Performance appraisal, management by objectives method.
Performance appraisal is the process of designing and negotiating the method and criteria for the appraisal of performance, applying the method, and giving evaluation and developmental feedback to the person concerned (Fisher et al, 2003:493). Following the job analysis on the Assistant Loans Manager for the ANZ Branch at West End Business Centre, an appropriate performance appraisal will be designed. Firstly, the purpose of the appraisal will be discussed. Followed by his will be the evaluation of which method is most suitable to use. Thirdly, the reason for rejecting the other options will be considered. Finally, this report will address issues, which need to be addressed by management for successful implementation of the scheme.
The purpose of this performance appraisal is developmental as it aims to improve employee performance, employee relationships and identify training needs (Graham and Kramer, 1995:357). ANZ Business Centre at West End focuses on employee development and communication as opposed to creating barriers between the employee-employers relationship, which may occur in a performance appraisal with a promotional or remuneration purpose. By integrating a developmental approach, employees are motivated to achieve higher work standards, whereas a remuneration or promotion performance appraisal may overshadow the other benefits of a performance appraisal (Michaelree, 1979: 48). These benefits include training and development, problem solving and planning. More specifically performance improvement will be the focus of the performance appraisal, which encourages continued successful performance and strengthens individual weaknesses to make employees more effective, and productive (Graham and Kramer, 1995:358).
When a highly structured performance appraisal is introduced to a flexible and collaborative work environment it needs to be devised and accepted by the employees and employer in order to reap the full benefits of the program (Rudman, 1995:67). As this organisation is not hierarchical and employees are encouraged to give ideas and opinions it is more appropriate to use performance-related suggestions.
Performance appraisal can be done by using an informal or a formal system, informal system are usually found in small organisations, partly because day-to-day communication with employees is easier than in a large organisation (Hank, 1994:19). Conversely, a complex organisation like ANZ with several branches and divisions which has many employees will require a formal system in order to provide more sufficient information (Hank, 1994:19).
In choosing which performance appraisal method to use for the focal position, the following factors need to be considered. The performance appraisal method needs to fit with and support the organisation's other human resource strategies, management approach, organisational culture, structure, policies and programs which all have an overall impact on the performance management approach (Rudman, 1995:28). ANZ focuses on development and encourages employee participation in the performance appraisal process. The performance appraisal method has to recognize the particular needs of the organisation and its people as well as complement the structure and culture of the organisation (Michaelree, 1979:49). Given that ANZ strives to become a learning organisation, with open lines of communication.
This is achieved through adopting a performance appraisal method which does not cause barriers between the employee-employer relationship, rather focuses on strengthening and developing the relationship (Latham and Wexley, 1994:50).
When developing a performance appraisal system management needs to consider the employee, the nature of their work, the working environment, and relationships involved (Rudman,1995:29). Being a community orientated friendly organisation, ANZ needs to encourage and keep employees motivated and passionate about their work and their role within the community. This can be done by improving employee skills, abilities and achievements, by setting challenging but attainable goals (www.1000ventures.com/business_guide/mgmt_mbo_main.html). ANZ is focused on the results and achievements of its employees' rather than how they perform their job. They believe in retain the kind of staff that have the ability and knowledge to perform the tasks set out in their job descriptions, therefore making it unnecessary to focus on how the job is done. Further more employees are encouraged by setting objectives that constantly improve and monitor their performance.
It is therefore evident that the most appropriate method to use for appraising the focal position is the Management by Objectives (MBO) method, which is an objective based approach (Pecora and Hunter, 1988:61). This approach is concerned with setting measurable objectives, performance standards and comparing those standards to actual performance attained (Michaelree, 1995:48). This result oriented approach involves mutually developed performance objective by workers and supervisors it allows a worker to self-monitor progress toward specific goals and permits creativity and discretion (Pecora and Hunter,1988:62). Further more self appraisal allows the appraiser in this case the Relationship Manager - ...
