• measuring,
• evaluating, and
• influencing an employee’s job-related attributes, behaviors and outcomes.

Historically, performance appraisal was linked to material outcomes...

...with the assumption that a cut in pay, or a rise, should provide the required impetus for an employee to either improve or continue to perform well.

...a structured appraisal system is more likely to be  lawful, fair, defensible, valid and reliable

performance appraisal... a structured and formal interaction between a subordinate and his/her supervisor

.

PERFORMANCE APPRAISAL DEFINED

Let's begin our discussion of performance appraisal by defining the concept. Performance appraisal is a formal system of measuring, evaluating, and influencing an employee’s job-related attributes, behaviors and outcomes. The objective is to to determine how productive an employee is and/or to determine if an employee’s productivity can be improved. As such, performance appraisals serve an important purpose in managing people and meeting company goals.

The tendency to make judgements about oneself or about people one is working with, appears to be both inevitable and universal. However, without a carefully structured system of appraisal and evaluation, people will judge the performance of coworkers --  subordinates, superiors, and peers -- arbitrarily and informally.

This tendency to judge, without a systematic procedure, has the potential to create serious motivational, ethical and legal problems within the firm. On the other hand, a structured appraisal system is more likely to be   lawful, fair, defensible, valid and reliable.

Historically, the generalized institution of systematic evaluation procedures began in the 1950's. Initial performance appraisal systems began as methods for justifying relative income distributions -- deciding whether or not the wage of an individual employee, relative to other employees, was justifiable. However, with the evolution of performance appraisal procedures, the traditional emphasis on reward outcomes was progressively reduced. Instead, the usefulness of appraisal as a tool for motivation and development was recognized.

Before moving any further in this discussion, we must note that the foundation of performance appraisal is the job analysis (and the subsequent job description).

As we refine our definition and understanding of performance appraisal, we should add that the process includes a structured and  formal interaction between a subordinate and his/her supervisor. Generally, this takes the form of a periodic interview (perhaps semi-annually), in which the performance of the subordinate is examined and discussed.

In some organizations appraisal results may be used to determine relative rewards in the firm -- who should get merit pay increases, bonuses, or promotions. Similarly, appraisal results can be used to identify the poorer performers who may require some form of counselling, demotion, dismissal or decreases in pay.

Interestingly, performance appraisal is a very controversial managerial issue. Some researchers have expressed doubts about the validity and reliability of the process.  On the other hand, there are advocates of performance appraisal who claim that it may well be the most critical of all human resource management tools.

Another area of controversy centers around the use of performance appraisal in the determination or allocation of organizational rewards. It is argued that performance appraisal has too many important employee development uses to be used to determine reward outcomes. From this perspective, the reward-linked process is perceived as judgmental and potentially punitive rather than as an opportunity for constructive review and encouragement. Too often, the appraisers know their appraisees well, and may be reluctant to suggest that a subordinate needs to improve certain work skills if the appraisal result also has the effect of negating a promotion or a raise in pay. In such cases, appraisers sense that the appraisal result can lead to resentment and serious morale damage, with further workplace disruption, soured relationships and productivity declines.

However, it may be argued that the evaluation of employees for reward purposes is part of the basic responsibilities of management and that the reluctance to do so while appraising performance for developmental purposes is based on muddled ideas of motivation and management.

Advocates of the appraisal-reward linkage claim that performance must be linked to rewards. It is argued that organizations must have a process by which rewards are openly and fairly distributed to those most deserving on the basis of merit, effort and results. As we know from previous discussions of equity (Equity Theory of Motivation), there is need for remunerative justice in organizations. Performance appraisals constitute a process whereby fair and consistent rewards can be implemented.

An enlightened way of looking at formal performance appraisal is that it is a summary of the year-long communications between supervisors and employees. The important point made by this definition is that "performance appraisal" and feedback to the employees about their performance ought to be an on-going process. As such, the "formal performance appraisal" is just the culmination or summary of events that could conceivably be happening every day. Unfortunately, in too many organizations, the role and importance of informal feedback from supervisors is ignored as greater emphasis is placed on the formalized annual appraisals.

...effective appraisal systems provide both evaluation and feedback

The main aim of the evaluation is to identify performance gaps...

...feedback is necessary to inform employee about those performance gaps

One of the functions of performance appraisals is to ensure that people are accountable for their organizational responsibilities

Performance appraisal

• satisfies psychological needs
• increases employees' job satisfaction

We've seen from previous discussions, that people are one of a company's most valuable assets. While most assets depreciate over time, people, viewed as assets, may actually appreciate. One of the manager's major responsibilities is to improve and update the knowledge and skills of employees -- appreciation of assets. Performance appraisal plays a significant role as a tool and technique of organizational development and growth. In essence, effective appraisal systems provide both evaluation and feedback.

The main aim of the evaluation is to identify performance gaps -- when performance does not meet the organizational standards -- whereas feedback is necessary to inform employee about those performance gaps.

From the employee's perspective, performance appraisal informs them about what is required of them in order to do their jobs, it tells them how well they have achieved those objectives and helps them take corrective action to improve their performance, and, finally, it may reward them for meeting the required standards.

