Employee Performance Appraisal

Best Practices Management Essay

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Introduction
The Software development industry is a vital part of the economy worldwide even
during economic insecurities. As a result of the ever increasing globalization of
markets and the need for improved efficiency, organizations are investing on
software that allows them to do business in competitive markets. This has lead to the
growth in the software development industry.
The growth in this industry has lead many companies to shift to countries with a low
cost of development. Today the development of new software is outsourced while the
management is situated in western countries. This has lead to more efficient costcontrol over the process.
hSenid Business Solutions is a software development company specializing in Total
Human Resource & Payroll Management Solutions, Time & Attendance Solutions,
Outsourcing, Gold Trading Solutions, Community Development Management
Solutions, Customized Software Developments and ASP Solutions.
The Company was established in 1997 by Mr. Dinesh Saparamadu with few
engineers. Today hSenid is a software development company with offices in United
States, Singapore, India and R&D centers in Sri Lanka & Malaysia. The Company has
made a significant impact on the IT industry both, locally and globally with its
unique and innovative range of products.

As mentioned above the Business Solutions division of hSenid is specialized and

globally recognized in building comprehensive HR applications that assist HR
professionals to effectively manage their human resource and implement HR best
practices. These solutions have been specially designed to meet employee needs
swiftly and consistently, aligning manpower and skills with organizational goals and
mission.

The capturing, maintaining and updating of employee related information stands at

the very core of any HR or personnel management work. It is an elementary stepping
stone to all other tasks. Hence a core HR module is required to build and maintain a
database which would serve as a centralized location for other modules to access
information.
The Employee Master Information module has been designed for this purpose. It
includes a comprehensive set of tools, capable of capturing a wide variety of relevant
employee data, maintaining them with a high level of security, displaying the details
in a very logical manner and providing the necessary information to all other parts of
the HRM solution. In addition modules such as Time and Attendance, Leave
Management, Payroll, Benefits Administration have been designed to manage
various HR functions.
The success of hSenid however lies in their creativity and innovation. Abiding by
their mission to innovate hSenid has introduced the Software As A service (SaaS)
delivery model. As the world is gradually moving towards the concept of cloud
computing, SaaS has offered a platform upon which Small and Medium Sized
Businesses could reap the benefits of low-cost software solutions. The new model
bears minimum investment unlike the alternative option of purchasing the software
upfront. Hence businesses adapting to the new model would benefit from the cost
savings in administration costs, standardization, increased speed and quality of
work.
hSenid aims to grab the attention of businesses towards the modern trend of the
industry by providing their software solutions across a common platform. The SaaS
model has paved the way in this regard. However the Human Resource functions of
each organization is not standardized. One such HR function which varies based on
the industry is Performance Evaluation of Employees. Organizations adopt various
methodologies to measure the performance of its employees. Thus if the HRM
solution is to be deployed as a Service, Standardization is of significant importance
since it is intended to cater the requirements of all potential clients.
It is evident that all organizations are on the look out to retain motivated and skilled
employees. Employee retention is considered as an integral aspect of HRM. As
mentioned above due to the diversity of requirements among most organizations
developing a Performance Appraisals module is considered as a challenging task.
Hence the development of an appraisal model that could be implemented across a
common platform laid the foundation for the research.

The research was focused on proposing an evaluation model which could be deployed
across a common platform. It was understood that the standard model should satisfy
the requirements of most organizations and possibly exceed majority of the
requirements. Various employee performance evaluation methodologies were
evaluated to gather information on the best possible solution. The drawbacks and the
advantages of each of these models were considered in developing the suggested
approach. Furthermore it was imperative that the proposed approach could be
implemented as a software solution. The research also involved a thorough study on
aspects which have an impact on performance appraisals. A study was carried out to
identify best practices that should be followed in order to execute a sound appraisal.
The report highlights the approach and the methodology used to develop a Standard
Framework, which would address the above mentioned issue. A survey was
conducted to gather information on various Performance Evaluation practices.
Banking and Telecommunication industries were considered for research purposes.
It is recommended that hSenid develops an Employee Compliance tracking module
to further enhance the process of performance evaluation. Furthermore the research
team recommends a list of best practices that could be adopted in the appraisal
process.