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It is therefore evident that the most appropriate method to use for appraising the focal position is the Management by Objectives (MBO) method, which is an objective based approach (Pecora and Hunter, 1988:61). This approach is concerned with setting measurable objectives, performance standards and comparing those standards to actual performance attained (Michaelree, 1995:48). This result oriented approach involves mutually developed performance objective by workers and supervisors it allows a worker to self-monitor progress toward specific goals and permits creativity and discretion (Pecora and Hunter,1988:62). Further more self appraisal allows the appraiser in this case the Relationship Manager - Paul Barnett to become aware of problems faced by the incumbent which he might not be aware of otherwise. This process provides ANZ with a good form of communication between the employer/employee relationships.
Another important factor which needs to be addressed is the implementation of the method within the organisation. It is also essential that (MBO) is applied effectively and efficiently other wise it will fail to observe the different kinds of objectives that relate to different employee levels and roles (Richards, 1986:5).
In order to achieve succuss with (MBO), three types of performance objectives and levels of planning will help overcome problems that may arise and make MBO more efficient and effective (Richards, 1986:30). Objectives have to be defined in three categories:
1. Routine objectives reflecting ongoing tasks that have to be maintained.
2. Project objectives of a one-time, problem-solving, or innovative nature.
3. Personal objectives focusing on the training and development needed by
workers to acquire skills to meet objectives.
Planning efforts must be built around objectives in all three areas, resulting in three separate levels of planning, developmental, maintenance, and remedial (Richards, 1986:30). Deciding on how many of each type of objective to address depends on factors unique to each job. This method is the most valid due to the purpose of this appraisal, which is achievement, training and development orientated (Daft, 2000:35).
The first step in analysing objectives is to describe what the employees' role is within the organisation. A job analysis which was conducted in Part A lead to the design of a job description for the focal position (Rudman, 1995:88). A job description sets out the principal accountabilities or key results areas of the job; this means the desired outcomes (Haynes, 1990:50). As a result the traditional lists of tasks and duties or inputs give way to brief statements of the results that are to be achieved Rudman, 1995:89). These results are than translated into specific goals for the incumbent to achieve over a particular time frame. By understanding this process and identifying the main areas of accountability for the position, this can than result in the success of the MBO (Richards, 1986:30). However in order for this method to be truly beneficial for the organisations the goals that are set need to be smart, this means it is essential that the goals are specific, measurable, agreed, realistic and consist within the time frame (Mondy, 1994:145). Further more as time progresses it is important to decide how the goals are to be achieved for the incumbent. Therefore there are certain steps that become useful for clarifying job requirements and sharing the mutual expectation of managers and their employees (Rudman, 1995:89-90). This is then followed by an agreement of specific work objectives or performance standards, which are seen as a logical starting point for the subsequent performance review (Mondy, 1994:145-146). Designing forms for performance planning and review under MBO can be startlingly straightforward. At their most simple, the forms need only provide space for the managers and the employee to agree on the key areas of the job, the goals or targets they set for each of these areas and, for later use, to note how well the goals or targets were met (Rudman, 1999:90).
There are many other methods that can be used for conducting performance appraisals; however they have been rejected due to their purpose, insufficiency and irrelevancy to the aim of performance appraisal for ANZ.
The Graphic Rating Scale assesses employee performance using specific employee behaviour of characteristics (Stone, 2002:28). A set of performance factors are listed, then the assessor subjectively scores each factor on a continuum (Eichel and Bender, 1984:42). The scales which are used have five points ranging from 1 (poor) through to 5 representing (advanced competency) (Eichel ad Bender, 1984:42). This technique has the advantage of being easy and uncomplicated to use but is very susceptible to rating errors, such as leniency, central tendency and halo affect (Fisher et al, 2003: 511). Other problems with graphic rating scales are ill-defined performance dimensions and vague scale anchors which may not apply to varying positions within the organisation (Dessler, 2000:341). As ANZ wants its employees to set goals to work towards achieving that their performance will be based on those goals this appraisal method is too broad and vague for the organization.
