Performance appraisal


A performance appraisal, is a periodic process where the job performance of an employee is documented and evaluated.
Performance appraisals are most often conducted by an employee's immediate manager or line manager. While extensively practiced, annual performance reviews have also been criticized as providing feedback too infrequently to be useful, and some critics argue that performance reviews in general do more harm than good. It is a principal-agent framework that describes the relationship of information between the employer and employee, in particular the direct effect and response received when a performance review is conducted.
Performance appraisals are a part of career development.

Objectives

Performance appraisal, as part of a performance management system, aims to increase the efficiency of the organisation and reduce inefficiencies that arise from subordinate work that fails to align with corporate goals. Performance appraisal interviews provide feedback to employees, at the same time facilitating collaboration and discussion on pay, career development and progression, and employee discipline, clarifying the expectations of subordinates, communicating their effectiveness in achieving those goals, and ideally improving employee engagement and satisfaction. Appraisals can also enhance motivation by recognizing the contributions of employees and providing them with growth opportunities. Although they can help facilitate management-employee communication, if not executed appropriately, they may result in legal issues or instead weaken employ morale towards organizational goals and values.
Performance appraisals may increase diversity in leadership positions by ensuring fairness in hiring and promotion, particularly of individuals of socially-excluded backgrounds, especially when such appraisals are done in a culturally-sensitive manner. Such appraisals may also provide an opportunity to prevent misunderstandings that may arise, including those stemming from cultural differences. Appraisal methods are not necessarily able to be transferable cross-culturally. Labor unions provide a platform against the misuse of appraisals to reinforce managerial bias or justify unfair terminations, particularly of marginalised persons. Some unions have argued that these systems be accessible to employees and their representatives, and should reflect collective efforts rather than focusing solely on individual accomplishments, as collaboration is key in creating an inclusive public workforce.
Some management theorists have argued that performance appraisals are crucial for manager in sales and other departments or industries. In the public sector, the usage of performance appraisals may further align with public-service values of transparency and accountability.

Implementation

A performance appraisal is a systematic, general and periodic process that assesses an individual employee's job performance and productivity in relation to certain pre-established criteria and organizational objectives. Other aspects of individual employees are considered as well, such as organizational citizenship behavior, accomplishments, potential for future improvement, strengths and weaknesses. There are three main methods of data collection: objective production, personnel, and judgmental evaluation. Judgmental evaluations are the most commonly used with a large variety of evaluation methods. Historically, appraisals have been conducted annually ; however, many companies are moving towards shorter cycles, and some have been moving into short-cycle appraisals.
The use of multi-source feedback – incorporating evaluations from peers, subordinates, and customers – over traditional supervisory ratings may assist to improve rating accuracy by reducing leniency bias and centrality bias. Transparent appraisal systems reduce the risk of surprise negative evaluations, a concern especially pertinent for socially excluded groups that may already face systemic bias in the workplace. Cognitive biases such as the anchoring effect and halo effect can impact the accuracy of appraisals used to identify training and professional development needs by relying too heavily on initial information when making judgments or a rater's overall positive impression of an individual, both of which can influence the assessment of performance, leading to biased judgments that influence evaluations. Researchers have found that the organizational citizenship behavioral dimensions of altruism and civic virtue can have just as much of an impact on manager's subjective evaluations of employees' performances as employees' objective productivity levels.
Performance appraisal systems serve the purpose of documenting appraisal processes and results. Proper documentation ensures performance is recorded transparently, safeguarding all parties in case of disputes around wrongful termination or discrimination.

Characteristics

Performance appraisals can provide room for discussion in the collaboration of individual and organizational goals.

Process

The performance management process begins with leadership within the organization creating a performance management policy. Theorists such as Peter Drucker have argued that performance management and appraisal systems ought to align individual and organizational performance. Activities to support the appraisal process include suitable models of assessment, appropriately credentialed staff, employee engagement training, and improvement actions.

Data collection

  • The objective production method consists of direct measures such as sales figures, production numbers, and the electronic performance monitoring of data entry workers. Although these measures deal with unambiguous criteria, they are usually incomplete and of reduced validity because the variability in performance can be due to factors outside of the employee's control, and because the quantity of production does not necessarily indicate the quality of the products.
  • The personnel method is the recording of withdrawal behaviors. Most organizations consider unexcused absences to be indicators of poor job performance, with all other factors being equal, although this might not actually be the case in practice.
  • Judgmental evaluation is the appraisal of performance by judgments of other employees, supervisors, or customers, commonly by way of rating. These tools typically take the form of a multi-format questionnaire that might include VAS, Likert scoring and the collection of both quantitative and qualitative data by a number of means. The most common types of error in collecting such data are cognitive biases and statistical errors such as leniency errors, central tendency errors, and errors resulting from the halo effect.

    Rating methods

For judgmental evaluations, raters are often trained to improve the validity of the data and reduce errors. Although meaningful in theory, such training may be expensive, time-consuming, and fail to produce meaningful results.
It is not uncommon for rating inflation to occur due to raters being motivated to give higher ratings because of the lack of organizational sanction concerning accurate/inaccurate appraisals, the rater's desire to guarantee promotions or salary increases, the rater's inclination to avoid negative reactions from subordinates, and the observation that higher ratings of the ratees reflect favorably upon the rater.
The main methods used in judgmental performance appraisal are:
  • Graphic rating scale: graphic rating scales are the most commonly used system in performance appraisal. On several different factors, subordinates are judged on 'how much' of that factor or trait they possess. Typically, the raters use a 5- or 7-point scale; however, there are as many as 20-point scales.
  • Employee-comparison methods: rather than subordinates being judged against pre-established criteria, they are compared with one another. This method eliminates central tendency and leniency errors but still allows for halo effect errors to occur.
  • *The rank-order method has raters ranking subordinates from "best" to "worst", but how truly good or bad one is on a performance dimension would be unknown.
  • *The paired-comparison method requires the rater to select the two "best" subordinates out of a group on each dimension then rank individuals according to the number of times each subordinate was selected as one of the "best".
  • *The forced-distribution method is good for large groups of ratees. The raters evaluate each subordinate on one or more dimensions and then place each subordinate in a 5 to 7 category normal distribution.
  • *The method of top-grading can be applied to the forced distribution method. This method identifies the 10% lowest performing subordinates, as according to the forced distribution, and dismisses them leaving the 90% higher performing subordinates.
  • Behavioral checklists and scales:
  • *The critical incident technique concerns "specific behaviors indicative of good or bad job performance". Supervisors record behaviors of what they judge to be job performance relevant, and they keep a running tally of good and bad behaviors. A discussion on performance may then follow.
  • *The behaviorally anchored rating scales combine the critical incidents method with rating scale methods by rating performance on a scale but with the scale points being anchored by behavioral incidents. Note that BARS are job specific.
  • *In the behavioral observation scale approach to performance appraisal, employees are also evaluated in the terms of critical incidents. In that respect, it is similar to BARS. However, the BOS appraisal rate subordinates on the frequency of the critical incidents as they are observed to occur over a given period. The ratings are assigned on a five-point scale. The behavioral incidents for the rating scale are developed in the same way as for BARS through identification by supervisors or other subject matter experts. Similarly, BOS techniques meet equal employment opportunity because they are related to actual behavior required for successful job performance.
  • A mixed-standard scale is a behavior-based rating process used during employee appraisals. The scale was originally developed in Finland.