Performance Appraisal Word count: 2850

HUMAN RESOURCE
MANAGEMENT ESSAY

PERFORMANCE APPRAISAL SYSTEM

11 January 2010

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Performance Appraisal Word count: 2850

INTRODUCTION

This essay is to answer the question two: “Critically evaluate the advantages and disadvantages
of individual performance appraisals/reviews. Assess to what extent such appraisals can
contribute to achieving high performance workplace.”

Firstly, the essay will present an overview of performance appraisals.

Secondly, it will talk about the advantages and disadvantages of individual performance
appraisal in comparing with team based performance appraisals.

Finally is the contribution of performance appraisal to the organization performance.

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PERFORMANCE APPRAISALS

Performance management is widespread among UK companies. CIDP survey (2005) has

reported that 87 percentages of organizations operated a formal performance management
system. Performance appraisal (PA) is an important part of the performance management. It has
been seen as an important tool to control and motivate the workplace. Redman (2005) reported
that “appraisal is particularly prominent” in many UK industrial sectors and public sectors.
Especially, all most employees of organizations are apprised by PA system. 91% respondents in
IRS survey (2005) had used PA for all employees. With organizations didn’t applied PA for all
staffs, PA was focused on managers and white-collar workers than manual workers. PA today
has combined many methods to produce reliable employee assessments and minimize
subjectivity. The organization will choose the appropriate approach to their culture and
objectives.

PA can provide many benefits for organizations. However, Taylor (1984) indicated that most
employers “use PA for two main reasons: assessing past and improving future performance”. In
practice, many organizations tend to be mixed up two purposes in one PA system. That has
raised a lot of criticism about PA. Many people have criticized about the incompatibility arise
from the different impact of these objectives on employees. Additionally, PA has been doubted
about it validity and its effectiveness on organization performance. However, today, PA is still
one of the useful methods to manage performance.

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ADVANTAGES OF INDIVIDUAL PERFORMANCE APPRAISALS

Today, team have commonplace in many organizations. Deming had emphasized on the value of
team working to organizations. However, in practice, managers usually emphasize the individual
PA and don’t support much team based appraisal. The CIDP research (2005) found that 65
percentage of organizations used individual annual appraisal. Only 6 percentages use team
appraisal. The main reason is that individual performance appraisal is easier to establish.
According to Readman (2005) there are two variants of team appraisal. The managers can
appraise the team as a whole. Then tem members will appraise each other at the individual level.
Another approach is that the managers only appraise at the team level.

In the prior approach, PA must be done at both the team and individual levels; thus, the size of
the measurement task will be doubled. In addition, it is difficult to separate the performance of
the team from the performance of the individual. Pritchard (1990) indicated that measuring
individual performance is difficult in a tem setting. That may cause difficulties in developing
measures of individuals’ contribution to the team and in data collection. It can lead to distorted
or meaningless results. Besides, according to Foot(2005) the colleagues may not know clearly
about all aspects of the individual’s job. Hence, they can’t appraise each other well. Additionally,
the relationship between members can influence appraisal. The result can also be influenced by
jealousy or rivalry in team. It may cause competition between members and detriment to team
work and individual performance. In many organizations, the team members may change
according to work task. Hence, it’s difficult in individual assessment and recognition.

In the following approach, the team performance is appraised as a whole. The managers don’t
differentiate any member performance from team performance. Ratings and reward will be equal
for all team members regardless of individual performance. According to IAG report (1993),
this can dissatisfy those who normally have outstanding ratings based on their personal
performance. Some members may also resent that their pay is dependent upon other
performance. Thus, that can decrease employees’ motivation and cause dissatisfaction.
Performance problems may not also be addressed adequately. It will cause many difficulties for
individual management such as disciplinary and promotions decision.

Because of above reasons, many managers like to use individual PA. Additionally, even though
teams are widespread in many organizations, most work is still independent. Teams may only be
used occasionally or may often change to work task. Another advantage of individual PA is that
employees prefer individual PA. The survey of Federal Employees (1992) showed that 69
percentages of employees prefer that their performance rating be based on individual
performance, not team performance. The survey also indicated that the employees prefer being
assessed by the first-lever supervisor than by coworker. Team based PA may be against UK
culture of individualism. Therefore, if the managers want to focus on team based PA, they need
provide further training for the employees.