Forced distribution and other ranking methods involve the evaluator placing a certain percentage of employees into each of several performance categories (Fisher et al, 2003: 509). Organisations that use such a method have groups of employees performing similar or the same tasks wishing to assess their overall performance. This method is often used to determine work-force reduction needs by monitoring efficiency and productivity (Rudman, 1995:68). As the focal position consists of one staff member performing a specific task and working towards achieving goals, this method is not valid and would not be beneficial. Further more this method informs employers of who performed best and worst but does not distinguish whether any of the employees achieved the desired performance standards or targets (Rudman, 1995:68).
Comparative methods involve the evaluation and comparison of employees against one another (Latham and Wexley, 1994:74). This method is not conducive with employee development as an employee learns how he or she compared with other employees, but this feedback does not indicate how to improve performance and could be detrimental to their confidence and motivation (Fisher et al, 2003:520). Comparative methods are good for making layoff, promotion and merit raise decisions but are generally not consistent with team orientated work places (Latham & Wexley, 1994: 79). In actual fact they have limited usefulness in performance planning and review (Rudman, 1995:72). As ANZ encourages team work and has a developmental, learning focus, therefore a comparative method would be detrimental for the organisation.
The critical incident technique requires the evaluator to constantly monitor and record the employee's behaviours and performance incidents over a certain period (Rudman, 1995:75-76). This technique end up being very time consuming for the evaluator and has a strong behavioural focus. As ANZ is focused on achievements and results gained from employee goals and initiative rather than employee behaviour this method is not relevant (Fisher et al, 2003:515).
Behaviourally anchored rating scales (BARS) are a performance appraisal method that combines elements of the traditional rating scale and critical incidents method (Stone, 2002:287). This method require each job category to have its own BARS, thus being very time consuming, difficult and costly. It requires the efforts of many people to complete and be successful within any organisation (Fisher et al, 2003:527).
Additionally the performance dimensions are all related to different kinds of behaviour but can only be indicative of likely types of behaviour (www.hrtoolkit.gov.bc.ca/staffing/staffing_steps/assess_methods/oral_interviews). This makes it impossible to give comprehensive descriptions of all aspects of performance. Meaning that managers are left to make their own judgements about what other types of behaviours should fit into the scale (Fisher et al, 2003:527). This contradicts the results orientated focus of the organization and its lack of concern for the behaviour that leads employees to achieve results. Additionally this method would not be feasible for the focal position as there are relatively few employees performing this specific job and training its employees or hiring an expert to conduct the performance review would be unlikely due to the time needed and cost incurred with this method. (Fisher et al, 2003: 516)
Behavioural Observation Scales (BOS) involves the use of critical incidents to develop a list of desired behaviours needed to perform a job successfully (Stone 2002:288). Further more it was developed to combat some of the problems faced while implementing the BARS method (Latham & Wexley, 1994: 84). This method includes a 5-point frequency-of-occurrence scale that is attached to each incident. Evaluators use this to determine how frequently each employee engages in the behaviour (Fisher et al, 2003: 517)(Rudman, 1995:90). Again this method is based on employee behaviour to judge performance and is not consistent with the aims of the focal organization as disgusted previously. Further more this method is again very time consuming and costly for training and developmental purposes. There is also a possibility that the specialised focus on several dimension may overlook the real essence of the job and whether the required outputs are being attained (Rudman, 1995:91).