The firm, on the other hand, needs a performance appraisal system in order to establish principles of managerial accountability. Clearly, where employees are given responsibilities and duties, they need to be held accountable. One of the functions of performance appraisals is to ensure that people are accountable for their organizational responsibilities.

Perhaps the most significant benefit of performance appraisals is the opportunities they provide supervisors and subordinates to have one-on-one discussions of important work issues. During appraisals, subordinates and supervisors can focus on work activities and goals, identify and correct existing problems, and encourage better future performance.

Performance Appraisal and Motivation

Motivational research has recognized the power of  recognition as an incentive (see Maslow and the Expectancy Theory of Motivation). Performance appraisals provide employees with recognition for their work efforts.  The appraisal system provides the supervisor with an opportunity to indicate to employees that the organization is interested in their performance and development. This recognition can have a positive motivational influence. on the individual's sense of worth, commitment and belonging.

Performance Appraisal and Training and Development

Performance appraisals identify performance gaps. As such, they provide an excellent opportunity for a supervisor and subordinate to recognize and agree upon individual training and development needs.

Performance appraisal discussion may identify the presence or absence of work skills. Further, the need for training can be made more relevant if attaining the requisite job skills is clearly linked to performance outcomes. Consolidated appraisal data can also help form a picture of the overall organizational training requirements.

Performance Appraisal and Recruitment

Recruitment and selection procedures need to be evaluated. Appraisal data can be used to monitor the success of a firm's recruitment and selection practices. From this data, the firm can determine how well employees who were hired in the past are performing.


Performance Appraisal and Employee Evaluation

Employee evaluation is a major objective of performance appraisal. Given the major functions of management -- planning, organizing, leading and controlling -- it is clear that evaluations (controlling) need to be done.

At its most basic level, performance appraisal is the process of examining and evaluating the performance of employees. However, the need to evaluate is also a source of tension as evaluative and developmental priorities appear to clash.  Some management experts have argued that appraisal cannot serve the needs of evaluation and development at the same time.

Performance Appraisal and Total Quality Management (TQM)

With the advent of TQM (Total Quality Management) and the extensive use of teams, traditional performance appraisal systems have come under some criticism. For example, rather than motivating employees, conflict may be created when appraisals are tied to merit pay and when that merit pay is based on a forced ranking.

W. Edwards Deming, the founder of total quality management (TQM) has long been associated with the view that performance appraisals ought to be eliminated. Many TQM proponents claim that performance appraisals are harmful.

However, there is  no doubt that, without safeguards such as appropriate design, adequate administrative support, comprehensive job analysis / description and training for appraisers, conventional performance appraisal processes risk becoming just another of the many bureaucratic rituals supervisors and subordinates must endure.

Performance Appraisal Summary

Performance appraisal, while enabling a manager to identify the training needs of employees, and evolving a training plan for them, also, serves to meet other objectives. Performance appraisal satisfies the psychological needs individuals have to know how they are performing their job and increases employees' job satisfaction and morale by letting them know that the manager is interested in their progress and development. Systematic performance appraisal also provides both the firm and the employee a careful evaluation, rather than a snap judgement of an employee's performance. Many firms use performance appraisals to plan placements and transfers and to provide input into decisions regarding salary increases, promotions, and transfers.  Finally, performance appraisals may be used as a basis for the coaching and counselling of individual employees by their superiors.

To summarize the uses of performance appraisal:

• Performance improvement
• Compensation
• Placement
• Training & development needs assessment
• Career planning
• Job design error detection
• Detection of external factors influencing job performance
  • performance deficiencies may be due to family or other pressures

...assessing the staff member's adequacy to perform tasks...

...help supervisors maintain control of the work and make the most effective use of their staff resources...

...a supportable basis for making personnel decisions

.

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Before looking at specifics about performance appraisal programs, it might be useful to examine some deficiencies of existing programs.

• No one takes performance management seriously.

Too often, performance management is viewed as an HR 'program' as opposed to a strategic business tool used to drive organizational success. In some organizations there is no penalty for not giving performance reviews. Further, in other organizations,  employees have little to no involvement in the process (e.g., setting their own objectives, leading the performance discussion). In many cases, both management and employees dread the process.

• Performance criteria stimulate individual behavior rather than what is good for the entire organization.

• Performance appraisal programs reinforce a "caste system."

In many firms, there is too much of a gap between middle management and upper management as far as performance rewards go. Such programs, where compensation is tied to appraisals, tend to reinforce established "caste systems". In other words, the company's program is very successful for upper management, but depending on the manager, it varies for the 'regular' employee population.

• Performance appraisal is inconsistently applied.

Frequently, performance appraisal programs are not consistently used across the organization. This relates to the previous point regarding managers not taking the process seriously. Often, if compensation is supposed to be linked to appraisal results, there are no actual distinctions financially among the levels of performance.

• Performance appraisals often amount to little more than one more round of annual form filling.

Too often, the performance appraisal process is a source of anxiety for supervisors and subordinates alike.

The three most common appraisal methods in use are rating scales, essay methods, and results-oriented or MBO methods. Open discussions between employees and their superiors is critical to an effective appraisal process. Research shows that employees are likely to feel satisfied with the appraisal if they are given the chance to speak freely and discuss their performance. Open discussions are also related to employees' perceptions of the fairness of the process. This is particularly so when they are permitted to challenge and appeal their evaluations.

