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

• 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 to be one way. The employee feels defensive and has little control over the situation. It's a process that reinforces a hierarchical structure, rather than a team environment that many companies want to achieve.

Developmental Performance Appraisal Purposes

The developmental approach to performance appraisal has been related to employees as individuals. This approach has been more concerned with the use of performance appraisal as a contributor to employee motivation, development, and human resources planning. The development approach contained all of the traditional overall organizational performance appraisal purposes and the following additional purposes:

1. Provide employees the opportunity to formally indicate the direction where they want their career to go and what they want to achieve

2. Show organizational interest in employee development, which was cited to help the enterprise retain ambitious, capable employees instead of losing the employees to competitors

3. Provided a structure for communications between employees and management to help clarify expectations of the employee by management and the employee

4. Provide satisfaction and encouragement to the employee who has been trying to perform well.

Analysis

Common Methods

Listed are several commonly used performance appraisal methods. Through evaluating the advantages and disadvantages, the analysis indicates that the methods are far from being perfect. However, the key point remains how they should be applied flexibly or smartly to meet the purpose of performance appraisals in a company.

Behavioral Anchored Rating Scales

The use of BARS can result in several advantages. First, they are developed through the active participation of both managers and job incumbents. This increases the likelihood that the method will be accepted. Second, the anchors are developed from the observations and experiences of employees who actually perform the job. Finally, they can be used to provide specific feedback concerning an employee’s job performance.

One major drawback to the use of BARSs is that they take considerable time and commitment to develop. Furthermore, separate forms must be developed for different jobs.

Checklists 

Because raters can see the positive or negative connotation of each question, bias can be introduced. Additional drawbacks to it are that it is time consuming to assemble the questions for each job category, separate listings of questions must be developed for each job category, and the checklist questions can have different meanings to different raters.

Critical Incident Technique 

The main drawback to this method is that the rater is required to record incidents regularly, which can be burdensome and time consuming. Also, the definition is unclear and may be interpreted differently by different people. This method may also result in distrust from employees, thus friction between the manager and employees when the employees believe the manager is keeping a record book on them.

Forced Choice Method

This method attempts to eliminate evaluator bias by forcing the rater to rank statements that are seemingly indistinguishable to unrelated. However, it has been reported to irritate raters, who feel they are not being trusted. Moreover, the results of the appraisal can be difficult to communicate to employees.

Forced Distribution

20%does not meet expectations, meets expectations 60%, exceeds expectations 20%

vertical axis number of employees; horizontal axis performance evaluation ratings.

                                                     

One problem with this is that in small groups of employees, a bell shaped distribution of performance may not be applicable. This means some employees probably will not be rated accurately.  It differs dramatically from the other methods in that one employee’s performance evaluation is a function of the performance of others in the job.

Graphic Rating Scale

It is subject to some serious weaknesses. One potential weakness is that evaluators are unlikely to interpret written descriptions in the same manner due to differences in background, experience, and personality. Another one relates to the choice of rating categories. It is possible to choose categories that have little relationship to job performance or to omit categories that have a significant influence on job performance.

Narrative or Essay Evaluation

Some companies still use this method exclusively, whereas in others, the method has been combined with the graphic rating scale.

The primary problem with it is that their length and content can vary considerably, depending on the rater. Thus essay appraisals are difficult to compare. The writing skills of the rater can also affect the appraisal.

Management by Objectives (MBO)

To avoid, or to deal with, the feeling that they are being judged by unfairly high standards, employees in some organizations are being asked to set - or help set - their own performance goals. MBO has become so familiar to most managers.

      It can work out well for management level provided handled in the right way. It should be noted, however, that when MBO is applied at lower organizational levels, employees do not always want to be involved in their own goal setting. Many do not want self-direction or autonomy. As a result, more variations of MBO are becoming increasingly common, and some critics see MBO drifting into a kind of manipulative form of management in which pseudo-participation substitutes for the real thing. Some organizations, therefore, are introducing a work-standards approach to goal setting in which the goals are openly set by management.