2. Review of Related Literature

From an organizational perspective performance is usually defined as the extent to
which an employee contributes to achieving the goals of the organization.
Performance appraisal is broadly defined as the process of identifying, evaluating,
and developing the work performance of the employee in the organization.
Appraisals are aligned with organizational goals and objectives whilst benefiting
employees in terms of recognition, receiving feedback, and offering career guidance.
(Lansburry, 1988).

Employee performance appraisal is an essential aspect in any organization and is

practiced since centuries. Longenker and Fink (1999) cited several reasons that
formal performance appraisals should be practiced in organizations. According to
them, formal appraisals are required to justify HR decisions such as promotions,
demotions, pay rises etc. Appraisals are also required to determine employee training
needs. The authors have cited that a recent study on high performance organizations
indicate that performance appraisal is one of the top 10 vehicles for creating

competitive advantage. On the other hand ineffective appraisal systems could give
rise to many problems including low morale, decreased productivity and a lessening
of the employee's enthusiasm, support for the organization. (Somerick, 1993).
It is mainly the advocates of TQM (Total Quality Management) who oppose the
implementation of performance appraisal in organizations (Deming, 1986; Glaser,
1993; Kane and Kane, 1992). Deming is of the view that 85% of the factors that affect
the employee's performance flow from the system which are beyond the control of
the employee, and only 15% of the factors are attributable to the employee. On the
other hand, human resource (HR) practitioners do not subscribe the view of TQM
proponents. HR practitioners often claim that performance appraisal is an essential
part of an organizational culture and it is required to assess organizational progress
towards goals (Daley, 1993; Landy and Farr, 1983). Aldakhilallah and Parente (2002)
have developed a performance appraisal process, known as TQMPE (Total Quality
Management Performance Evaluation) and is said to be a revised version of the
conventional methods of performance appraisal.
The following factors are considered as the benefits of an appraisal system,
Enables employees to identify their strengths and weaknesses
Provides an opportunity to motivate employees and encourage for better
performance.
Lets determine the need for further training.
Helps to set goals for future superior performance.
Organizations at all levels are trying to ensure that their departments and units are
doing more with less. In this context employee performance appraisal system can be
considered as a tool that can measure and suggest how to improve productivity
(Vallance, 1999).
In the modern context the common approach used in employee performance
appraisal is the use of a numerical or scalar rating system whereby managers are
required to score an individual against a number of objectives/attributes. In some
companies, employees receive assessments from their manager, peers, subordinates,
and customers, while also performing a self assessment.
The popular methods used for performance appraisal are,

Management by Objectives
360 degree appraisal
Behavioural Observation Scale
Behaviourally Anchored Scale
Trait based systems are also used in some organizations which rely on factors such as
integrity and conscientiousness. However since Trait based systems are based on the
personality traits, they make it difficult for a manager to provide feedback that can
initiate positive change in employee performance. This is due to the fact that even
though an employee can change a specific behaviour they cannot change their
personality.
Further Trait-based systems, because they are vague, are more easily influenced by
office politics, causing them to be less reliable as a source of information on an
employee's true performance. The vagueness of these instruments allows managers
to fill them out based on who they want to/feel should get a raise, rather than basing
scores on specific behaviors employees should/should not be engaging in.
(Wikipepedia, 2009)
Management by Objectives (MBO) is a process where the management sets the
objectives and the employees agree on the objectives and understand their role
within the organization.
An Important aspect of MBO is the measurement of the employee's actual
performance against the standards that is set. Since employees themselves have been
involved with goal setting and choosing the course of actions to be followed by them,
they are more likely to accomplish their responsibility. The advantage of the MBO
model is that employees gain a clear understanding of what is expected of them. i.e
their roles and responsibilities. Furthermore employees are motivated as they are
actively involved in the goal setting process. The MBO model also facilitates better
communication and coordination among superiors and subordinates. This in turn
helps employees to maintain good relationships within the enterprise.
However the MBO model does not take into account the context in which the goals
are set. Furthermore it does not address the issue of responding to obstacles and
constraints that the employee may come across when reaching the goal. Companies

also tend to evaluate their employee against the "Ideal" employee. In other words
MBO focuses on what employees should be not what they should do.

