Suitable appraisal system

University Degree Business and Administrative studies

Suitable Appraisal system

Performance appraisal can be defined as a planned official interface between an employee and supervisor that occurs periodically as an interview, in which the work performance of the employee is assessed and discussed, with a purpose to recognize weaknesses and strengths in addition to opportunities for improvement, rewards and development of skills. (North, 2007)

This essay intends to advise the suitable appraisal system for the functional employees, Professional employees and directors of the company. It will explain generally about appraisal system, purpose, need for appraisal, its requirements and various methods of conducting appraisal for different group of employees. Furthermore it will highlight the various drawbacks in each case and their possible solutions.

It is a common human nature to evaluate the work done by the employees. There had been informal system of performance appraisal since long, but formal appraisal has recently been introduced. Currently Performance appraisal (PA) has become important practice of Human resource (HR) management universally. It is an organizational change lever and management control tool for assessing employee performance.

(Redman and Wilkinson, 2006, p.155)

Today PA has become more widespread. It includes all occupational groups of company. Appraisal has moved down in organizational hierarchy from the top blue collars to each employee. It has been adapted from private sector to public sector as well. PA helps the organization to plan, delegate and assess the operations of their services.

(LGMB, 1994, P.6)

Performance management department of organization establishes the criteria through the performance appraisal process for the progress and development of company. PA aims to increase the work force efficiency and connects the company goals and objectives with the work targets for each employee.

The PA evaluates the employee’s present and past performances relative to his performance standards set up by company. This process includes setting up of employee work standards according to organizations goals, targets and objectives. Then individual actual performance is evaluated and compared with set standards. All employees are reviewed periodically for their progress towards their targets and feedback is given to them. This review identifies the training and development requirements of the employees and rewards for crossing the target levels. (Desseler, 2004)

Lastly evaluation is done regarding the effectiveness of whole process to judge whether it fulfilled the organizations objectives. Moreover what type of changes and improvements can be made for further development of company

There has been criticism and doubts about the reliability and compatibility of PA by various management gurus, researchers and psychometricians. In their view appraisal system is “so inherently flawed that it may be impossible to perfect it”. (Derven, 1990)

Conversely many strong believers of PA consider the process as “potentially the most crucial aspect of organizational life” (Lawrie, 1990)

Employees are appraised both on ‘objective and subjective measures’. Objective measures are like time keeping; attendance, productivity, quality etc and subjective measures are like Quality, flexibility dependability, loyalty, initiative and many more.

(Redman and Wilkinson, 2006)

Ideally appraisal process should always be conducted separately either for training and development or for reward outcomes of the employees like hike in pay and promotions. (Fletcher, 2004). Linking the appraisal results with reward outcomes purges the development value of the performance appraisal system. It can be more yielding process if reward outcome and appraisal results are isolated from each other. Rather than considering appraisal process as occasion for development, remoulding and encouragement to employees the reward linked appraisal results are perceived as condemnatory, punitive and distressing. If both are linked it becomes tough for appraisers being as both “judge and executioner”. (North, 2007)

In contrast appraisees are inclined towards linking of appraisal results with rewards. They feel satisfied if they are linked together and think time waste and disappointed if not. (Banister and Balkin, 1996). Although PA system has many practical flaws but it is the only most decent system available to achieve true and fair reward outcomes on the basis of merit and hard work of employees.

Whenever PA is conducted in any company there arises two thoughts, whether to conduct appraisal or not. In the bottom of both lies the line which says that “it will cost your company’s both capital and time if not handled well”. This is true for many companies when appraisal is not handled properly. Hence before commencing appraisal procedure the appraisal format should be perfect. The person or line manager conducting appraisal should be very well trained to commence the appraisal process. He should conduct it efficiently, impartially, professionally with proper care to make appraisal effective.

(Chandellar and Gryzb, 2002)

There are various reasons which make the appraisal results unworthy like panic, terror, doubt, partiality, conspiracy, unfaithfulness, humiliation, lethargy, blame and sheer incompetence.

