Source: Bartol et all 2010, p. 409
removing discontent, developing interpersonal relationship, aiding wage administration, exercising control, and improving communication (Walker 2010).
A formal PA system can provide a framework within which appraisers and appraisees can operate. A PA system can be developed through a programme comprising some stages, such as, determine overall approach to performance appraisal, where and how PA should be introduced, decide who is to be covered, decide on whether the same approach should be adopted at each level, set up project team, define role of human resource department, decide whether to use outside consultants, define performance management processes and documentation and plan implantation programme (Nankervis et all 2005).
The introduction of PA should have planned in the development stage. The main steps are to train everyone on PA, and once in operation, to monitor and evaluate how the system is working out in practice (Clark 1992).
PA comprises some steps, such as, select performance factors (based on job description) to be evaluated and set the standards to be achieved, set the performance review period, measure actual performance, compare performance with set standards and rate it with a suitable scale, communicate the ratings to the appraisee, use the performance appraisal for the desired purpose (Kramar et all 1997).
Noe et all (2010) suggested to measure performance through five approaches, such as, the comparative approach, the attribute approach, the behavioral approach, the result approach, and the quality approach. Byars and Rue (2000) identified some PA methods, such as, Goal setting or management by Objectives (MBO), multi-rater assessments (or 3600 performance appraisal), work standard approach, essay appraisal, critical-incident appraisal, graphic rating scale, checklist, behaviorally anchored rating scale (BARS), forced-choice rating and rating methods.
Commonwealth Bank of Australia: Employee Performance Appraisal Plans (EPAP)
Commonwealth Bank is the second largest Bank in Australia. When CBA develops EPAP (Employee Performance Appraisal Plans), they consider two factors, such as, performance elements and standards. Performance elements tell employees what they have to do and standards tell them how well they have to do it. CBA HR policy outlines that employees may have elements in between one to five and all of which will be considered critical. Failure of one or more critical element can result in the employee’s removal, reassignment or reduction in grade. The performance standards are expressions of the performance threshold(s), requirement(s), or expectation(s) that must be met for each element at a particular level of performance. They must be focused on results and include credible measures such as: quality, quantity, timeliness and cost-effectiveness. Managers must determine which of these standard measures are important for a given element.
PA could be informal and formal. CBA considers informal PA as an important activity and an internal part of the organizational culture. Informal PA is a continuous process of feeding back information to the employees about how well they are doing their work in the organization. The informal appraisal is conducted on a day-to-day basis. For example, the manager spontaneously mentions that a particularly piece of work was well performed or poorly performed. Because of the close connection between the behavior and the feedback on it, informal appraisal quickly encourages desirable performance and discourages undesirable performance before it becomes permanently ingrained.
The process of sophisticated tech-enabled EPAP at CBA starts in July each year with each employee reviewing his/her past performance with respect to the objectives and targets and giving his/her overall assessment of the results achieved by him/her. He/she also carries out a self review with regard to significant contributions made by him/her and important factors that facilitated or hindered his/her performance.
The immediate manager, then, marks the achievement of his/her subordinates by ranking his/her performance against objectives. Grades such as excellent, outstanding, satisfactory, need improvement and unsatisfactory – are given by him/her. Next, the manager along with the employee carries out performance planning and development planning for the next year. The superior also analyzes the subordinate’s past performance and gives him/her a feedback on his/her performance.
The manager also assesses the critical attributes of his/her subordinates with respect to five important criteria – innovativeness, initiative, interpersonal and team relationship, resourcefulness and communications skills. He/she also notes down the areas of strengths and weaknesses and marks the areas of growth in which the employee has potential to make significant contribution. Finally the boss can suggest the areas in which training can be imparted to the employee. At the end of the exercise, the next higher manager makes an overall observation and given his/her own specific development plans.
The entire exercise – from self-review of an employee to final review by his/her superiors – takes about three months. The HR department receives the assessment in October. It carries out overall assessment of various training needs and complies various reports which are submitted to GMs and HR management.
The success of EPAP depends on the sincerity shown by the management and the existence of transparent link between performance and reward. Let us examine the strengths of the EPAP as it exists on paper and in practice in CBA.
Every employee is given a chance to assess his/her own performance. This ensures that the employee’s view point of his/her performance is also considered. Moreover, the employee feels a sense of responsibility and knows that his/her performance is being judged on the basis of goals set for him/her in the previous year.
Critical attributes are listed and areas of strengths and weaknesses are deliberate. The manager can not make general comments but has to be specific while assessing the personality traits of an individual. Also he/she must clearly point out the strengths and weaknesses of the employee so that proper training can be given to him/her.