The 360 Degree Feedback performance appraisal model refers to feedback that
comes from all around an employee. In other words feedback on individual
performance is provided by subordinates, peers, and supervisors. It also includes a
self assessment and sometimes feedback from clients and other sources such as the
stakeholders.
The results from the 360-degree feedback are generally used by the person receiving
the feedback to plan personal development. Results may also be used by
organizations in making administrative decisions such as promotions.
However there is significant controversy as to whether the 360 feedback model
improves employee performance or whether it decreases employee performance.
Most organizations opt for an anonymously filled up 360 degree feedback document.
The gathered data is then tabulated in a confidential manner. The results are shared
with the person whose skills and performance were evaluated. This approach relies
heavily on the relationship, trust and satisfaction that the employees exhibit with
their supervisors and therefore is highly subjective.
The lack of accountability has been an issue with the 360 degree evaluation model.
Since the feedbacks are coming from anonymous sources there is a significant
question mark as to whether the feedback could be used for something other than
development purposes. "When anonymous feedback from peers is improperly used, a
department stand to destroy whatever trust and credibility existed between manager
and employees." (Carey,1995, p.56)
Finally the information alone will not be useful in changing the behaviour of the
employees. It takes a considerable amount of time to digest and form realistic action
plans. If the feedback obtained from the 360 degree feedback is not converted to a
realistic plan it is bound to lose the value of the entire evaluation process. (Waldman
& Atwater, 1998, p.17)
Furthermore techniques such as essay appraisal, graphic rating scale, forced choice
rating scale, field review, work standards approach, ranking methods, assessment
centres are also used in the appraisal process.

In Essay Appraisals the appraiser is required to write an essay on the employee's

strengths, weaknesses and the potential skills. This technique is less complex and is
more valid as compared to other appraisal methods. The drawback however is the
difficulty involved in combining and comparing essays as it might include various
aspects on an employee's performance and qualifications. In other words the essays
might not follow a standard format; hence essays written to evaluate employees
might differ in terms of the aspects covered in the essay.
Graphic Rating Scale is a consistent and reliable method. A person's quality and
quantity of work is assessed in a graphical scale. Several personality traits such as the
employees' cooperation and reliability are taken into consideration in this method.
The advantage of this method is that it is more economical to develop and is less
complicated. Although the Graphic Rating Scale method is widely used it is under
frequent debate among HR professionals.
Forced Choice Rating technique is unbiased compared to other rating methods. This
method does not involve a third party in the appraisal. The raters are required are
required to choose among groups statements those that best fit the individual
employee and those that least fit him/her. The statements are then weighed and
scored the same way psychological tests are scored. This technique however is
limited to lower and middle management levels in organizations as the levels of jobs
are similar to make standard common appraisal forms for the group.
Field Review is a group judgement technique, which tends to be more fairer and valid
than individual ratings. In this method a member of the personnel department meets
with a small groups of raters from each supervisory unit and goes over each
employee's ratings with them. The advantage of this method is that, each rater
conceives uniform standards, arrives at group consensus whilst identifying areas of
disagreement. The biggest drawback of this method is that it consumes a
considerable amount of time.
In Assessment Centers, the assessment for future performance or potential of the
employee is assessed in contrast to the past performance. In this method individuals
from various departments are brought together and they spend two or three working
days on group assignments similar to ones they would be handling if they were
promoted. The pooled judgement of the observers leads to order of merit ranking on
the participants.

Ranking Methods are useful when two employees who work for different supervisors
need to be compared. In this method appraisal forms are not particularly useful. This
method is also used to compare people in separate units of an organization.
Work Standards Approach is a technique where daily performance standards are set
for each employee. It is focused on improving productivity and could be used to
provide an accurate and objective appraisal of work for each employee. This method
revolves around spending a considerable amount of time on observing the employees
on the job, simplifying and improving the job where possible and arriving at realistic
output standards. However the drawback is that employees are rated differently and
hence makes it difficult to draw comparisons among employees especially in
situations such as salary increase and promotions.
In most performance appraisal programs/systems the superiority of the supervisor is
over-emphasized which might be damaging especially in an organizational culture
which is focused on employee participation. On the other hand when negative
feedback is communicated to employees, it might fail to motivate employees and
often result in worse performance. In some organizations employees are unaware as
to whether an appraisal system exists. An appraisal system would not be successful if
the appraised does not know the criteria under which he/she is evaluated. Hence the
communication of evaluation criteria is of utmost importance. The issue of tough and
lenient raters/evaluators is also of concern. Some departments might have highly
competent employees as compared to other departments. In such situations
appraisals can be highly intensive. Biasness in organizations is often the biggest
drawback of appraisal systems, which may result in non competent employees being
rewarded. This would demotivate highly competent employees, thus resulting in an
organizational culture which is less active and dynamic.