A worthy meaningful appraisal needs to be true, impartial, fair, purposeful, mutual, practical, specific, understandable, continuing and precise. It should be conducted without any discrimination like age, gender, colour, nationality, sexual orientation, race, religion, disability etc. It should be well formatted as well. (Chandellar and Grzyb, 2002) (Chapman, 2007)

Company should charter PA schedule in such a way that appraisal is reviewed before the new business cycle plan is created. Review period should be at least six months. It provides opportunity to make changes according to the new needs, resource requirement and development of company. (HRD group, 2008)

Every company has two basic purposes while conducting performance appraisal i.e Evaluation system and feedback system. The evaluation system identifies the gap between the employee performance and work standards. This gap occurs when employee’s performance does not meet the acceptable standard of work set up by the company. The feedback system is two ways type like appraiser gives feedback to employees and appraisee gives his personal feedback of his job performance. (North, 2006) ...

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The best way to make appraisal process meaningful the company is to prepare the results after looking at the views of both line manager (appraiser) and employee (appraisee).

Employee view point for performance appraisal has four parts. What work commitment company expects from him, his past performance feedback, What improvement and training do he requires for better performance and lastly if performance was good then reward in the form of pay hike or promotion. (Cash, 1993)

Company’s point of view of PA is to establish the principle of accountability which says that there should be “alignment of responsibility and accountability” of workers at each level of company. In various companies employees are given responsibilities and duties but the way these duties are performed by them are not accounted. These things results in overlapping of responsibilities and blame culture at work units which ultimately lead to failure of company. (North, 2007)

HR department of organization usually make policies and prepare detailed forms, questionnaires and procedures for appraisal process. They provide training to line managers or supervisors for learning important appraisal skills. HR department monitors the appraisal and make sure that format of appraisal matches with the company objectives.

Four steps are considered while planning for suitable appraisal system for any company. Firstly, Purpose which has further two aspects measurement and feedback. In measurement, employee’s past performance is evaluated against the company standards and competence is assessed. It is usually done through use of various rating forms and questionnaire. In feedback, general comments are given to employee regarding his past performance of work and progress in company. Generally it is a productive chat with constructive criticism for further improvement and exchange of views between line manager and employee. (Instep, 2005), (CIPD, 2008)

Second step is the timing of conducting appraisal. It usually should be before commencing new business cycle plan.

Third step is the documentation, keep the format of forms or questionnaire simple to make it easy for appraisee as well as appraiser to understand and discuss. It should provide clear agenda for discussion of appraisal results and contain agreed outcomes for future goals of the company.

Last step is the Effectiveness of the appraisal process. It is the most important to make sure that appraisal results will be valuable, meaningful and effective for the development of the company. To ensure this, proper appraisal techniques should be taught to line managers and proper guidance should be given to employees as well. (Instep, 2005)

Appraisal process fails whenever there is flaw in any of above four steps and results in wastage of valuable time as well as capital of organization.

There are various methods and tools of appraisal for different groups of employees in the companies. Every method of appraisal has its own pros and cons.

Functional employees of the company are appraised by various traditional as well as recently introduced methods of appraisal. Functional employees can be appraised by traditional “rank yank method”, Graphic rating scale method, Alternation ranking method, Paired comparison method, Forced distribution method, Critical Incident method, Behaviorally anchored rating scales, Management by objectives (MBO), and Computerized web based programs. (Desseler, 2004)

Recently introduced appraisal methods for functional employees includes Customer appraisals, Team based appraisals and 360 degree appraisal method.

Professional employees of company like HR professionals, Managers, Doctors, Engineers, Architects, Lawyer’s are also appraised through recently introduced appraisal processes like Upward appraisal method, 360 degree performance appraisal method and Competency based appraisal method. (Redman and Wilkinson, 2006, p.160)

Directors of the company are mostly appraised by CEO (Chief executive officer) of the company and through 360 degree performance feedback appraisal method.

(Chapman, 2007)

Recently there has been more stress on authority relations implicit in employee performance appraisal system. Currently appraisal system has been broadened in the range by increasing the number of appraisers through various appraisal methods like 360 degree appraisal, upward appraisal and the inclusion of external customers as appraisers. Hence through these recent development employees are constantly been exposed to the appraisers. Thus it keeps them on their toes at all times and eventually increases work efficiency and productivity of company.