It is the nature of the evaluative process that negative feedback must be given. Employees must recognize that such feedback is provided with a constructive intent. It is incumbent upon the appraiser to demonstrate that their intentions are helpful and constructive. Criticism which is vague, ill-informed, unfair or harshly presented is likely to lead to problems such as anger, resentment, tension and workplace conflict, as well as increased resistance to improvement, denial of problems, and poorer performance.


Goal-setting is an important element in employee motivation as goals stimulate employee effort, focus attention, increase persistence, and encourage employees to find new and better ways to work. The appraisal process holds employees accountable for previously established goals.

The feedback provided to an employee must be credible and come from a credible source. To that end, it is important that the appraiser be well-informed. Further, both appraiser and appraisee should feel comfortable with and be familiar with the techniques of appraisal. Appraisers should also be knowledgeable about the employee's job and job-related performance.

PERFORMANCE APPRAISAL PREPARATION

Appraisal systems should be job-related, have standards, be practical, and use dependable measures. Considering that progression along pay scales might be effected by appraisal outcomes, any such system must be perceived to be (and actually be) fair and objective.

Some characteristics to look for in an appraisal process are:

• Objectivity / measurability
• Work relatedness of measures
• Measures are within the appraisee's control
• Measures are attainable
• Contains an appeal mechanism
• Management commitment to the entire process -- training provided where necessary
• Be simple and not take appraisers nor appraisees unduly away from their core tasks
• Be sophisticated enough to ensure appraisees' perceptions of fairness
• Measuring clear competencies only
• Provides a feedback mechanism with a link to training and development
  

PERFORMANCE STANDARDS

Performance standards are the benchmarks against which performance is measured. These standards must be based on job analyses and be directly related to the desired results of each job.

If pay increases are dependent upon the outcome of the performance appraisal, there can be no room for subjective, nebulous performance indicators. Great divisiveness, jealousy and demotivation can be caused by poor performance pay systems using inadequate or inappropriate benchmarks.

Performance Measures

PAST-ORIENTED APPRAISAL METHODS

ADVANTAGE

• performance has occurred and can be measured
• provides employees with feedback

DISADVANTAGE

• performance has occurred and cannot be changed

Comparative Evaluation Methods

• Ranking Methods
• Forced Distributions
• Point Allocation Method
• Paired Comparisons

Rating Scale Disadvantages...

• rater biases
• specific performance criteria may be omitted to make form applicable to a variety of jobs in the organization
• descriptive evaluations are subject to individual interpretation

Rating Scales

As we indicated above, formal appraisal systems are necessary in order to introduce objectivity into the evaluation process. Rating scales provide appraisers a fairly high degree of structure. Using rating scales, employee traits and characteristics are rated on a scale that usually has several points ranging from "poor" to "excellent". For example, characteristics assessed might include cooperation, communications ability, initiative, punctuality and technical competence. It is, of course, important that the traits being evaluated be job-related. In designing the scale, the human resource specialist must make reference to the appropriate job descriptions. Use of inappropriate traits could result in legal action on the grounds of discrimination.

Advantages of Rating Scales

The greatest advantage of rating scales is that they are structured and standardized. Thus, ratings can be easily compared and contrasted. Using rating scales, each employee is rated according to the same basic appraisal process. The process encourages equality in treatment for all employees.

Further, rating scales are easy to construct, to use and to understand.

Disadvantages of Rating Scales

Even though rating scales ought to be constructed with reference to the relevant job descriptions, questions must be asked about whether or not the selected traits are relevant to the jobs of all the appraisees? Often, when efforts are made to standardize an appraisal form across the entire organization, certain traits that are included will have a greater relevance for some jobs than others.

For example, the trait "initiative" might not be very important in a job that is tightly defined and rigidly structured. In such cases, a low appraisal rating for initiative may not mean that an employee lacks initiative. Rather, it may reflect that fact that an employee has few opportunities to use and display that particular trait.

In efforts to standardize the rating instrument, it is possible that factors that an employee's performance may depend on, have not been included in the selected list of relevant traits. Thus, some employees may end up with ratings that do not fairly reflect their effort or value to the organization.

Selective perception is the human tendency. Although rating scales are designed to lend objectivity and empiricism to the evaluation process, it is difficult to eliminate problems of selective perception (biases and rater inconsistencies).  Similarly, the reliability of rating instruments may be questioned if different appraisers would interpret the rating traits (such as, "punctuality") differently. What exactly does "Below average skill" mean? Different appraisers could very likely interpret this "score" differently.

Some errors are errors of perception. Other errors may in fact be deliberate. A very common rating error is that of central tendency. An appraiser, wary of confrontations or repercussions, may be tempted to give too many passive, middle-of-the-road ratings. Thus the spread of ratings for all employees tends to be clumped around the middle of the scale.

Rating Scale Summary

Using a rating scale, the rater provides a subjective evaluation of an employee's performance along a scale from high to low. Since the method provides a numerical value for each dimension or trait, an overall average can be calculated for each employee. The rating scale is inexpensive and easy to administer.