3. Research Approach
3.1. Methods
This research was primarily conducted based on the information gathered through
the World Wide Web. In addition an interview session was held with Mr. Sampath
Jayasundara to obtain an insight into various performance evaluation
methodologies. Questionnaires were also used to gather information on employee
opinions. The questionnaires were designed to investigate the various approaches
used by organizations to measure the performance of its employees. A total of 200
questionnaires were distributed amongst employees from the Banking and

Telecommunication sectors. The questionnaire used a combination of both open

ended and close ended questions with the intention of obtaining additional
information from the recipients. Each team member focused on collecting
information from 40 employees, which required personal visits to selected
organizations.

3.2. Results
Majority of the employees are of the view that the appraisal system prevalent in their
organizations does not take into account the external aspects relevant to their
occupation. Most employees complain that even though they perform a dual role, the
evaluation considers only the activities related to their respective designations.
Employees state that the evaluation systems are obsolete and have not been reviewed
frequently. The lack of employee involvement in the goal setting process has also
been raised as a concern. Furthermore in most organizations annual appraisals are
conducted in a very short time period. Hence certain aspects are often ignored.
Results indicate that approximately 67% of the employees suggest that the existing
appraisal system is not satisfactory. They are of the view that supervisors and
managers tend to forget the achievements made by an employee as time passes by.
Elaborating further some employees went on to say that all the hard work done at the
beginning of the year is often forgotten at the time of appraisal. This in turn results in
employees being evaluated on their current performance as opposed the overall
performance within the year. Around 9% of employees shared an interesting opinion.
These employees were of the view that existing appraisal system was satisfactory and
that it required minor alterations. They were also of the view that the employees tend
to complain about appraisal systems when they do not receive the expected benefits.
Around 60% of the employees believe that the appraisal process should be conducted
in a methodical manner and that supervisors should maintain clearly documented
achievements and failures of each employee. This will in turn serve as a guideline in
the appraisal process and will obviate the need for an informal assessment. This will
also eliminate the focus on relationships in a corporate environment. Employees
suggest that they should have the opportunity to view their achievements and failures
(areas of improvements) over a time period. The following section provides a detailed
analysis on the data gathered through questionnaires.
The following section provides a detailed analysis on the data gathered. It was
interesting to note that the opinions of employees in both sectors followed a similar

pattern. Questionnaires were formulated to gain a precise understanding of

individual perspectives. The use of both open and close ended questions enabled the
research team to gather a vast amount of information relevant to the research.
Do you believe that the existing Appraisal System is satisfactory?
Answers
Industry
Strongly Agree
Agree
Disagree
Strongly Disagree
Neutral
Banking
7
15
33
39
6
Telecommunications
11
19
24
38
8

18
34
57
77
14
Table 3.1. Employee opinions on existing appraisal systems
As mentioned above a large percentage of employees are not satisfied with the
prevalent appraisal system. As Table 3.1. indicates 26% of employees agree that the
existing system is satisfactory. These employees argue that "employees who perform
well are always recognized". Furthermore the use of diverse assessment criteria was
also highlighted as a justification to the successfulness of existing appraisal systems.
What measure would you think is most suitable to solve issues in existing appraisal
systems?
Answers
Industry
Change Existing System
Alter the existing system and continue
Introduce a novel concept
Merge Existing Appraisal Models
Shouldn't be changed
Banking
25
16
19

24
16
Telecommunications
28
14
23
22
13
53
30
32
46
29
Table 3.2. Employee opinions on measures to solve the issue
As Table 3.2. indicates when questioned as to what measures could be taken to solve
the issues, a considerable amount of employees stated that either the existing system
should change or an alteration should be done to the existing system. However it was
important to note that 41% of employees from both sectors believed that the existing
system should either be altered or organization should adopt a combination of
appraisal models.
If the existing appraisal system is to be improved what additions/alterations do you
think are required?
Answers
Industry

Involve employees in the goal setting process

Eliminate the relationship based culture
Track employee actions throughout the year
Train the evaluators
No Improvements are needed
Banking
27
19
22
18
11
Telecommunications
23
20
16
26
14
50
39
38
44
25