      360˚ Feedback

360 degree feedback is more likely to be easily introduced where openness, mutual trust and honesty are part of the corporate culture and there is a genuine interest in and desire for performance improvement. The adoption of a full 360 degree approach needs to stem from a steady evolution in appraisal and development practices. It is very unlikely that a 360 degree scheme would be accepted where there is no history of systematic feedback on performance. It would present too radical a step.

360 degree processes with a clear purpose and objectives are likely to be more effective, particularly when they are aligned with company strategies and goals and can be linked to existing processes within the company.

The method is time consuming and requires fair evaluations from many parties which may be found difficult.

Paired Comparison

One major problem with this method is that it becomes unwieldy when comparing more than five or six people.

Weighted Checklist

A large list of descriptive statements about effective and ineffective behavior on jobs can be time consuming.

Due to the space of the assignment, many other methods can not be listed and discussed one by one. The point being made here is none of those methods is able to achieve all the purposes of a performance appraisal system. They all have their own pitfalls. Nevertheless what we can do in practice is to match an appropriate appraisal method to a particular performance appraisal goal.

Common Mistakes

Where performance appraisal fails to work, there is often lack of support from the top levels of management.

It is crucial that top management believe in the value of appraisal and express their visible commitment to it. Top managers are powerful role models for other managers and employees. Their belief and confidence in the appraisal system is the precondition of employee’s buy-in.

  Fear of Failure
There is a stubborn suspicion among many appraisers that a poor appraisal result tends to reflect badly upon them as well, since they are usually the employee's supervisor. Many appraisers have a vested interest in making their subordinates "look good" on paper.

When this problem exists (and it can be found in many organizations), it may point to a problem in the organization culture. The cause may be a culture that is intolerant of failure. In other words, appraisers may fear the possibility of repercussions - both for themselves and the appraisee.

  Judgment Aversion
Many people have a natural reluctance to "play judge" and create a permanent record which may affect an employee's future career. This is the case especially where there may be a need to make negative appraisal remarks.

Training in the techniques of constructive evaluation may help. Appraisers need to recognize that problems left unchecked could ultimately cause more harm to an employee's career than early detection and correction.

Organizations might consider the confidential archiving of appraisal records more than, say, three years old.

  Appraiser Preparation
The bane of any performance appraisal system is the appraiser who wants to "play it by ear". Such attitudes should be actively discouraged by stressing the importance and technical challenge of good performance appraisal.

  Employee Participation
Employees should participate with their supervisors in the creation of their own performance goals and development plans. Mutual agreement is a key to success. A plan wherein the employee feels some degree of ownership is more likely to be accepted than one that is imposed. This does not mean that employees do not desire guidance from their supervisor; indeed they do.

  Ongoing Process
One of the most common mistakes in the practice of performance appraisal is to perceive appraisal as an isolated event rather than an ongoing process.

Employees generally require more feedback, and more frequently, than can be provided in an annual appraisal. Frequent mini-appraisals and feedback sessions will help ensure that employees receive the ongoing guidance, support and encouragement they need. Here is an example from my own experience. When I was working for the company of Canilx Culture and Communication in Beijing, two brief meetings within a department were held twice a day. One was in the morning before the employees started the work for the day, where every employee communicated his or her task for ‘today’ to the rest of the department including the manager. The manager would consult whether the employee needed assistance from other employees or even other departments. Later in the afternoon the other session was basically the reports of the status of the tasks discussed in the morning. Those who did not accomplish what they were supposed to finish were responsible to give the reasons and deadlines for that. The manager was responsible to arrange assistance available. In this way, performance check or task achievement, whatever you wish to call that, became a daily routine to everybody so that employees would not panic about being evaluated at the end the year. It was quite effective to improve the performance in time. It saved time since every session would take at most 15 minutes. It works well in a small company or within a department, or even a project team.

Of course many supervisors complain they don't have the time to provide this sort of ongoing feedback. This is hardly likely. What supervisors really mean when they say this is that the supervision and development of subordinates is not as high a priority as certain other tasks.