Both the employee and the superior decide the goals and objectives for the employee. Management by Objectives (MBO) depends on giving the employee a role in selecting and setting targets for his/her own development. This process ensures that unrealistic goals are not set for the employee and his superior also becomes responsible for the success of his/her success.
Specific training and development plans are formulate. Either the superior or the employee can list out the training and development programmes needed for the growth and development of the employee.
The bias of superior is checked by giving a role to next superior in assessing the employee’s performance. The next superior analyzes very high or very low grades, thereby preventing the superior from indulging in favoritism or penalizing.
Summery of HR Issues/Problems in EPAP
- The entire exercise is time consuming and tedious. Because of such time consuming work, the superior tries to reduce his work by giving hasty report. This prevents true assessment of performance. Moreover, many employees feel that this is a mere paper work which does not have much significance.
- Many employees complain that the entire exercise is mere ritual to be indulged every year since they do not see any transparent link between the performance and the reward.
- No KPAs for the employee. To make the performance of the employee more effective, his/her Key Performance Areas (KPA) should be identified and communicated to him/her. For instance, a person in sale should know that his KPA is the sale of bank products (say). This helps in focusing employee’s effort and achieving better results.
- There is very little emphasis on role playing in the evaluation of the performance. It is known that as the employee moves up in the senior position, more than meeting his/her goals, his/her role in the bank becomes more crucial. An employee is a leader to his/her subordinates and his/her ability to lead his/her subordinates, group of department must be analyzed since it becomes necessary to plan for future promotions and successions.
- As all goals and objectives (such as behavior or team work) are not quantified, there are chances of disagreements during the appraisal session.
- Increment is very low, and also there is not much of difference in increments for different ratings, hence there is no financial motivation for better performance.
- Promotion is partially depended on EPAP. Each employee is required to apply for the next level and EPAP is useful when they attend interview.
- EPAP couldn’t overcome discrimination and biasness completely. As a result, some employees are victim of biasness and discrimination.
Notwithstanding the above strengths and weaknesses, in overall analysis, this system tries to be scientific in approach and seeks to do justice to the employee.
After going through the EPAP being followed in CBA, it was apparent that CBA doesn’t go for a detailed appraisal and the results are not well communicated to the employees. Even if some action is taken, its impact is negligible. Most of the employees consider it a wasteful paper work. Even though, the concept of performance appraisal is now quite old, still a lot is to be done so as to make it effective and worthy. The issues/problems I have identified in EPAP activity area, HR management needs to take some actions having regard to its impact on performance in CBA. The overall EPAP is suffering from lack of relevance, sensitivity, reliability, acceptability and practicality. It is evident from EPAP that management people sometimes don’t know what they want and find it extremely painful even to discuss the issue. When employees find out what management wants, they may not like it. Some managers feel they may loose flexibility by stating objectives in advance: “If I tell them what I want, then they will only do those things.” This is management and appraisal by reaction: “I will see what they do and then tell them whether I like it or not.” Therefore, employees (including managers) are not motivated about EPAP and they often loose motivation after performance appraisal is done.
Constraints to manage EPAP issues in CBA
HR management need to consider some constraints that exist in CBA before they assess possible strategies for managing the issues/problems related to EPAP. An interaction with some managers of various backgrounds and other employees working in different departments in CBA highlighted the following common constraints in implementing ‘performance feedback’, as perceived by them:
- A work culture is not so conducive to proper giving receiving of feedback.
- Lack of appreciation about the philosophy and benefits of performance feedback.
- Lack of willingness of superiors/top management in adopting the practice.
- Fears and apprehensions about the use of performance feedback outcomes.
- Confidentiality in the existing performance appraisal system.
- Interference by the trade unions in case of workers.
- Lack of proper system/procedure.
- Lack of accountability.
- Lack of clarity on role, goal, job demands, etc.
- No direct linkages of performance feedback system with rewards/punishment.
- Lack of proper skill in performance analysis and giving feedback.
- Constraint of time availability.
- Personal bias and subjectivity.
- Non-uniformity in the criteria of performance analysis.
- Lack of trust and openness in people and conservativeness.
- Heterogeneous interest.
- Low motivation.
- Target achievement oriented system.
- Non recognition of the effort in subordinate development.
Recommended Policies and Actions
An effective and workable PA system can be developed and implemented, but in order to do so the system must be relevant, sensitive, reliable, acceptable and also practical. Let’s briefly examine each of these.