Table 3.3. Employee opinions on improvement factors

The involvement of employees in the goal setting process was highlighted as one of
the key aspects that should be incorporated to the appraisal system. The results in
Table 3.3. provides evidence that elimination of the relationship based culture and
the involvement of employees in the goal setting process could improve the appraisal
systems.
Furthermore 22% of employees from both sectors suggest that the evaluators should
be trained before they perform appraisal. A small percentage of employees (12.5%)
believe that the existing appraisal systems do not require changes. These employees
questioned the sustainability of a new or a modified appraisal system and suggested
that if a new appraisal system is to be introduced it should satisfy the requirements
of all employees, which is not practically possible.
Do you think employees should retain a copy of their assessment?
Answers
Industry
Strongly Agree
Agree
Disagree
Strongly Disagree
Neutral
Banking
46
21
13
16
4

Telecommunications
37
25
17
14
7
83
46
30
30
11
Employees of both sectors displayed a common attitude towards the retention of
personal assessment copies. A significant 64.5% of employees shared critical views
on retaining a copy of personal assessments. Most of these employees argued that
copies of assessments could be used to correct their mistakes and further enhance
their skills. This would in turn be beneficial to employees in terms of personal and
professional growth. However the assessment should provide acceptable
justifications for each comment/remark.
On the other hand some employees believe that copies of assessments shouldn't be
handed over to employees. These employees stated that certain comments made by
supervisors cannot be directly justified and could only be associated with the
behaviour of each employee. Hence making a comment/remark on the behaviour of
an employee might create a environment of doubt which is not healthy in a corporate
environment.
Do you think that the time period for appraisals is too lengthy?
Answers
Industry

Strongly Agree
Agree
Disagree
Strongly Disagree
Neutral
Banking
31
19
26
18
8
Telecommunications
27
13
30
24
4
58
32
56
42
12

Table 3.4. Employee opinions on the length of appraisals

It was noted that 45% of the employees believe that the prevalent appraisal systems
are time consuming and effects the productivity of the organization. However these
employees agreed that an appraisal system is critical for any organization and that it
should be conducted in a methodical manner which consumes less time.
A Further 73% of employees are of the view that the time frame in which the
performance evaluation is conducted is insufficient. They argue that this has in turn
lead to incomplete appraisals which might not take into account the essential aspects
of the evaluation process. Organizations that conduct appraisals bi-annually tend to
limit the time consumed for the evaluation process. Furthermore since the appraisal
process does not have a direct impact on the revenue, most managers consider the
appraisals as wastage of human hours. Some employees stated that "It is the
employees that drive a business and if proper recognition is not given to the work
they do employee retention will turn out to be an issue."
Almost all the employees suggested that the appraisals should be aligned with the
designation/role of each employee. For an example the evaluation criteria used to
evaluate the performance of a receptionist should be different from the criteria used
to evaluate an engineer. The performance criteria should ideally take into
consideration the various aspects related to each designation/role. In most
organizations there is a lack of distinction between performance evaluation criteria
used for various designations/roles.
A negative attitude was visible among most employees when asked as to whether
they were satisfied with the existing process. Some employees state that if the
appraisal is to be successful all employees should actively participate in the process.
However most employees are reluctant to adhere to processes as they believe that
processes consume a considerable amount of time and results in decreased
productivity. Hence an overall change in the employee attitude towards appraisals
was considered as an important resolution.

4. Employee Performance Appraisal Best

Practices
A list of best practices was derived by the research team following the analysis of the
gathered data. It was identified that the following aspects play a vital role in
improving the effectiveness of appraisal systems.

Employee participation: based on the research outcome it was evident that most
employees believe that the appraisal systems are biased. In such a situation it is
highly unlikely that they would accept the outcome of a performance evaluation.
Participation gives an opportunity for the employees to discuss their concerns.
Performance methodology, criteria for evaluation and the evaluation form itself
could be developed with the involvement of employees. Higher employee
participation is bound to generate an atmosphere of cooperation and support. This in
turn would facilitate in the development of a healthy coaching or counseling
relationship. Appraisal related tension and rater-ratee conflicts could also be reduced
by initiating a relationship based culture. Somerick (1993) suggested that having a
dialogue session between the manager and the employees would initiate problems to
be solved immediately.
Goal setting: Goal setting consists of performance goals that are specific, challenging
and accepted. Goal setting within performance appraisal has resulted in greater
appraisal satisfaction and increased performance (Dobbins et al., 1990). Stevens
(1990) states that: "assign employees a series of goals to be accomplished in the
course of a year. When annual reviews are held, rate the employees' progress in
achieving these goals." Furthermore goal setting should take into consideration the
context in which the goals are set. It should also take into consideration the obstacles
that the employees may face during the course of the time period concerned.
Developing performance standards: Standards should be developed in order to
measure the essential job duties and responsibilities.
Performance appraisal interview: In a performance evaluation interview, the
interviewer must be aware of the employee needs to protect confidentiality and
privacy. Roberts (1994) is of the view that it is of utmost importance to provide
undivided attention during the interview and reserve sufficient time for a full
discussion of the issues.
Krug (1998) suggested asking open-ended questions would encourage employee
participation in the appraisal interview. He suggests that question such as "Do you
enjoy your job?" should be avoided and replaced by questions which would bring
about answers which are more thoughtful and informative. As an example the
question "How do you feel about working in this company?" requires a certain degree
of thought.