If appraisal is viewed as an isolated event, it is only natural that supervisors will come to view their responsibilities in the same way. Just as worrying, employees may come to see their own effort and commitment levels as something that needs a bit of a polish up in the month or two preceding appraisals.

Successful Performance Appraisal

An effective performance appraisal process can instill an organization’s culture in its employees, but if valuable managers’ and employees’ time is consumed by paper work it is counterproductive. Here is an example on how a company improved productivity and managed cut the cost of an appraisal system at the same time.

After six months of use, managers and staff at the National Rehabilitation Hospital (NRH), an 800 person hospital, liked their new performance appraisal process emphasizing the hospital’s value-driven culture. There used to be two complaints, the paper intensive process took too long to complete and employee data was not readily accessible by managers. By working with a local IT provider and building on technology they already had, the hospital automated the process and saved thousands of dollars a year. A right choice of a performance appraisal system should serve the purpose of appraisals and at the same time, most importantly, should be in favour of both managers and employees. We would rather abandon it, if a system exists as demotivator to employees in a company.

Conclusions

Formal systems for appraising performance are neither worthless nor evil, as some critics have implied; nor are they panaceas, as many managers might wish. A formal appraisal system is a commendable attempt to make visible, and hence improvable, a set of essential organization activities. Personal judgments about employee performance are inescapable, and subjective values and fallible human perception are always involved. Formal appraisal systems, to the degree that they bring these perceptions and values into the open, make it possible for at least some of the inherent bias and error to be recognized and remedied.

One cannot say the way to solve a problem is not to face it. By improving the probability that good performance will be recognized and poor performance corrected, a sound appraisal system can contribute both to organizational morale and organizational performance. Moreover, the alternative to a bad appraisal program need not be no appraisal program at all, as some critics have suggested. It can and ought to be a better appraisal program. And the first step in that direction is a thoughtful matching of practice to purpose.

Communication is vital to any organization’s success.  Unfortunately, in many cases, communication is only flowing one way.  Managing employees’ performance depends on communication flowing freely in all directions at all times – not just once a year at review time.

Recommendations

Each performance management appraisal system will be different, because each company is different. However, there are some key elements which will appear in every well constructed system.  

• An appraisal system should have the full support of senior management. Without this, the system will eventually collapse.
• The appraisal system should first have been piloted and then reviewed.
• The intentions of the appraisal system should be clearly communicated to all employees.
• The system should enable all employees to have clearly established objectives which are linked with the company strategy.
• The appraisal system should have simple and easily understood documentation to support it.
• The appraisal system should not be a part of the standard disciplinary procedures of the company. It must be subject to ongoing monitoring, review, evaluation and updating. As a business evolves, so must the appraisal procedures.
• The system should be adaptable and encompass all levels of employees in the company.
• A reward system should be separated from the appraisal system.

If they wish, a company can give whatever names for their performance appraisal system, which they feel most comfortable with or suit their needs best. The term ‘performance appraisal’ tends to set up two opposite groups---appraisers and appraisees. That may cause employees’ aversion and thus become a barrier for their buy-in of the system. Therefore ‘softer’ or neutral terms may be considered, such as ‘Joint review and action planning’.

It will be harmful for a company to try to squeeze or fix a theoretical appraisal system without thinking of the company’s situation. First, none of those academic approaches works perfectly without any change. Second, different companies differ in many aspects. For instance, an IT company will by no means use the same performance appraisal system as that in a public, non-for-profit hospital. Companies have to consider their uniqueness in terms of the industry they are in, the organizational structure and their size, etc. Basically two questions should be asked when they evaluate their appraisal programme:

Are we doing things right? (i.e., are the process and the rules being followed?)

Are we doing the right things? (i.e., what effect does the programme have?)

It should also be noted that a company will have a better idea about the employees’ potential and their personal goals after performance appraisals. What the company can do is to transfer or promote the employee to help fulfill his expectation and therefore motivate him to perform better. At the same time, the company is able to cut the cost of external recruitment and utilize the existing human resources.

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