plan for the future by setting organisational objectives. These should be achieved through personal objectives agreed at the appraisal. This is vital for all employees in order to maintain a competitive position, and it is important that the method for doing this is successful. All the material in the ‘Skills of Appraisal and Performance Review’ resource is dedicated to that end. However, underlying the methods, practices and techniques there must be crucial managerial thoughts, attitudes and activities.
Organizational Behavior by Steve Robbins
The Art of HRD, Reward Management, Volume 9 by Micheal Armstrongand Helen Murlis
Performance Management, Concepts, Practices and Strategies for Organisation success by S. K. Bhatia
Human resource management by sunny fernandes
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Performance appraisal. (2016, May 16). Retrieved from https://studymoose.com/performance-appraisal-2-essay