Self evaluation: Self evaluation is also of significant importance as it enables

employees to systematically assess their performance. Studies provide evidence that
self evaluation increases employees' perceived fairness on the appraisal process.
Employees can perform a self evaluation by completing their own appraisal form and
presenting the draft for discussion with the evaluator. McCarthy (2000) comments
that employees who have an opportunity to asses their own performance often come
up with creative solutions that would not have been considered in the one-sided
managerial evaluation. Pam Perry, vice president of human resources for CB Richard
Ellis says (cited in McCarthy, 2000, p. 25)
I have my staff write their own reviews; they do the rating and include their
comments, then we sit down together and go over them. It eliminates the debate over
who is right and who is wrong and allows us to focus on what's important. It's
valuable for employees to express their thoughts about their performance in writing.
Management feedback: Management feedback is of essential importance for two
reasons. Firstly employees' work should be appreciated when they exceed
expectations or when they perform the assigned task in an acceptable manner.
Secondly employees should also be given constructive feedback on aspects that
he/she would require improvements. If constructive feedback is not given on areas
which employees need improvement, there is a possibility that employees may
believe that their current level of performance is satisfactory. Camardella (2003, p.
105) states: Evaluating each employee as average, without specifically mentioning
strengths and weaknesses, diminishes the value of the appraisal process. When an
employee's strengths and weaknesses are explained, the employee can build on his or
her strengths and correct his or her weaknesses. Employees cannot improve their job
performance unless they are told where their performance is inadequate. To have an
effective performance appraisal system, there must be formal and informal
performance feedback.
Roberts (2003, p. 93) states that: Feedback is essential in gaining the maximum
benefits from goal setting. Without feedback, employees are unable to make
adjustments in job performance or receive positive reinforcement for effective job
behavior. Effective performance feedback is timely, specific, behavioral in nature,
and presented by a credible source. Performance feedback is effective in changing
employee work behavior and enhances employee job satisfaction and performance.
Furthermore Feedback should provide a short list of areas where the employee needs
improvement, highlight the most important ones to be improved first.

Need of a user-friendly procedure: The Performance evaluation criteria and rating

procedure should be simple enough so that they could be understood by the raters
and ratees. Essentially the performance criteria should focus on the employee's job.
It should also take into account other intangible aspects such as attitude, personality
traits, etc.
Design of specific and relevant appraisals: Employees often complain that "Our
company uses the same appraisal for all positions. Appraisal systems should be
reviewed and updated periodically to address the present situation. Some employees
state that the organizations do not change the appraisal system sufficiently, and
therefore the appraisals are not relevant at times.
Evaluator training: The results of the research suggests that most employees are of
the view that the person responsible for assessing the performance is not properly
trained and therefore is incapable of providing feedback on employees' performance.
The research conducted by the American Management Association provides evidence
that the main reason for employee and supervisor's dissatisfaction with the
performance appraisal process is that a large number of managers are poorly trained
on providing feedback to employees (cited in Krug, 1998). Mot employees are of the
view that the person who conducts the appraisal exercise should receive extensive
training in goal setting, setting performance standards, conducting interviews,
providing feedback, avoiding rating biases, etc.
In particular, top management must be aware about the competency level of the
raters as mentioned by Martin and Bartol(1998, p. 226):a review may suggest that
a rater who consistently gives all high ratings would be committing a leniency error.
On the other hand, a rater who rated most employees low may have fallen prey to the
stringency error, and one who entered most employees in the middle of the scale may
be demonstrating the error of central tendency.
Revision of the performance appraisal process: Appraisal system should be revised
periodically so that it reflects the present situation of the organization. Longenecken
and Fink (1999, p. 22) state: It is important to systematically and regularly review
system operations to make sure that process and practices are being followed and
effective. Examples of measures that can be used to assess the health of your
appraisal system include employee acceptance and trust of the appraisal systems.
Employees are subject to both conscious and unwitting assessment by their
supervisors on a daily basis. Much of this assessment is subjective and may be