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The PA system must be relevant: A clear linkage should exist between performance standards and organizational goals, and that a correspondence exists between the critical job elements identified through a job analysis and the dimensions to be rated on an appraisal instrument. Performance standards translate the job requirements identified through job analysis into levels of acceptable/unacceptable employee behavior (Cascio and Bernadin 1981). They play a critical role in the job analysis/performance appraisal linkage, as figure 1 shows.
Periodic maintenance and updating of job analysis, performance standards and appraisal system are required. Relevance will be a fundamental consideration in the arguments presented by both sides if appraisal system is challenged in court (Casico and Bernadin 1981).
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The PA system must be sensitive: Discrimination is one of the major issues these days. PA system can’t be workable if it discriminates effective from ineffective performers. If PA system is the victim of discrimination, then it can’t make a useful contribution to merit pay decisions or any other type of personnel decision for that matter (Kavanagh 1981).
Kavanagh (1981) pointed out that managers are being urged to help their employees grow and develop on the job, and to use the appraisal program as a tool in this effort. Thus, if a naïve manager completes honest appraisals, none of the employees receive a merit increase. Not only does this create a morale problem for the manager, but it can destroy the future use of performance feedback for employee growth. If the employee realizes the manager’s evaluation is to be used for administrative purposes, he/she will be defensive and reluctant to accept negative information during a feedback interview. For the performance feedback to be effective there must be an open and trusting relationship during the interview. Although this has been known for some time, there are few organizations that have modified their practices to deal with this issue.
Meyer et all (1965) suggested that discussions about merit pay should not be combined with discussions about personal growth and development. Employee must go through frequent appraisal sessions (monthly, weekly, even daily), job-relevant strengths and weaknesses so that he/she is well aware of how his or her performance is viewed by their manager. The discrimination that must be made can be made honestly, equitably, and sensitively.
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The PA system must be reliable: Manager’s with different perspectives often see the same employee’s job performance differently. Reliability in this context refers to consistency of judgment (Borman 1974). To avoid such issue, if any manager is to provide reliable data he or she must have a detailed knowledge of what the employee had done and the conditions under which he or she had done.
The immediate manager is responsible for reward (and punishment) decisions such as pay, promotion, and discipline, he or she must be able to tie effective (ineffective) performance to the personnel actions taken.
Appraisal by subordinates can be a useful tool to improve manager’s performance. Subordinates offer a somewhat different perspective on a manager’s performance. They now directly the extent to which he or she does or does not delegate, the extent to which he or she plans and organizes, the type of leadership style (s) the manager is most comfortable with, and how well he or she communicate. This approach is used regularly by universities (Thornton 1980).
It seems reasonable to have each individual judge his or her own job performance. This might improve employee motivation and reduce his or her defensiveness during an appraisal interview. On the other hand, comparisons with appraisals by managers, peers, and subordinates suggest that self-appraisals tend to show more leniencies, less variability, more bias, and less agreement with the judgments of others (Thornton 1980). However, at present, we know very little about the theoretical basis of self-appraisal, its measurement properties, or the types of behavior potentially influenced by self-appraisals (Heneman 1980).
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The PA system must be acceptable: The major operational imperative of an appraisal system is that it be acceptable to hose who will use it. When subordinates know very little about what will be tested, how they should prepared, or how performance will be scored, it is no wonder that they are suspicious, and in some cases, devious and untrue about themselves. PA system should be promoting more openness. When subordinates can collaborate openly in trying to improve performance, when how to improve performance is public knowledge, when both the assessment technique and its practical utility are understood, then we can expect to find the active participation and support for appraisal programs that is so sorely needed (Casico and Phillips 1979).
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The PA system must be practical: Regardless of the technical superiority of any appraisal system, if it interferes significantly with ongoing operations, if data collection, recording, interpretation or storage become excessive, then the system can’t be effective (Walker 2010).
If workable performance appraisal systems are our top priority, then we must do everything possible to ensure that all involved in appraisal (appraisers and appraisee) are motivated to cooperate. It may well be (and this is empirically testable) that appraisers who are more involved and more interested in the test (because they were participants in a training program, or because they were deeply involved at all stages of development of an appraisal system) will make more careful and more accurate ratings (Heneman 1980).
Conclusion
In the organizational setting mostly people are interested to evaluate others by appraising performance, but hardly prepared to be evaluated. Hence, it is a real challenge for HR professionals to make the appraisal system more pragmatic to ensure that people trust in the system. So long a human being evaluates another; there would be some subjectivity in the assessment. Thus, it is essential to balance the subjectivity and objectivity in the appraisal system to make it people oriented, workable, and productive. Moreover the purpose of the system should be more developmental rather than punitive in nature.
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