Rating Scale Example:

Checklist

The checklist is another example of a rating-type performance appraisal methodology. This rating method requires the rater to select statements or words that describe the employee's performance or characteristics. Like the rating scale discussed above, the checklist is inexpensive and easy to use. For purposes of quantification, the various items to be checked may be weighted.

Checklist example...

Critical Incident Technique

Using the Critical Incident Technique as an appraisal methodology, the rater is required to record statements that describe extremely good and bad employee behavior related to performance - CRITICAL INCIDENTS. The recorded incidents include a brief explanation of what happened. Since real incidents are recorded, this method is particularly useful giving employees job-related feedback.

The drawback of the Critical Incident technique is that it is often difficult to get busy   supervisors to record incidents as they occur.

The essay method of performance appraisal requires the appraiser to prepare a written statement about employees being appraised. The essay describes specific strengths and weaknesses in job performance. Further, the essay may suggest actions the employee might take in order to remedy problem areas identified in the appraisal.

The essay may be written by the appraiser alone, or it be prepared with input from the employee.

While the rating scale is structured and confining, the narrative essay allows the appraiser to examine any relevant issue, attribute, or performance. Thus, appraisers are able to place emphasis on whatever issues or attributes they feel are appropriate. In this sense, the narrative essay is open-ended and flexible.

For example, the narrative essay may indicate that the incumbent’s job description needs revision. Further, additional comments in the essay may pertain to the conditions and circumstances of effective/ineffective employee behavior. The narrative essay is also flexible enough to permit comments from the employee.

On the other hand, the essay method is time-consuming and more difficult to administer. Generally, appraisers find the narrative essay more demanding than methods such as rating scales. Furthermore, the greatest advantage - freedom of expression - is also a disadvantage. For example, different writing skills of appraisers can distort the process. Since the process is subjective (and, in general, we're striving for objectivity in evaluation), it is difficult to compare the results of different employees.

See notes from the appropriate lab...

One of your classmates wrote:

I am having problems with finding the steps in the developement of BARS...

Wilf replies...

First a citation from an HRM text...

*****

Now, Wilf's answer:

MBO... is results-oriented.

MBO... the manager participates in the process only after the employee has

• done a good deal of thinking about her/his job,
• made a careful assessment of her/his strengths and weaknesses, and
• formulated some specific plans to accomplish her/his goals.

...objectives are explicitly stated and accompanied by a detailed account of actions... This document is... discussed with the manager and modified...

At the conclusion... the employee appraises what she/he has accomplished... Next the employee substantiates the achievement...

MBO... assumption that the individual knows more than anyone else about her/his own capabilities, needs, strengths, weaknesses and goals...

...role for the Manager is to help the employee relate his/her career planning to the goals of the company.

Instead of rating performance on the basis of pre-established traits, MBO concentrates on actual job  outcomes.

Direct results can be observed, whereas the traits and attributes must be guessed at or inferred.

Management-by-Objectives (MBO)

The use of management objectives was first advocated by management theorist Peter Drucker. MBO (management by objectives), as a method of performance appraisal, is results-oriented. This appraisal method seeks to measure the extent to which predetermined work objectives have been met by the employee.

The first step in this process is to have each employee arrive at a clear statement of major features of his/her job. This statement defines broad areas of the employee's responsibility. The manager and the employee then discuss the draft jointly, and modify it as may be necessary. This occurs until both agree that it is adequate.

Working from this statement of responsibilities (broad goals), the employee then establishes her/his objectives or 'targets' for a specified period (say, twelve months). These targets are specific actions which the employee proposes to take:

For example:

• setting up regular staff meetings to improve communication,
• reorganizing the office,
• completing or undertaking a certain study, etc.

The objectives are explicitly stated and accompanied by a detailed account of actions the employee proposes to take to achieve them. This document is, in turn, discussed with the manager and modified until both are satisfied with it.

At the conclusion of the specified period, the employee appraises what she/he has accomplished relative to the objectives set earlier. Next the employee substantiates the achievement of the set objectives with factual data wherever possible.

An interview between the manager and the employee is then scheduled. This interview includes an examination by the manager and the employee of the employee's self-appraisal. The interview culminates in a resetting of targets for the next time period.

Throughout the process, the manager has veto power. In practice a manager rarely needs to exercise it.

An advantage to this MBO process is that it is based on the assumption that the individual (employee) knows more than anyone else about her/his own capabilities, needs, strengths, weaknesses and goals. The proper role for the Manager is to help the employee relate his/her career planning to the goals of the company. The manager can help, associate, test and validate soundness of the employee's goals and the plans for achieving them. If the manager accepts this role, the performance appraisal process moves from judging an employee's personal worth to advising, guiding and encouraging.

As an appraisal (as opposed to planning) method, the MBO approach overcomes problems that result from assuming that all traits necessary for job success can be identified and measured (see Rating Scale). Instead of rating performance on the basis of pre-established traits, MBO concentrates on actual job  outcomes. Clearly, if an employee meets or exceeds a set of  objectives, then he or she has demonstrated an acceptable level of job performance. Using MBO, employees are not judged on someone's subjective opinion of their abilities. Direct results can be observed, whereas the traits and attributes must be guessed at or inferred.

A further advantage of MBO is that the emphasis is on the future rather than on the past. Appraisal thus becomes a means to a constructive end.