affected by factors such as the ability of the employee to get on with his or her
supervisor, his or her reactions under pressure, his or her appearance, degree of
organization, levels of attentiveness and interest. While these sort of assessments are
difficult to avoid, a standard appraisal model that would take into account the above
mentioned factors would to a certain extent reduce the reliance on such informal
assessment. The following section describes the proposed appraisal model.

5. The Solution
Firstly the performance evaluation criteria should be properly structured. Each
criteria should have a clearly defined meaning along with a set of subcriteria. The
subcriteria should have their respective weights and priorities. The criteria used to
evaluate the performance of a particular employee should be specific to the
designation/role concerned. It should essentially entail the job responsibilities as
well as the expected improvements. Improvements have to be set based on a study of
each employee.
Initially the supervisor sets goals and objectives for a particular employee with
his/her participation in the goal setting process. This will ensure that the employees
have a proper understanding of what is expected of them. The supervisor then has
the responsibility of tracking 'incidents' related to the employee. In other words the
supervisor should document the activites of the employees. For an example if the
employee delights the client that can be considered as achievement. On the other
hand if the employee misses a deadline due unacceptable reasons that can be
considered as a fallout. However this process of recording actions of an employee
over a time period ensure that there is clear evidence of the actions performed by
each individual. This in turn would facilitate in an effective appraisal process and
would prevent the possibility of employees being evaluated on based on the
relationship that he/she has with the managers/supervisor. In annual appraisals the
supervisor and the employee would meet up after the specified time period. The
supervisor would then complete the appraisal based on the recorded objectives and
goals that were set initially. The recorded 'incidents' could be used to justify each
evaluation. If the employee agrees with the appraisal he/she could comment and sign
the appraisal. The process would be completed once the reviewing manager signs and
retains a copy. The supervisor and employee would receive a copy of the appraisal.
This would enable the employee to have a focus on the aspects that he/she needs to
improve and thereby will form a strong base for 'Personal Development'.

However if the employee disagrees with the appraisal he/she would be a given a time
frame to prepare the comments. The supervisors would then forward both the
appraisal and the comments from the employee to the reviewing manager. Reviewing
manager could then uphold/recommend changes to the appraisal within a specified
time period. The appraisal is sent back to the supervisor and results in a meeting
with the employee concerned.
Figure 5.1. The Proposed Appraisal Process (Main Flow)

Figure 5.2. The Proposed Approach (Sub Flow)

6. Recommendations
As described above factors such as employee participation in the goal setting process,
self evaluation, evaluator training, design of specific and relevant appraisals,
management feedback etc should be taken into consideration in developing a
'Performance Appraisal' module. Managers should be able to carry out the appraisal
processes tailored to their needs and access information in a variety of different
forms and reports. Employees on the other hand should be able to benchmark
themselves with other employees, divisions etc. The ability to define own appraisal
forms, adjust grading criteria, set goals and targets, track entire sections/divisions,
generate inputs for training are some of the essential aspects that should be
considered in developing the appraisal module.
In the knowledge based economy, it is of critical importance to deliver the right
knowledge and skills to the right people at the right time within the given financial
resources. Hence the research team recommends that a comprehensive training and
development module should be incorporated to the existing HRM solution. The
training module should provide functionalities to record training needs, track
attendance, evaluation programs, etc. The training module should be interlinked
with other HRD modules (Performance Appraisal/Management) to provide a
platform for human capital management. This in turn would enable the
organizations using the HRM product to gain a competitive advantage based on the
workforce.
Furthermore existing modules such as Competence Management & Employee Self
Service should be further enhanced to optimize the process of human capital
management. As an example defining the competency levels required for specific job
roles is an integral aspect which has to be given due consideration. Methods to assess

monitor and manage competencies of each employee should be clearly structured.

