As perhaps the most central of human resources (HR) systems, performance appraisal has commanded the attention of organizational scientists for many years. In the organizational context, performance is usually defined as the extent to which an organizational member contributes to achieving the goals of the organization. Performance appraisal is defined as the process of identifying, evaluating, and developing the work performance of the employee in the organization, so that organizational goals and objectives are effectively achieved while, at the same time, benefiting employees in terms of recognition, receiving feedback, and offering career guidance. The terms performance assessment, performance evaluation, and performance management are also used to describe the process.
Performance appraisal is an inseparable part of organizational life. Formal performance appraisals are required to justify a wide range of HR decisions such as selection, compensation, promotion, and training. Performance appraisal characteristics include target (individual, team), type (outcome-, behavioral-, or competency-based), and data source (manager or multirater). Especially in team-based organizations there is a critical need for effective leadership in designing and implementing performance appraisal systems. Performance appraisal systems must move from a focus on the outcomes, behaviors, and competencies of teams to those of individuals.
Ineffective appraisal systems can bring many problems including low morale, decreased employee productivity, and a lessening of an employee’s commitment and support for the organization. If employees are confident in the fairness of the appraisal process, they are more likely to accept performance ratings, even adverse ones, because they perceive a fair decision making process. On the other hand, if the employees perceive the process as unfair and not systematic, it is unlikely that they will accept the outcome of the appraisal process.
One way to enhance appraisal system fairness, reach organizational justice, and face subjectivity is 360degree appraisal system design, which requires obtaining information from all sources including supervisors, subordinates, peers, suppliers, clients, and consultants.
In general, anyone who has useful information on how an employee does the job may be a source in the 360degree appraisal. On another but related issue, participation gives an opportunity to the employees to raise their voices into the appraisal process. Greater employee participation (i.e., goal-setting process, performance standards, qualitative and quantitative evaluation criteria, self-evaluation) increases employee satisfaction and generates an atmosphere of cooperation and support, reducing rater-ratee conflicts, especially during the performance appraisal interview.
The performance appraisal interview is a potentially important part of any organization’s performance appraisal system. The appraisal interview might function in several important ways: Providing feedback to employees, developing employees, and discussing compensation, job status, and disciplinary decisions. The interviewer must be sensitive to employee needs for privacy and confidentiality. It is very important to provide undivided attention during the interview and reserve adequate time for discussion.
Management’s 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.
In general, the superior’s knowledge of the subordinate’s job and performance, superior’s support of the subordinate, and welcoming the subordinate’s participation are key factors for producing effective interviews. The appropriate function, frequency, and format of the interview, as well as goal setting and actual subordinate participation, depend on characteristics of the employee and the job.
As stated, most performance appraisal systems depend heavily on subjective ratings of performance provided by supervisors, peers, subordinates, and job incumbents. Despite a heavy reliance on performance ratings, it is generally acknowledged that they are too often contaminated by systematic errors (leniency, central tendency, halo, and contrast errors). Rater training programs can have positive effects on the psychometric quality of performance ratings. Methods used to provide training are lectures, group discussion, and practice and feedback. In general, the more involved raters become in the training process the greater the outcome. Providing raters with the opportunity to participate in a group discussion along with practice and feedback exercises produces better results than presenting training material to them through a lecture. Practice and feedback exercises appear to be a necessary ingredient for increasing accuracy in ratings.
Today, organizations face environments characterized by increasing dynamism and competition, and sustainable fit can be achieved only by developing a flexible organization. The importance of developing and applying HR practices aimed at achieving fit is crucial. HR systems such as performance appraisal systems have relatively strong universalistic relationships with important measures of organizational performance.
1. Amy Delpo, The Performance Appraisal Handbook: Legal & Practical Rules for Managers (NOLO 2007);
2. Christoph Demmke, Performance Assessment in the Public Services of the EU Member States: Procedure for Performance Appraisal, for Employee Interviews and Target Agreements (European Institute of Public Administration, 2007);
3. Clive Fletcher, Appraisal, Feedback and Development: Making Performance Review Work (Routledge, 2008);
4. Margaret Foot and Caroline Hook, Introducing Human Resource Management (Prentice Hall/Financial Times, 2008);
5. Martin M. Greller, “Subordinate Participation in the Appraisal Interview,” Journal of Applied Psychology (v.60/5, 1975);
6. I. M. Jawahar, “The Influence of Perceptions of Fairness on Performance Appraisal Reactions,” Journal of Labor Research (v.28/4, 2007);
7. Susanne G. Scott and Walter O. Einstein, “Strategic Performance Appraisal in Team-based Organizations: One Size Does Not Fit All,” Academy of Management Executive (v.15/2, 2001).
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