Performance Management the Benefits of Performance Appraisals

Performance Management

The benefits of performance appraisals for both employers and employees

Performance management has become endemic to virtually all large organizations world-wide. "An estimated 80-90 per cent of organisations in the U.S.A. And UK use appraisals, and there has been an increase from 69 per cent to 87 per cent of organisations between 1998 and 2004 using formal performance management systems" (Prowse & Prowse 2009). The benefits for performance appraisal are fairly obvious for organizations: they enable managers to give feedback to employees so employees can align their behaviors better with desired organizational objectives. They also provide a 'paper trail' in case an employee is upset about his or her treatment regarding wages and benefits. However, performance appraisals can also be beneficial from the employee's point-of-view. They can help the employee identify and remedy both positive and negative behaviors and enable him or her to enhance aspects of his or her performance that are likely to lead to personal success. However, the designs of performance appraisal programs do not always support these lofty aims. Today "human resource (HR) programs are called upon to help organizations navigate complex global environments, recruit and maintain top talent, and a host of other critical organizational functions," and must be designed to maximize their efficiency in the face of scarce resources (Hannum 2008). No organization can discount the performance review process given the potentially valuable input it can offer and no employee can be so assured of his or her job that he or she cannot take the feedback received to heart.

Appraisals are supposed to provide objective feedback to employees, but such objectivity must be facilitated by the structure of the appraisal process. In previous eras, scientific management and behavioral assessment through behavioural anchored rating scales (BARS), behavioural observation scales (BOS), behavioural evaluation scales (BES) was attempted -- now, however, performance feedback often includes interviews and more open-ended qualitative discussions (Prowse & Prowse 2009). There has also been an "introduction of self-appraisal, peer appraisal, 360-degree appraisal and balanced scorecard approaches, to provide a wider perspective on performance" (Rowland & Hall 2012). Performance appraisals contain elements other than grading employees in a manner directly linked to pay and promotional considerations and also contain discussions to support employee development to varying degrees.

For performance appraisals (particularly those with subjective elements) to be effective they must both be fair and be perceived as fair: "fair practices in human resource management, particularly in terms of performance appraisal has a predictive role in the employees' attitude…the relationship between fairness in performance appraisal with organizational citizenship behavior is mediated by the satisfaction of the former" (Salleh et al. 2013). In short, if employees feel they are being evaluated in a just and effective manner, they are more likely to feel satisfied with their jobs and their performance and value for the organization improves. Employee satisfaction with the performance appraisal system has also been positively linked to employee creativity and innovation: if employees feel they are respected and noticed as individuals, they are more likely to take risks and go above and beyond their specific job duties (Fesharaki, Fesharaki, & Allameh 2012: 312).

The demand for fairness has led organizations to adopt more holistic methods of employee assessment and to foster a more inclusive dialogue between employees and managers to stimulate interest and involvement in the process. "Outcomes and processes which are perceived as unfair in an organization will result in a workforce whose contribution through enthusiasm and 'going the extra mile' is not fully achieved" (Rowland & Hall 2012). Performance management should not be something that is done 'to' employees but 'with' employees. One component which can make the process feel fairer is the idea of self-appraisal, in which the employee rates his or her own performance, strengths, and weaknesses. This can encourage the employee to set benchmarks for him or herself, which can be more intrinsically motivational than simply following the lead of the employer. Elements of self-appraisal also allow employees to counteract possible biases or oversights in regards to performance. Once again, this empowers the individual employee to make decisions and take control over his or her career. Self-appraisal also encourages discussions between managers and subordinates that have the quality of mentorship rather than top-down direction. This can work to circumvent the most commonly-cited flaws in the performance appraisal process which are "not giving adequate consideration to employee's viewpoints; not applying decision-making criteria consistently across employees; not providing timely feedback to employees after decisions; not providing justification for the decisions and not treating employees with courtesy and civility" (Rowland & Hall 2012).

However, there can be no denying that no matter how equitable the nature of the appraisal process and no matter how fair an organization strives to be, there is an inevitable asymmetry in the power dynamic when the employee is under scrutiny. One way to ensure that the overall system serves both individual employees and managers is to have differentiated types of appraisals: "It is useful to begin with the purpose of the appraisal. It is customary to distinguish between two different purposes of appraisal; administrative and developmental. The administrative appraisal is usually part of a performance management system and can result in increased pay and other rewards such as promotion, career opportunities or actions to remedy disciplinary or capability issues, perhaps resulting in dismissal. The developmental appraisal is related to enhancing individual performance and usually sits uneasily within a formal system" (Rowland & Hall 2012). Interestingly, managers often rank aligning skills with pay and promotions to be the least important aspect of the interviewing process overall, indicating that frequent and thorough developmental interviews are likely to be far more critical in determining future organizational success (Rowland & Hall 2012).

Having a clear differentiation between different types of appraisals (administrative vs. developmental) can help obviate one of the most frequently-expressed criticisms of performance appraisals that attempt to merge administrative and developmental capabilities, namely that employees are fearful of being fully honest in an environment which is liable to cost them dearly in pay and promotional possibilities if they are fully candid. "Employees are reluctant to confide any limitations to and concerns with their current performance as this could impact on their merit-related reward or promotion opportunities…This conflicts with performance appraisal as a developmental process as appraisers are challenged with differing roles as both monitors and judges of performance, and an understanding counselor" (Prowse & Prowse 2009). However, managers also may be wary of being unduly critical for fear of being "demotivating" (Prowse & Prowse 2009).