Although this is time-consuming and costly, it generally has high employee involvement and creditability, the strongest impact on behavior and performance and a positive influence on communication and goal sharing. Yet others believe that technology can be used as a tool to eliminate biases (Dutton, 2001). Software-based performance appraisals focus on results and actions rather than personality traits. Thus, they can provide more objective facts that can be used to create plans for individual development and for achieving the organization's major goals. A worker's morale is determined by his relative pay status. A contract that rewards only individual performance can thereby adversely affect their productivity. On the other hand, competition for relative pay status tends to boost the productivity of highly skilled workers in the firm. The net effect on productivity depends on the composition of the firm's workforce. If the workforce is sufficiently heterogeneous then the inclusion of a profit-sharing component in the pay contract, which reduces the pay differential across workers, can sufficiently boost the morale of the least skilled workers as to improve overall productivity and profitability.

Consultants recommend either changing the way performance is linked to pay during performance reviews or making the compensation review a separate process. Kennedy and Dresser (2001), acknowledge that an employee's morale is determined by relative pay status and that reviews that are accompanied by low wage increases will adversely affect their productivity, producing the exact opposite of the performance appraisal's intentions. At the same time, these authors realize that competition for relative productive boosts productivity, particularly for highly skilled employees. Therefore, Kennedy and Dresser recommend the inclusion of a profit-sharing component and variable pay incentives instead of just trying to give large base-pay increases to high performers and small increases to low performers. Some believe that the performance and compensation review process ought to be separate because they serve completely different purposes and because more than performance affects wage increases. The performance review is to appraise past performance and assess future potential of an employee while a compensation review is to establish the employee's value to the corporation, based on their duties and responsibilities, potential, and their own financial goals (Moulton).

Moulton explains...

In this endeavor, Web-based systems are useful so that employees can easily see their performance evaluations and track their progress towards goals (Dutton, 200). Further, these systems serve as documentation to provide accurate and objective data for the entire performance appraisal time period.
In summary, there are a number of things an employer can do to improve their performance appraisal process; this report has just scratched the surface. For starters, two-sided accountability, 360 degree appraisals that solicit input from the broad audience that an employee interacts with and software to promote objectivity can help eliminate biases. Companies might consider separating performance appraisals and compensation reviews that the appraisals can accomplish their objectives. Or, companies might use incentives rather than just straight percentage-based pay increases to motivate workers. Finally, employers need to focus on continuous performance management with frequent views and should consider software to promote information sharing and accuracy.

Bibliography

Alternative performance reviews. http://www.toolpack.com/performance.html

Bascal, R. Seven stupid things employees do to screw up performance appraisal. http://work911.com/performance/particles/stupemp.htm

Billikopf, G. Performance appraisal. http://www.cnr.berkeley.edu/ucce50/ag-labor/7labor/06.htm

Culbert, S.A. (2003, July). Two-sided accountability. Executive Excellence, Vol. 20 Issue 7, p 20.

Dutton, G. (2001, April). Making reviews more efficient and fair. Workforce, Vol. 80 Issue 4, p76, 6p.

Kennedy, P.W. And Dresser, S.G. (2001, December) Appraising and paying for performance: Another look at an age-old problem. By: Kennedy, Peter W.; Dresser, Sandy Grogan. Employee Benefits, Vol. 26 Issue 4, p8, 7p

Losyk, B. (2002, April) How to conduct a performance appraisal. (cover story) By: Public Management (U.S.), Vol. 84 Issue 3, p8, 4p

Moulton, S. Pay, motivation, and performance management. http://www.actioninsight.com/Article13.htm