On the downside, using MBO can lead to unrealistic expectations about what can and cannot be accomplished. Also, while one of the strengths of MBO is the clarity of direction that comes from well-articulated objectives, this can be a source of weakness. Whereas modern organizations need to be flexible, objectives, by their very nature, impose a certain rigidity. A solution might be to make the objectives less specific. However, less specificity implies less clarity, and less clarity may lead to either employee confusion over what is to be achieved, or attempts to hide failure in fuzzy objectives.

Rater Biases

In spite of efforts to introduce objectivity into the appraisal process, so long as humans are engaged in the process, there will be a degree of subjectivity. Below is a list of possible errors:

• Halo effect
• Error of central tendency
• Leniency & strictness biases
• Personal prejudice
• Primacy and recency effect
• Contrast effect
• Spillover effect

Reasons for Performance Appraisal Failures

Where performance appraisal fails to work as well as it should, lack of support from the top levels of management is often cited as a major contributing reason.

Opposition may be based on political motives, or more simply, on ignorance or disbelief in the effectiveness of the appraisal process.

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.

Those attempting to introduce performance appraisal, or even to reform an existing system, must be acutely aware of the importance of political issues and symbolism in the success of such projects.


Fear of Failure
There is a stubborn suspicion among many appraisers that a poor appraisal result tends to reflect badly upon them also, 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.

Longenecker (1989) argues that accuracy in performance appraisal is impossible to achieve, since people play social and political games, and they protect their own interests. "No savvy manager...", says Longenecker, "... is going to use the appraisal process to shoot himself or herself in the foot."

No matter what safeguards are in place, "... when you turn managers loose in the real world, they consciously fudge the numbers." What Longenecker is saying is that appraisers will, for all sorts of reasons, deliberately distort the evaluations that they give to employees.

Indeed, surveys have shown that not only do many managers admit to a little fudging, they actually defend it as a tactic necessary for effective management.

The fudging motives of appraisers have, at times, a certain plausibility. For instance, a supervisor who has given an overly generous appraisal to a marginal performer might claim that their "legitimate" motive was the hope of encouraging a better performance.

On the other hand, fudging motives can a lot less admirable and sometimes devious: the appraiser who fudges to avoid the possibility of an unpleasant confrontation, the appraiser who fudges to hide employee difficulties from senior managers, the appraiser who fudges in order to punish or reward employees.


Judgement 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 (such as self-auditing) 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.

Feedback-Seeking
Larson has described a social game played by poor performers. Many supervisors will recognize the game at once and may have been its victims.

The game is called feedback-seeking. It occurs where a poor performing employee regularly seeks informal praise from his or her supervisor at inappropriate moments.

Often the feedback-seeker will get the praise they want, since they choose the time and place to ask for it. In effect, they "ambush" the supervisor by seeking feedback at moments when the supervisor is unable or unprepared to give them a full and proper answer, or in settings that are inappropriate for a frank assessment.

The supervisor may feel "put on the spot", but will often provide a few encouraging words of support. The game seems innocent enough until appraisal time comes around. Then the supervisor will find that the employee recalls, with perfect clarity, every casual word of praise ever spoken!

This places the supervisor in a difficult bind. Either the supervisor lied when giving the praise, or least, misled the employee into thinking that their performance was acceptable (in fact, this is the argument that feedback-seekers will often make).

The aim of the game is that the feedback- seeker wants to deflect responsibility for their own poor performance. They also seek to bolster their appraisal rating by bringing in all the "evidence" of casual praise. Very often the feedback seeker will succeed in making the supervisor feel at least partly responsible. As a result, their appraisal result may be upgraded.

Was the supervisor partly responsible? Not really. The truth of the matter is that they have been "blackmailed" by a subtle social game. But like most social games, the play depends on the unconscious participation of both sides. Making supervisors aware of the game is usually sufficient to stop it. They must learn to say, when asked for casual praise, "I can't talk about it now... but see me in my office later."

This puts the supervisor back in control of the appraisal process.


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. Perhaps drawing their attention to the contents of this website, for example, may help them to see the critical issues that must be considered.


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 very much do.


Performance Management
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. While it may not be necessary to conduct full appraisal sessions more than once or twice a year, performance management should be viewed as an ongoing process.

Frequent mini-appraisals and feedback sessions will help ensure that employees receive the ongoing guidance, support and encouragement they need.

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.

In this case, the organization may need to review the priorities and values that it has instilled in its supervisory ranks. After all, supervisors who haven't got time to monitor and facilitate the performance of their subordinates are like chefs who haven't got time to cook, or dentists who are too busy to look at teeth. It just doesn't make sense.

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.

Performance Appraisal
Bias Effects

Gabris & Mitchell have reported a disruptive bias in performance appraisal known as the Matthew Effect.

It is named after the Matthew of biblical fame who wrote, "To him who has shall be given, and he shall have abundance: but from him who does not have, even that which he has shall be taken away."

In performance appraisal, the Matthew Effect is said to occur where employees tend to keep receiving the same appraisal results, year in and year out. That is, their appraisal results tend to become self-fulfilling: if they have done well, they will continue to do well; if they have done poorly, they will continue to do poorly.