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DISADVANTAGES OF INDIVIDUAL PERFORMANCE APPRAISAL

Despite of the popular of individual PA, many people argue that individual PA doesn’t fit with
the organizations today. Excellence depends on a culture of cross-company cooperation and
identification with the purposes of the larger organization. Thus, tomorrow’s measures of
performance will be increasingly work group-focused (Thornburg, 1991)

As work in many organizations becomes more complex, employees are increasingly dependent
upon each other to accomplish their work. Therefore, it is difficult to appraise individual
performance separating from team performance. According to Dr. Edwards Deming,
“performance of the individual cannot be measured, except possibly on a long-term basis”.
Pritchard (1990) also commented: “Organizational productivity measures have a higher
probability of being valid measures when applied to groups, not individuals, and should only be
exclusively used to determine individual performance under certain circumstances“

In addition, it is more difficult and time-consuming to set objectives and measurement standard
for individual than team. Because group performance requires a more macro focus than
individual performance, group performance goals are more likely to be consistent with the
organization s direction. (Schuster and Zingheim, 1992)

Besides, individual PA may cause competition between employees. Team based PA can restrict
competition between employees. Hence, it promotes and supports teamwork. It also encourages
stronger working relationships and better communication among employees. It can encourage
employees to share knowledge more openly with their team members in an effort to increase
their team’s overall performance. Team reward can act as an incentive for poor performers to
improve and bring themselves into line with the team’s standards.

Regardless of the advantages and disadvantages, the PA needs to fit the goals, environment and
culture of organizations. Thus, managers need to choose the appropriate PA system for their
organization. Individual PA may be used in organization encouraging individual achievement.
Team based PA may fit in organizations that have extensively incorporated teamwork into their
environment. Team based PA also fit in organizations that need to encourage successful
teamwork in order to improve the effectiveness and productivity of the organization.

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THE CONTRIBUTION OF PERFORMANCE APPRAISAL TO BUSINESS

PERFORMANCE

Even thought PA is used widespread in many organizations, it still has many criticisms. Many
people doubt about the impact of PA on business performance. There are many difficulties in
evaluating the impact of performance management separated from other factors that can also
influence on organizational performance.

However, according to CIPD (2001), there is a positive relationship between people management
and business performance. IRS employment review (2005) reported that 65% believe that PA
improves company performance. In addition, in one research, Appelbaum and her colleagues
indentify three types of people performance management that are important for business
performance. They are skill enhancing practices, motivation enhancing practices and
involvement enhancing practices.

In 2002, prior to the merger with IDEC, Biogen had launched a PA program. After 2 years,
Biogen IDEC considered that PA was” effectively changing the way it does business and helping
it build a world-class company.” (IDS HR Studies, 2005). According to 2004 survey, “nearly 90
per cent felt that they were encouraged to use their own initiative and improve their performance;
85 per cent said that they understood how their work contributed to company culture; 86 per cent
felt that their managers cared about their well-being; and 90 per cent were proud to work for
Biogen Idec.” (IDS HR Studies, 2005)

PA is a powerful tool for communication, particularly to enhance the communication between

managers and employees. In the rush and bustle of daily working, it offers a rare chance for
supervisor and subordinate to have time out for a one-on-one discussion of important work issue.
In the absence of a formal performance, some managers will give regular feedback on their
employees' performance while others don’t. A formal PA can ensure that managers and
employees meet formally and regularly to discuss performance and potential. It facilitates open
organization culture as people become used to giving and receiving feedback. An open and
mutual trust environment thus enhances the employees’ contribution for organization. They do
not just do their job but can go beyond what they are required to do. One employee after his first
PA had said: “In twenty years of work, that’s the first time anyone has ever bothered to sit down
and tell me how I’m doing”.

PA also helps employees understand clearly about their role and how it contributes to
organizational objectives. Hence, they are more likely to be committed to what they are doing.
According to CIPD survey (2009), 30% agree that performance management would help
individuals understand what they should do and how they ought to be doing it. A staff working
at NHS North Trust hospital commented: “Without individual review it would be so easy for you

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to drift and not to do anything. It keeps you on your toes. It keeps you focused. You know
exactly what you are aiming for. It makes you look at what you do and what the organization’s
trying to achieve. If you don’t have appraisal it would be so easy just to not do anything. You’d
just drift. It makes you think about where you are going and where you would like to be”.
(Redman, 2005, pp.177)

PA also provides employees the recognition for their work effort. By linking to reward decision,
it helps to motivate employees. There is criticism about linkage between appraisal result and
reward decision. However, the separation of appraisal result and reward outcome will cause bad
impression for employees. They may think appraisal is deception. It is designed to give an
appearance of open and equality environment while the pay and promotion is decided in secret.
Bannister and Balkin (1990) reported that “discussion of pay at the time of PA” increases
employees’ acceptance of appraisal and employees satisfaction. Many managers believe that
there should be a strong link between performance management and reward decision. According
to CIPD report (2009), most of managers thought that pay can only be perceived as fair and
consistent if employees feel that the better performers receive the better rewards. For example,
Vicky Bourne from Sanofi-Aventis commented: “I think people are more comfortable with pay
increases and bonuses if they can see a direct link to performance, than if they feel they are
group linked and rewards depend on other people.” (CIPD report, 2009, p.18)

PA offers an opportunity for managers and employees to recognize and agree for individual
development needs and career path. Employees have chance to participate in decision making.
Thus, it can enhance the involvement of employees. The development plan also provides
necessary training to enhance employees’ skill. That will improve the future employees’
performance and also organization performance. In 2007, Vodafone implemented a program
calling Realise. It was to develop and enhance employee engagement in the company’s culture to
improve business performance. The plan had increased the employee engagement index
increased by four percentages. The people manager index, which measures employees’
perception of their manager, rose by three percentages.