(Redman and Wilkinson, 2006)

HR professionals and managers are also not spared from the disciplinary action of the appraisal system. The managers often act as barriers in introduction of new HR management techniques like employee involvement, employee empowerment etc. Hence through methods like upward appraisal managers are appraised and those scoring less are “screwed”. (Redman and Wilkinson, 2006)

The appraisal for functional workers is conducted by the Line manager or immediate supervisor. There are various performance appraisal methods and each of them has their own merits and demerits. (Desseler, 2004)

In early times many companies had adapted “Rank and Yank” method of appraisal. It was based upon granting ranks or grades to the employees according to their performance at work .It identifies the poor performers. Best workers were given A grades, middle B and worst performers were granted C grade and dismissal if there was no improvement in performance with redundancy package. This strategy was known as “Rank and Yank” system. (Redman and Wilkinson, 2006, p.154)

This system helps the manager to take tough decisions regarding exclusion of underperformers in organization. It facilitates constant improvement and increase in productivity and efficiency of company. But conversely it is sure that somebody is definitely going to fall under lowest category even if overall performance on the whole is fabulous. It might be possible that low performers in high productive departments may be contributing more as compared to high performers in the overall performance of the company.

There are further issues that “rank and yank” method discourages team work and promote internal conflict between the employees. It encourages negative competition as each worker tends to protect his position at the cost of other worker. This system discourages creativity and innovation among employees due to lesser team work. Many companies have abandoned it due to increasing litigations and there are doubts whether this system justifies administrative costs linked with replacing employee and providing training. (Redman and Wilkinson, 2006, p.154)

Graphic rating scale method is a simple and popular technique to appraise functional employees. This scale lists a number of traits like quality, productivity, work knowledge etc and range of performance level from outstanding to unsatisfactory having its own rating scale. The employees are rated according to the performance against each trait.

(Desseler, 2004, p.243)

Alternation ranking method is method to rank employees from best to worst according to their performance against each trait.

In Paired comparison method all the employees are paired and they are compared with each other on each trait to indicate better employ on each trait.

In Forced distribution method, it is like grading of employees on the curve. A preset percentage of rating is placed against various performance categories on each trait like quality, productivity, reliability of employees. For example 15% high performing employees, 20% average performers and 15 % low performers. This method undermines team work. (Desseler, 2004, p.247) In Critical incident method of appraisal line manager keep record of positive and negative examples of employee’s work related behavior. Manager reviews it and meet with employee once or twice in year to discuss his performance using his record of incidents.

Behaviorally Anchored rating scales connects benefits of both quantified graphic rating scales and narrative critical incidents method. It gives more reliable, accurate and equitable appraisal results for employees.

MBO or Management by objectives, In this system specific measurable targets is set by manager for each employee and then progress of performance is reviewed periodically and feedback is discussed. This method is time consuming as setting individual targets then evaluating and providing feedback is a very long process. (Desseler, 2004,p.251)

Although these methods are simple techniques of conducting appraisal but such rating scales or grades has unclear standards and may result in partial appraisal. There can be central tendency of rating everybody equally and average or leniency or extra strictness. Such biasness and problems distort the meaningfulness of the appraisal.

Customer appraisal is recent method to appraise functional workers. Many companies in UK set employee performance standards based upon customer care indicators and appraise the staff according to the feedback of their experience given by the customers. There are range of ways to collect such feedback data’s from the customers. It can be done through various customer surveys on telephone, through post, web based surveys, personal interviews and filling up of customer feedback cards. It is very common in call centres to tap conversation between customer and customer care executive and provide immediate feedback to the employee.

“Mystery” or “Phantom shopping” is another method of customer appraisal. It has been found out that customer care services can only be evaluated at the “boundary” or point of exchange of services between employee and customer. In this specialized agencies send their staff for shopping who act as real customers. These fake customers observe and record their experience of customer care services of company under survey. This method is used in various restaurants, super market stores, banks etc.

(Redman and Wilkinson, 2006, p.163)

Thus mystery shopping provides real and rich source of feedback regarding company’s employee’s performance. This feedback is evaluated and further actions are taken for improvement and better staff performance. It reveals the factors which results in customers to leave without buying anything. It provides impartial and reliable ratings of staff performance at low cost as compared to large customer surveys.