The Matthew Effect suggests that no matter how hard an employee strives, their past appraisal records will prejudice their future attempts to improve.

There is other research to support the theory that poor performers might not be given a fair chance to improve. A study of supervisors in nearly 40 different organizations found that subordinates tend to be divided into two groups: in-groupers and out-groupers.

This study, by Heneman, Greenberger & Anonyou (1989) reported that ingroupers are subordinates who seem to be favored by their supervisors. In their relationship with the boss, they enjoy "a high degree of trust, interaction, support and rewards."

On the other hand, outgroupers don't do as well. They appear to be permanently out of favor and are likely to bear the brunt of supervisory distrust and criticism. The effect is therefore similar to the horns and halo effect; supervisors tend to judge employees as either good or bad, and then seek evidence that supports that opinion.

It was found that when an ingrouper did poorly on a task, supervisors tended to overlook the failure or attribute to causes such as bad luck or bad timing; when they did well, their success was attributed to effort and ability.

But when a outgrouper performed well, it was rarely attributed to their effort or ability. And when an outgrouper performed poorly, there was little hesitation it citing the cause as laziness or incompetence.

It is not clear how supervisors come to make the distinction between ingroupers and outgroupers. Whatever the criteria, however, it is clearly not objective, equitable or reliable.

This bias must inevitably lead to a distortion of the appraisal process. It must also be a source of frustration for those employees who are discriminated against.


Frustration
The extent of this frustration was explored by Gabris & Mitchell. They studied an organization with a quarterly performance appraisal system. The workforce was divided into two groups: those who had been given high appraisal results consistently, and those who had low results consistently.

When the groups were asked if the appraisal system was fair and equitable, 63 per cent of the high performers agreed, compared to only 5 per cent of the lower performers.

The groups were asked if their supervisors listened to them. Of the high performers, 69 per cent said yes, while among the low performers, 95 per cent said no.

Finally, when asked if their supervisors were supportive, nearly half of the high performers agreed that they were, while none (nil, zilch, zero!) of the low performers agreed.

Of course, not everyone who gets a poor appraisal result is a victim of supervisory bias. Nor are all supervisors prone to making the same degree of ingroup and outgroup distinction. The effects discussed here are tendencies, not immutable effects.

But to some extent, it appears that certain employees may be unfairly advantaged, while others are disadvantaged, by bias effects in the judgements of supervisors.

It is a cardinal principle of performance appraisal that employees should have the chance to improve their appraisal results - especially if their past results have not been so good. It is a very serious flaw in the process of appraisal if this principle is denied in practice.

There are reasonable steps which can be taken to limit the effects of supervisory bias.


Awareness Training
The first line of defence lies in raising awareness of the problem. Supervisors need to be informed of the types of subtle bias that can interfere with their performance as appraisers. They need to understand that the ingroup/outgroup bias, for instance, reduces the morale and motivation of their subordinates.


Developing Poor Performers
Incentives, financial or non-financial, may offered to encourage supervisors to make special efforts to help poor performers improve. Supervisory appraisals, for example, might stress the importance of working with poor performers to upgrade their performance. The possibilities are extensive.


Retention of Records
Performance appraisal results should not become a permanent part of an employee's personnel record. Employees should not feel that their employment history has been forever marred because of a poor appraisal result.

If appraisal records are to be retained for long periods of time, they should be securely archived and access to them restricted. New supervisors should not be permitted to review records that are older than a few years. Employees should have the chance to make a new impression.


Counselling, Transfer, Termination
There is always the possibility that an employee who receives poor appraisal results is in fact a chronic poor performer.

Of course, no employer is bound to tolerate poor performance forever. Consistently poor appraisal results will indicate a need for counselling, transfer or termination. The exact remedy will depend on the circumstances.

Common Appraisal System Faults

Some of the most frequent faults employees find with performance appraisal systems are:

1. the reported evaluations tend to be non-specific (generalities cannot help an employee make improvement)
2. the comments in the appraisal document are inconsistent with actual performance (at least as perceived by the employees) -- the observations lack empirical evidence
3. the meetings are handled poorly and dominated by superiors who tend to use one-way communication
4. little or no constructive suggestions for improvement are made during the interview
5. consistent with the observation that superiors frequently engage in one-way communication, the individual employee has little or no input
6. the process is mechanical and contributes little to either the betterment of the organization or the employee
7. given the faults listed above, the process engenders hostility in the employees

Improving Appraisal Systems

The following suggestions might lead to a more rational performance appraisal process:

• ensure that all employees are subject to evaluation (from the president/manager down)
  • people in the organization will feel more commitment to the performance evaluation process if the supervisors who give appraisals will also be judged
• the appraisals ought to be spread out throughout the year
• supervisors faced with a pile of appraisals at any one period of time will feel overwhelmed and will likely not do a good job because they are rushed
• legal considerations and confidentiality issues must be considered
  • policies with respect to where the appraisals will be kept and who has access to them must be implemented
• self-evaluation should be encouraged as part of the process
  • this procedure may invite disagreement
  • most people rate themselves the same or lower than their manager will
  • another benefit of self appraisal is that managers frequently don't know all that's required to get the job done -- the manager thus learns more about the organization by reading the employees' self-evaluation
• have peers conduct reciprocal reviews
• have subordinates evaluate their superiors
• establish a clear relationship between salary increments and performance appraisals
• establish a policy to determine how much of the review will be based on personal observation and interaction, and how much will rely on input received from others -- make sure all employees are aware of this policy
• publicize which performance appraisal methodology you intend to use:
  • management by objectives
  • essays
  • graphic rating scales
  • weighted checklists
  • behavioral anchored ratings
  • forced choices
  • critical incidents
  • rankings
  • paired comparisons
• consider using external sources of information -- customers, clients
• use performance appraisals as a chance to clarify or communicate the intent of the employees' job descriptions
• use performance appraisals as a chance to revise job descriptions -- the interview may make it clear that the job description is inconsistent with tasks actually required of the employees
• include objectives for the coming year in the performance appraisals
• follow up on the performance appraisal recommendations

360-degree Performance Appraisal: Evaluating Employees From All Angles

Traditional performance appraisals, as discussed above, can be both subjective and simplistic. At times, they can also be deemed to be "political". In an attempt to improve this methodology, some companies have turned to 360-degree appraisals. 360 appraisals pool feedback from a department's internal and external customers to ensure a broader, more accurate perspective of an employee's performance.

360-degree performance appraisal is an attempt to answer the question: "How can a supervisor evaluate an employee he or she sees only a few hours each week?"

Using internal and external clients

360-degree performance appraisals offer an alternative by which organizations may gain more useful performance information about employees. Because all clients/customers an employee comes into contact with can conceivably have input into the performance appraisal, this methodology can also makes them more accountable to their customers.

Using a courtroom metaphor, one could say that, rather than having a single person play judge, a 360-degree appraisal acts more like a jury. People who actually deal with the employee each day have an opportunity to create a pool of information from which the appraisal is written. Internal clients may include supervisors, subordinates, co-workers, and representatives from other departments. External customers may include clients, suppliers, consultants and customers.

Perceived fairness

Given the use of a wide variety of sources for information in the 360-appraisal process, this method provides a broader view of the employee's performance. Frequently, the employee on whom the appraisal is being done (the ratee) will feel that the process is more fair.

Validity

Very often, an employee's peers know their behaviors best. Consequently, employees cannot hide as easily in 360-degree appraisals.

Employee development

360-degree appraisal enables an employee to compare his or her own perceptions of their work performance with the perception of others. As such, the method facilitates employee self-development. Feedback from one's peers is more likely to lead to changed behaviors.

Accountability to customers

A 360-degree appraisal process provides a formalized communication link between the employee being evaluated and their customers. These people now have feedback into the employee's performance rating. As such, the process is likely to make the employee more accountable to his or her various internal and external customers. Furthermore, organizations can also use this feedback to create more customer-oriented goals for the following year.

The raters: how many and who?

One issue employers must solve in implementing a 360-degree appraisal program is determining how many raters should be involved. Next, the organization must decide who should do the rating. Generally speaking, less than five raters limits the perspective while more than ten raters is likely to make the appraisal system complex and time consuming. A firm would be well advised to develop a workable definition of what constitutes a peer, an internal customer, an external customer, a supervisor, etc. For example, to be useful, the customer ought to be one who has significant interactions with the ratee.

Some organizations permit the ratee to develop a list of key internal and external customers that he or she interacts with. The ratee then recommends five to ten of these individuals to serve as raters. In this process, the supervisor still retains the ultimate responsibility for the appraisal and therefore ensures that appropriate raters are selected. The ratee is thus prevented from stacking the deck with supportive customers.

Another option has the raters selected at random from the ratee's team by a computer-generated system. Those selected are then notified by E-mail to participate in the appraisal.

Limitations on the use of external clients

An organization contemplating the use of the 360-degree process must keep in mind that reviewing that organization's employees' performance is not the customer's business. To ensure the customers' cooperation, the process should be a mutually beneficial process.

Furthermore, the various external customers would ideally evaluate the ratee only on the behaviors or work incidents that they have directly observed. This, of course, also holds for internal raters.

Summarizing the data

Once all raters have supplied their appraisals, the employee's supervisor is generally responsible for summarizing the data and determining the final performance rating.

After summarizing the data, the supervisor conducts the formal appraisal interview with the ratee.

Another variation of the summary process makes the ratee responsible for summarizing the feedback data from the raters. The ratee then submits a summary analysis to his or her supervisor. The ratee and the supervisor then meet to determine the ratee's final performance rating and development plan.

Rater confidentiality

Organizations must decide whether the feedback from the various raters should be kept anonymous or be identified to the employee. Sometimes raters give fuzzy feedback because of the fear that the feedback might come back to them.

One rule rule might be that no rater can give negative feedback in the appraisal unless that rater has previously given the feedback directly to the ratee. Most organizations should start with a policy of confidentiality until sufficient understanding, maturity and organizational trust is achieved.

Prescriptions for legally defensible appraisal systems...