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Even though, many managers agree that PA is an essential management tool, there are many
opinions about the effectiveness of PA in practice. According to CIPD survey (2009), only 21%
agree that performance management has positive impact on organization performance while a
sizeable 23% disagree and 56% neither agree nor disagree. The problem is that performance is
great in theory but it is difficult to carry out well in practice. In IRS employment review (2005)
42.1 % agree that appraisals are often badly conducted and 37 % believe there can be too much
emphasis on paperwork.

Performance appraisal is a load of rubbish. You decide on the rating you want in the box and
then make up a few words of narrative in the other sections to justify it.(Manager from County
NatWest Group, quoted by Carlton and Sloman, 1992)

The main problem of PA is the validity. The validity of PA would be influenced by the clearly
performance criteria. Longenecker commented” If ambiguity surrounds the job description,
goals, traits and/or the behaviours that will be the basis for the evaluation the process is doomed
to fail from the start.”. Normally, managers indicate that organization measurement instrument is
inappropriate for evaluating performance. Many intangible elements of the job are difficult to
assess. Besides, there are many distorting effects influence on the accurate of the assessment and
data generation. Subjectivity and bias can change appraisal decisions. Some staff at NHS
hospital declared: “A nurse who’ an extrovert, who does a lot of mouthing off, may give the
impression that they are doing a really wonderful job and the lass who is quiet could be doing an
even better job. But because she’s not there selling herself, telling you how wonderful she is, she
often loses out here” (Redman, 2005, pp.180). Longenecker (1989) also indicated that the
political manipulation can discredit appraisal. People play social and political games to protect
their interests. Longenecker stated ’No savvy manager is going to use the appraisal process to
shoot himself or herself in the foot’. In addition, many employees may not have motivation to
rate accurately. They may think the system is not fair or they don’t understand the importance of
accurate rating to appraisees’ future career and organizational objectives. Additionally, managers
may lack of required skill and preparation to conduct an effective appraisal. A staff at NHS
North Trust hospital once said: “Conducting individual performance review on nights, at 2 am,
when people are not their best, is hardly conductive to quality process”. They also may have
limited knowledge of the actual employees’ performance. In the meeting, the managers may
criticize and do most of talking, leaving no opportunity for employees responding. However,
they may be reluctant in helping employees to create a development plan. Barge (1989, p. 359)
stated, “Who can talk openly and constructively about their personal development and growth in
a meeting where subjective opinions about performance are being expressed”. Thus, training
people to participate in PA is a vital component to ensure an effective PA.

The conflict of purposes is another reason making ineffective PA. According to Taylor, there are
two main reasons for implementing PA: assessing past and improving future performance.

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However, many problems may arise when organization try to carry out two aims at the same
time. When employees perceive the purpose is to evaluate, they don’t open up about their
development need. That can cause problem on development purpose. Many organizations
separate the pay and development meeting. The linkage between appraisal results and reward
decision is also contested. Many managers argued that close link will make the PA become a
potentially punitive system and put pressure on employees. That once happened at Xerox
Company. The appraisal process became of rating game. The aim is to get the highest possible
score. The appraisal process has put tremendous pressure on appraises and appraisers. Xerox
finally abandoned the rating system. Thus, the measurement needs to be conduct fairly and
clearly to overcome this problem.

Employment may perceive the PA as a manager control. Then the PA can’t enhance the
communication in organization. CIPD survey (2002) revealed that over half of employees felt
their performance was assessed all the time. If employees don’t understand about the purpose of
PA, PA can be time-consuming. Additionally, poorly designed system can be burden on
organization performance when PA may require participants fill in large quantities of paper
works.

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CONCLUSION

Even though PA has many issues, it still is the important tool to manage performance. The use of
PA has been increased recent years. Up to now, there are no methods can replace PA in
evaluating and enhancing employee performance. In order to increase its contribution to
organizations, it needs often to be reviewed and made changes. According to CIPD(2005) mange
mangers will make change to their PA in the next 12 months. Additionally, PA has been
influenced by changes in Human resource management and business environment. Thus the
managers need adapt and develop new appropriate PA approaches to their organizations. For
example, to overcome the conflict of purpose of PA, many organizations have changed the direct
link between employees’ performance and reward decision. Civil Service Motoring Association
(CSMA) provides employees a bonus payment if it meets performance targets. CSMA also
indicated that if a link between reward decision and individual is remade, it is likely about bonus
payment, not basic pay.

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