Mystery shopping is not popular among employees. It is conducted once after long period and it is difficult to judge customer services in short survey. Employees often feel this system as unethical or lack of trust on employees by company. They consider mystery shoppers as ‘snoopers’ and react with hostility. (Shing Spence, 2002)

To avoid such feelings, after mystery shopping the staff with good performance ratings should be rewarded and underperformers should be given further training.

Team based appraisal is another way of appraising functional employees working in teams. Many companies have their work organized in different teams which are independent. There are two types of team based appraisal.

In first, Teams are given specific targets and then performance is measured, evaluated and rewards are given. The whole process is appraised by manager but he does not provide individual performance feedback. Equal ratings and incentives are given to all the members of the team. Team internally can discuss about their performance problems and other competence deficiencies for their further improvement.

In second type, Individual performance rating is provided to each team member but not by management. It is done in the form of peer appraisal in which team member themselves appraise each other via anonymous rating questionnaire. (Redman and Wilkinson, 2006, p.164)

To avoid some of the pitfalls in above methods nowadays various computer web based appraisal programs are available. These software’s enable line managers to keep notes on employee’s performance entire year. Then employees are rated electronically against range of performance traits. Such software’s provide variety of evaluation dimension like productivity, quality, leadership, dependability etc. For e.g performancereview.com. In US 26 million workers have their performance monitored electronically. Such software’s provide opportunity to employee’s as well to monitor their performance progress against company set criteria’s. (Desseler, 2004)

The appraisal process for Professionals has been recent addition in HR management. As doctors are assessed by the number of patients they treat, lawyers through cases they won, players through number of games won, so why not the HR professionals like managers, line managers are not appraised? or there is just self appraisal or one to one appraisal conducted by their bosses. Such appraisal methods have got enough space for partiality and biasness. So appraising the HR professionals by the people who are directly affected by their activities are the best solution of appraising them. HR Department act as “Service Center” for “internal customer” (interpret as employees). So employees can be the best possible source of appraisal for HR professionals through Upward appraisal. (Himachali, 2007)

In upward appraisal managers are appraised by employees who rate them through anonymous questionnaire. It is done anonymous to give free hand to employees and to avoid their fears, so that they can provide true and unfavorable feedback (if they want) on the performance of their manager. (Redman and Wilkinson, 2006)

Upward appraisal definitely brings positive change in quality of work, attitude and behavior of professionals. It makes managers to work efficiently and affectively for the company and improves work culture in units. Due to upward appraisal they will definitely concentrate on their prescribed work rather than bullying around the employees. Such system brings transparency and will remove ‘favoritism’ practices. It increases the team spirit and cohesiveness in work. Above of all it will change the psychology of some HR professionals who consider themselves ‘God’ and thinks that they can ‘make or break’ the career of any employee from this position. (Himachali, 2007)

Upward appraisal increases employee involvement and empowerment and brings democracy at work. It is more effective in delayered organizations where employees are more in contact with managers and old methods of top down boss appraisal seen to be less effective. This method is more robust to litigations of appraisal results because of the use of multiple raters. In fact managers do not favour this system as it can be threatening to their career. (Grint, 1993) Professionals at receiving end are not sure about the honest opinions of their employees as well. Due to lack of acceptance of upward appraisal by managers this system has been very less adopted in UK.

360 degree feedback is the system of rating feedback for any occupational group of company from all directions like peers, subordinates, supervisors and customers. It is conducted by anonymous surveys. 360 degree feedback survey is done in many ways like use of audio and video tapes of feedback recording, online computerized data gathering system, “Fun” methods in which employees are asked to write short statements to compare managers with some particular characters, passing structural questionnaires based upon models of managerial competency. Some companies use Dispont method in which open questions are given to employees and they are asked to write in detail about their manager’s value adding areas, his major strengths, weaknesses and areas of improvement needs and working of manager. This method has demerits of unstructured approach, like famous manager but incompetent can be rated above the manager who is not popular but highly competent and effective for company.