In most organisations, the human resources department is responsible for coordinating the design and implementation of performance appraisal programs. However it is essential that managers play a key role from the beginning to end (Mondy and Premeaux, 1993:331). This is due to the fact that if the organisational senior management does not actively support and participate in the system of performance planning and review, it is not very realistic to expect other managers to be enthusiastic- nor to expect employee generally to be serious about performance appraisal (Rudman, 1995: 34-35) Therefore it is essential that the appraisal obtain management support, this way it can be implemented into a positive environment which is accentuated in ANZ (Rudman, 1995:72). Senior Management and manager will have the responsibility for actually conducting the appraisal, as they must directly participate in the program if it is to succeed (Mondy and Premeaux, 1993:331). Several possibilities exist as to who will actually rate the employee, however the most appropriate approach is a combination of self-appraisal and appraisal assessment from the employee's manager, who is Paul Barnett the Relationship Manager of ANZ Business Centre at West End.
To successfully implement a Management by Objectives performance appraisal system the organization needs to follow certain steps. These include:
* Review the organizational objectives or goals.
* Set key performance indicators for individual positions,
* From the key performance indicators objectives are set and agreed upon by the manager or employer and the employee.
Through out the appraisal time period the employee must self monitor their own progress to ensure they reach their objectives (Haynes, 1990:78). In conjunction with this the manager or person who is appraising the employee will be monitoring the employee's progress along the way (Fisher et al. 2003: 518) .When the time comes for assessment the appraiser and employee will discuss how well the employee met and achieved the objectives. They will assess the attainability of the objectives, the reasons why some objectives were or were not achieved, decide if training in certain areas is required and set new objectives for the employee to work towards achieving within the next set time period (Fisher et al, 2003: 518)
(Kotelnikov. 2004 www.1000ventures.com/business_guide/mgmt_mbo_main.html)
Key Performance Indicators for the focal position:
* Communicate with and discuss loan details to obtain guidance from the business loans manager.
* Interview potential clients by using advanced communication skills to assess their needs.
* Successfully complete loan applications for business loan clients.
* Successfully obtain business loans that suit your clients needs.
* Resolve customer complaints and enquiries within 48hrs.
* Complete documentation and required reports in a timely manner.
* Build good relationships with colleagues and refer clients to them if need be.
* Participate in community projects as a volunteer.
* Promote ANZ's mission to be the bank with a human face and community orientated.
Objectives for the focal position:
* Interview 10-15 new clients per month.
* Successfully complete 9 loan applications per month.
* Finalise 7 business loans a month.
* Complete 20hrs of voluntary community work per six months.
* Keep customer complaints below 2 per month.
The following evaluation form is to be prepared by the assessor with the details of the objectives that have been set, the current standard of performance and how it is measured, the employee's target standard and their actual standard of performance at completion of the appraisal period. The time frame for this performance appraisal will be 6 months with 3 progress reviews every second month (www.theworkingmanager.com/articles/details.asp?ArticleNo=189).
PERFORMANCE APPRAISAL
MANAGEMENT BY OBJECTIVES METHOD
Assistant Business Loans Manager
Employee
Julia Foo
Date:
st May 04
Assistant business loans Manager
Progress reviews
st _______________
2nd _______________
3rd _______________
Date
Prepared By
Paul Barnett
Date:
st May 04
Relationship Manager
Major job objectives
%
WT
Measures of Results
Std of Perf.
Results1
Results 2
Target
Actual
Target
Actual
Interview new clients
25%
a. Number of new clients interviewed per month
8
Increase to
0-15
2
b. Number of new clients that do not return
4
Decrease
to
3
2
Complete loan applications
Finalised loan agreements
40%
a. Number of loan applications completed per month.
7
Increase to
9
8
b. Number of loan applications incomplete per month.
4
Decrease to
2
2
5%
a. Number of finalised loan agreements per month
5
Increase to
7
6
Voluntary Community Work
Customer Complaints
0%
a. Hours of community work completed during the appraisal period (6 months)
0
Increase to
20
21
0%
a. Number of customer complaints per month
3
Decrease to
2
2
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Stone, R. (2002) Human Resource Management 4th Edition, John Wiley and Sons Australia Ltd.
The Working Manager: Management By Objectives, viewed 20 May 2004, www.theworkingmanager.com/articles/details.asp?ArticleNo=189.