Almost every company in one way or another goes through a periodic ritual, known as performance appraisals.

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Human Resource Management

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Introduction

Almost every company in one way or another goes through a periodic ritual, known as performance appraisals. On hearing performance appraisals, people will pick up the typical painstaking and tedious process with piles of paper and much complexity. At the end of the day, most of the time, every employee gets a similar ‘fairly good’ evaluation. Sometimes people do ask ‘What is the point of doing it?’

That’s one of the common failures of performance appraisals. Due to those failures, some researchers or professionals argue that performance appraisal is only a perfect idea in theory but it never works out in practice. There is always a reason for everything, and performance appraisal failures are no exception. Why it doesn’t work? What are the problems? If we can find out where the problems lie in and overcome them, a well designed performance appraisal system, which is tailored for a company, will definitely work in practice. A successful example will be given and analyzed later in the analysis part.

In the following parts, some commonly used methods of performance appraisals will be mentioned and along the advantages and disadvantages will be discussed. Key factors to the success of the system will be analyzed and advice and suggestions will be given on how to develop and implement an effective performance appraisal system.

This assignment consists of five main parts, which are introduction, literature review, analysis of common mistakes, conclusions and recommendations.            

Literature Review

Performance appraisal definition

There is not a widely consented definition for performance appraisal. It is a most arguable concept in management. Too many different notions and systems have been developed or being developed. For many people, performance appraisal projects images of piecework and performance-related-pay (PRP), and has been seen as a less than objective principle (McArdle et al. 1992). This fear has become a rational one in recent times for education (Harley and Lee 1995; Miller 1991), articulating notions of surveillance and control (Reed and Whitaker 1992). Broadly speaking, there are two camps, those who support performance appraisal (Cotton 1993; Molander and Winterton 1994; Murphy and Cleveland 1995) and those who see it as a form of control (Causer and Jones 1996; Coates 1994).

Performance appraisal can be defined as a process of determining and communicating to an employee how he or she is performing on the job and, ideally, establishing a plan of improvement. (Lloyd L. Byars and Leslie W. Rue) 

Like many other people management concepts, performance appraisal is subordinated under a notion of the ‘individual as resource’, to be drawn on and used to the full, much like machinery (Ramsey 1991; Coates 1992). In many contemporary literatures, performance appraisal stresses both employer and employee should focus on the complementary purpose of the organization’s development. On one hand individuals are a potential business resource through the enhancement of their personal skills. While on the other, they are seen as any other investment in equipment (cf. Cutler 1992).

Quite lot literatures contribute to find out the problems with performance appraisals and provide suggestions and techniques on how to tackle them. Robert Bacal, author of (McGraw-Hill Professional Publishing, 1998) describes "ten stupid things managers do to screw up performance appraisal." Among these are some of the very aspects of the process that most discourage employees: evaluating all employees by the same measures, comparing one employee unfavorably with another, forgetting that appraisal is about improvement and not blame, and incorporating the trivial and petty into the process. Bacal and Roger Fritz wrote  (Alpha Books, 2000). The book offers strategies through which the appraisal process can be more beneficial for both employers and workers.

Approaches to Performance Appraisals

There have been two prevalent approaches to performance appraisal. The first approach has been the traditional approach.  This approach has also been known as the organizational or overall approach. The traditional approach has been primarily concerned with the overall organization and has been involved with past performance. Over thirty years ago McGregor (1960) argued that, ‘Appraisal programs are designed ... to provide more systematic control of the behaviour of subordinates.’ The second approach to performance appraisal has been the developmental approach. This approach viewed the employees as individuals and has been forward looking through the use of goal setting. Through performance appraisal, organizations ‘create’ functionally flexible workers in a ‘quality’ environment (Hill 1991).

Purposes of Traditional Performance Appraisals

Performance appraisal for evaluation using the traditional approach has served the following purposes:

  1. Promotion, separation, and transfer decisions
  2. Feedback to the employee regarding how the organization viewed the employee's performance
  3. Evaluation of relative contributions made by individuals and entire departments in achieving higher level organization goals
  4. Reward decisions, including merit increases, promotions, and other rewards
  5. Ascertaining and diagnosing training and development decisions
  6. Information upon which work scheduling plans, budgeting, and human resources planning can be used

There are two serious flaws in the traditional approach to performance appraisal. They are:

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  • Organizational performance appraisal is primarily concerned with the past rather than being forward looking through the use of setting objectives or goals.
  • Performance appraisal is usually tied to the employees' salary review. Dealing with salary generally overwhelmed or blocked creative, meaningful, or comprehensive consideration of performance goals.

Ideally, performance appraisals are an opportunity for the supervisor and employee to communicate: to review the past year and share ideas and thoughts for the coming year. Because the traditional approach tends to put the supervisor in the role of judging how well the employee performed, the communication is bound ...

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