• system should be formal
• appraisal should be based on job analysis
• rating should be on specific work dimensions rather than on overall or global measures
• performance standards must be communicated to employees
• raters should be trained
• evaluators should be given specific, written instructions about the standards and the process
• use more than one independent evaluator of performance
• evaluators must have ample time to evaluate performance
• use objective data whenever possible
• data should be empirically validated
• procedures for appraisal must not differ as a function of race, sex, color, national origin, marital status, or age
• avoid ratings on traits, personality, or aptitude
• behavioral documentation should be given for extreme ratings (critical incidents)
• employees should be given an opportunity to review their appraisals
• a formal appeal system should be available

N.B.: When the Vice President/Division Head submits an annual merit increment recommendation, the content of the employee's appraisal should be consistent with and directly reflect the increment recommendation. The processing of merit increases will be contingent on the receipt of performance appraisal documentation.

Guidelines for effective performance evaluation interviews...

• emphasize positive aspects of employee performance
• tell employee that the purpose is to improve performance, not to discipline
• conduct the review in private
• review the performance formally at least annually (more frequently for those performing poorly)
• make criticisms specific
• focus on performance, not personality
• stay calm; do not argue
• identify specific actions the employee can take to improve performance
• emphasize the evaluator’s willingness to assist the employee’s efforts to improve performance
• end by stressing positive

A Critique of Traditional Performance Appraisal: A TQM Perspective

Asking too much of one process

As mentioned above, proponents of TQM (Total Quality Management) have questioned the usefulness of performance appraisals. Such appraisals are deemed to be destructive of team spirit as the results of the appraisal reward individual performance rather than cooperative efforts. It is argued that there is no reason to assume that the same tool that accurately measures an employee's contributions to an organization can also effectively communicate what is expected, help in growth and development, and finally, assist in the assignation financial rewards.

The problems with traditional performance appraisal

Why can't appraisals measure performance fairly and accurately? Proponents of the TQM approach will argue that an employee's performance is largely a function of systemic factors over which the employee has little or no control.

Performance as a function of throughputs, not motivation

It is essential to TQM to understand that an organization is a system of inputs, throughputs, and outputs. Employees are inputs themselves. These employees are hired on the basis of a selection process defined by management. Further, they are then trained, given tools and equipment with which to do the job, and supervised by managers. All of these factors are outside of the employee's control. According to the tenets of TQM, if you appraise, assess, or otherwise evaluate an employee's performance, you will see that it is primarily a function of these other factors. In other words, an employee's performance is more likely to be a function of management's actions (or inactions) than of the worker's own motivation.

Unintended consequences of the performance appraisal system

Deming uses an example to illustrate how performance appraisal systems can change employee behaviors, but not necessarily their contribution to the organization's goals.

Cashiers at a supermarket are required to balance their cash receipts at the end of each day. Occasionally some cashiers will be over by a few cents and some will be under.

A manager, hoping to gain a measure of control over what happens at the cashier stations, implements a new performance appraisal system. Under this new system, no cashier can have more than three unbalanced account closings in any one month.

The outcome is clear: all cashiers are able to achieve this goal, but they do it by creating a slush fund from the days when they are over-balanced to cover the times when they are under. The manager gets what he thinks he wants, but only by unintentionally motivating employees to violate accounting principles.

TQM, variation, and performance appraisal

According to TQM, variation is a natural part of all organizational processes. A lack of understanding of variation becomes harmful when it gets combined with performance appraisal because the process deals with people's lives and self-esteem.

Consider the typical performance appraisal rating scheme (a Likert scale):

What are the consequences of using such a system? First, it forces managers to compare employees. Whereas this may be seen as desirable from some perspectives, there can be little doubt that it can also create competition and not cooperation.

A system that assigns a "number" to the performance of employees necessarily attacks their self-esteem. Furthermore, TQM proponents contend that few managers can objectively justify a distinction between "greatly exceeds" and "exceeds." The difference, if there is one, is likely to be only an opinion.

When this rating scheme is further linked to compensation, the communication to the employee is that his or her salary is determined by a one-word or one-number judgment about his or her entire year's performance: a "4" versus a "5." Are such evaluations/judgements defensible?

Why appraisals don't support teams

Several reasons help explain why existing appraisal systems aren't supporting teams as well as they need to:

• Appraisal systems were usually developed only with individual performers in mind. The ideas of self-managing work teams, cross-functional work teams and other team structures were too new or used too infrequently to take into account. The bottom line was the majority of employee and management needs were satisfied with a simpler system.
• Measuring team performance is difficult. Today's cross functional teams are likely to be made up of very creative employees. Research scientists, marketers and procurement professionals are hard enough to measure as individuals, yet alone when they are put on a cross-functional team to develop a new product. In addition to the difficulties inherent to measuring white-collar work, it is often difficult to decide were the team leaves off and the individuals begin.
• Different types of teams require different approaches to measurement. Many appraisal systems use one common set of evaluation factors. But project teams which come together for a one-shot task need to be measured in a different way than a permanent work team assigned to troubleshoot and install computer systems. And cross-functional teams are much harder to measure than homogeneous teams.
• The quality improvement movement has downplayed the importance of appraisal systems. Deming came out and said that appraisals should be abolished as they are inherently destructive systems which interfere with employee performance improvements. But American companies have not abandoned performance appraisals. As it turns out Deming was right, but only if the system was poorly designed. But the payoff from well-designed appraisal systems can be enormous. One company has been able to document $20.8 million in performance improvements due to a new appraisal system.