These modules should have strong relationships with modules such as Training &
Development, Performance Appraisal/Management, etc. Personal benchmarking and
the tracking of employees with highest potential are essential aspects which need to
be incorporated to the Competence Management module. Employee Self service on
the other hand should enable employees to view their personal files, update
information and perform HR functions relevant to them.
This would give employees more confidence and a better overview, which in turn
would be beneficial to the organization in retaining employees.
It is also recommended that hSenid develops an Employee Compliance tracking
module to further enhance the process of performance evaluation. Employee
Compliance should initiate an employees' commitment towards the organization's
defined rules, regulations, policies, processes and, procedures. The initiation of
aspects such as daily task updates, team meetings, action items, etc would enable the
organization to obtain feedback on each employees' actions. The feedback could then
be used in the performance appraisal process. The implementation of this module
could be elaborated as follows. Employees are assigned tasks by their respective
Managers, Supervisors etc. These tasks would be entered into a system which is
accessible by all employees. Each employee would then be able to view the assigned
tasks. Each task would have an estimated time duration and an associated effort. On
a daily basis the employee is required to lodge time for the tasks performed. However
if the employee fails to do so it can be considered as non-compliance. The feedback
obtained over a period of time would serve as a source of evaluation for each
employee. Constant maintenance of team meetings, action items, action plans to
resolve issues etc. can also be considered as a form compliance. These factors could
be used to track the progress of each employee. Employee performance in
challenging circumstances could be observed by maintaining team meetings and
action plans.
The development of an incident capturing module is also recommended as it would
serve as a form of justification in the appraisal process. In this method the supervisor
would identify and prepare a list of critical incidents, giving details of very effective
and ineffective, also positive and negative behaviour of an employee. The negative or
ineffective critical incidents represent the poor behaviour of employees on the job.
There is a separate log for each employee in the organization, which is maintained by
their supervisor or manager. These critical incidents of worker behavior is recorded
periodically by supervisors and is used to evaluate the employees' performance at the

end of a period. For this purpose there should be a methodology to note down the
critical incidents.

7. Conclusion
It is a known fact that employee appraisal systems play a vital role in retaining
valuable employees. Such appraisal systems enable employees to understand their
job responsibilities. Furthermore properly structured appraisal systems help
employees achieve personal growth. On the other hand unfair appraisal systems can
result in employee dissatisfaction which in turn would have a negative impact on the
employees' productivity. Hence it is of utmost importance to identify the various
factors that are needed to develop an effective appraisal system. The research was
carried out with the intention of developing an acceptable performance appraisal
approach that could be deployed as a software solution. hSenid Business Solutions,
the market leader in HRM products provided the platform to conduct the research.
The software-as-a-service (SaaS) delivery model is extensively used to cater small
and medium scaled enterprises (SMEs). hSenid with its vision to innovate has
initiated the deployment of HRM products as a web service. However certain HR
functionalities such as employee performance appraisals are not conducted in a
standardized manner across organizations. Hence it's imperative to construct a
standard approach/model that most organizations could utilize. In evaluating
existing methodologies it was evident that companies are concerned about problems
of equality in evaluation and effectiveness, they are also concerned about other issues
such as evaluation accuracy, mistakes in ratings, or a consideration of the cognitive
processes applied in the evaluation process.
The research focuses on the drawbacks of various appraisal approaches and aims to
provide a sustainable solution. Employee opinions and feedback from various
managers were taken into consideration in deriving a best possible approach that
could be utilized by majority of the organizations. It was concluded that effective
employee evaluation results could be achieved by considering aspects such as
informing the employees of the objectives that they need to achieve, employee
involvement in the designing of the appraisal process etc. The proposed
model/approach could be utilized by most organizations as it includes the key
aspects that any organization would be looking for. As mentioned above it includes
aspects such as the constant maintenance of an 'incident journal' which would
eliminate the drawbacks associated with the traditional relationship based approach.

Major issues such as relevance of objectives, experience gained and significance of

objectives were given due consideration in developing the proposed approach.
Proper research techniques were selected to test the effects of various appraisal
models used in the Sri Lankan banking and telecommunication industry. Feedback
of employees from these sectors was used to derive the proposed approach. From the
team's perspective the experience gained by all team members was invaluable as it
helped the team to understand, analyse and thereby provide a feasible solution for
the problem concerned. The exposure gained by interacting with industry experts,
employees of different organizations was invaluable as it provided an insight into
how the corporate world handles an important aspect as employee performance
evaluation.