(Redman and Wilkinson, 2006, p.160)

This system is used for both performance feedback and remuneration for managers. The use of multiple appraisers provides more accurate feedback.

There are many demerits of 360 degree feedback. It is not sure that result generated is accurate and meaningful for appraisee and beneficial for organization. Sometimes questionnaires are not easy to understand and same questionnaire are given to all appraisers regardless of the different type of contact with the appraisee, Hence it becomes difficult to rate. There are incidents of extraordinary performance of managers at work place but appraisers are usually asked to provide ratings on the questions they are asked. Many aspects like customers views are left out. There are challenges of making it more meaningful by comparison of ratings between managers and follow up with the facilitators.

Competency based appraisal is a recent HR practice pointed towards managers as well as non managerial employees The companies use competency based models for selection of new employees, training, development and for giving incentives after appraisal. (Mitrani et al , 1992)

In this method key competencies are identified from good job performances rather than rating many abilities and traits. Only such key competencies are analyzed to assess performance. Employees are given feedback and asked to make improvement in such key areas. (Sparrow, 1999)

The competency concept widens the purpose of appraisal from assessment of ‘what is achieved’ to ‘how well’ the work is done. Although it involves the running cost but benefits has to be counterbalanced. (Redman and Wilkinson, 2006,p.165)

The performance appraisal for Directors of the company is conducted by CEO (Chief executive officer) and through 360 degree feedback appraisal method.

Director complete his summary of competencies and vital areas of progress, achievements and responsibilities in past year and forward it to CEO. CEO acts as a line manager for director he reviews the summary and conducts 360 degree feedback from other directors, deputy director, assistant directors and managers.

After all appraisal results CEO discusses summary with partners and executive members about director’s achievement and key competencies. Then finally CEO have discussion with the director regarding progress, priorities, development and any outstanding issues and reach an agreement of personal development plan . (Bolton council, 2006)

There are range of issues regarding conduct of performance appraisal. It is very expensive and time consuming activity, it is most disliked by managers due to ‘pussilanimity’ as they are too scared of giving negative or corrective feedback, Appraisal adds additional pressure on employees and it might hamper the company performance in long term. PA system can not be borrowed from one company to execute in to another as well. (Furnham, 1996)

There are varieties of ‘distorting ‘effects in the appraisal process. Mainly ‘halo effects’ in which some positive criteria disturb the real assessment of the employee. In ‘Horns effect’ one negative criterion leads the appraisal rating. In ‘Dopper gauger effect’ appraisal rating depicts some similarity between appraiser and appraisee. In ‘Crony effect’ appraisal ratings are affected due to some relationship between appraiser and appraisee. In ‘Veblen effect’ there is tendency of appraiser to give low rating to all irrespective of their work performance. In ‘impression effect’ employees put good impression on manager and hide their actual performance. Good impression on manager results in distorted ratings. (Redman and Wilkinson, 2006)

Sometimes appraisal ratings are manipulated by managers according to their favorable conditions which suits them in their future career building. It is known as ‘Organizational games’. In some instances managers purposely under rate some rebellious employee to get rid of them. (snape et al)

There are problems with the appraisal of professionals as they doubt the potential of managers to undermine professional autonomy. Such issues are raised in NHS UK.

Many companies do not follow the positive outcomes of appraisal results .All data are just kept in files and no action is taken.

All these pitfalls change the appraisal ratings and make the appraisal meaningless for the company and affects performance negatively. So company should avoid such pitfalls while conducting appraisal and should follow the positive outcomes of appraisal results.

If positive outcomes are sincerely followed by company then it can do wonders for organizations work culture and productivity. Moreover regular restructuring of the PA system is necessary so that it remains compatible with the new business environments.

The PA is a vital managerial tool or HR management technique for motivating and controlling work force of the company. It is a good way of maintaining loyalty and commitment of employees towards the company objectives than directly managing there performance.

The Performance appraisal process is the most important activity for company’s development. The meaningful and effective performance appraisal provides purpose, route and dedication for the change and development. The appraisal outcome has lot of influence on work culture, efficiency and productivity of company. The performance appraisal is not unrealistic it is practical and essential activity for the overall growth of company.

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