Performance appraisals, also referred to as a performance review or performance evaluation, are a method by which the job performance of an employee is evaluated.
What is Performance?
Employees are performing well when they are effective, productive and reaching the set goals or company targets. An employee who is at work on time, rarely absent, who reduces the number of work-related accidents and who has an appropriate level of productivity will be considered a good performer.
What is Appraisal?
A famous French president was known to start his day with a call to his astrologer asking him: how am I performing? How is my country performing?
A performance appraisal is an evaluation of employees by supervisors. Most employees wish to have feedback on their job performances. Appraisals are helpful in many human resource decisions: selection, training, promotion, transfer, wage, salary…and, appraisals may aid in improving overall personnel performance.
Objectives of Performance Appraisal
Performance Appraisals are done with a few key objectives in mind:
1. To maintain records for compensation packages, wage structure, salaries, pay raises, or restructuring.
2. To identify the strengths and weaknesses of employees.
3. To assess and maintain the potential each person has for further growth and development.
4. To provide feedback to employees regarding their performance.
5. To serve as a basis for improving working habits of employees.
6. To review and retain promotional and other training programmes.
Advantages of a Performance Appraisal
Performance appraisals are an investment for both the company and the employee. Here are just a few of the advantages:
1. Promotion: On one hand, performance appraisals help the supervisors to recommend promotion programmes for efficient employees. On the other hand, inefficient workers can be dismissed or demoted.
2. Compensation: Performance appraisals help to evaluate compensation packages for employees. Packages, which include bonuses, higher salary rates, extra benefits and allowances, are dependent on how an employee is performing.
3. Employees Development: Performance appraisals help supervisors to develop training policies and programmes based on strengths and weaknesses of employees so that new roles can be designed for efficient employees.
4. Selection Validation: Performance appraisals help supervisors to understand the importance, strengths and weaknesses of selection procedures. Future changes in selection methods can be made thanks to feedback from the employees.
5. Communication: For any organisation, effective communication between employees and employers is very important. Through performance appraisals:
a. Employers can understand and accept skills of workers,
b. Workers can also understand, learn to trust and have confidence in superiors,
c. A company can maintain a positive labour-management relationship.
6. Motivation: Performance appraisals serve as a motivational tool. Through evaluating the performance of employees, if the targets are achieved, a person’s efficiency can be determined. This motivates a person to work toward perhaps a better job, and helps him or her to improve performance in the future.
What are the disadvantages of performance appraisal?
Performance Appraisals are once a year, maybe less
Start with the fact that performance appraisals are usually annual. Employees need feedback and goal planning much more frequently than annually. Some employees need weekly, even daily, performance feedback to keep them focused on the most important goals, to provide them with developmental coaching to help them increase their ability to contribute, and to recognize them for their contributions.
Limited Perspective
Traditional performance review tools involve only the manager’s view of his subordinates’ performance. If the manager supervises several people directly, and also reports to his own supervisor, he probably has a limited amount of time to actually observe any one employee in action. Many companies overcome this drawback by using peer review-based appraisal tools that take into account the employee’s working relationship with customers, coworkers and vendors, in addition to supervisor feedback. By taking a broader view, the evaluation allows for a more objective assessment of performance.
Erosion of Motivation
Companies that use performance appraisals as the sole tool when giving out pay increases run the risk of increasing conflict between supervisors and workers, and eroding employee motivation. Conflicts arise because workers want the largest pay increase possible, but managers often have limited funds for these increases. The manager wants the workers to improve the weak areas of performance. Improvement requires that the manager and employee work together, but when pay is tied to performance appraisals, employees often focus on their strong points rather than trying to improve their weaknesses. This can lead to arguments over the appraisals and allotted pay increases.
Time Consuming
One of the most popular peer-review models, the 360° feedback appraisal model, requires training of evaluators and careful crafting of survey questions. The evaluation process itself can take two or more weeks at a time, depending on the size of the company, the time taken before obtaining feedback from people interacting with the employee’s customers, coworkers, vendors, and supervisors.
Poorly Trained Managers
Effective performance appraisals do not just happen, and organizations should not assume that managers know how to conduct them effectively --even if they have many years of experience as managers. In fact, since the process can differ from organization to organization, it is important that training be provided to introduce managers to the philosophy of performance appraisals at the organization, including a review of the forms, the rating system and how the data gathered is used. Training should take place regularly as a refresher both for new managers and for those who have been with the company longer.
Subject to Appraiser Bias
Managers may bring their own biases and subjective notions to the appraisal process. A bias can alter the results of the peer review-based appraisal schemes, causing employees to lose faith in the system and not to see them as credible measures of performance. Employees must see these systems as fair and just for the process to work properly.
Recently, Dan Price, an American CEO, increased all minimum salaries to a certain figure. Initially, enthusiasm was high. However, after a week, not everyone was happy, and two of the company's most valued members left the company, "spurred in part by their view that it was unfair to increase the pay of some new hires while the longest-serving staff members got small or no raises.”
Financial manager Maisley McMaster, one of the employees that left, said she had spent five years putting in long hours that little time left for her husband and extended family. Yet she had loved the 'special culture' of the place, working her way up the company’s ladder. According to Mc Master, however, raises were "given to people with fewer skills and those who were least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump," she told the New York Times. A fairer plan, she told the paper, would give newer employees smaller increases, along with the chance to earn a more substantial raise with more experience and appraisal.
Do performance appraisals potentially motivate people to achieve more? If there is no appraisal, will the company get employees who just clock in and out, making the same as the ones who put in the extra hours, chaining high performers to less motivated team members? Will employees have new concerns, worrying that maybe their performances do not merit the increase?
Sources:
http://www.managementstudyguide.com
http://smallbusiness.chron.com
http://www.nytimes.com/2015/08/02/business/a-company-copes-with-backlash-against-the-raise-that-roared.html?_r=0
Photo credit: geralt via Pixabay, CC0 Public Domain License
I tend to view performance appraisals as only good for departments involving sales, projects, clients acquisition, etc. For other teams like accounting , performance is to be considered under a different angle.
This article demonstrates well some of the main advantages of the appraisal process. The main associated imperfections of this instrument are also well presented.
Managing the human resources of a company is a complex task and the responsibility is not only with the HR department. The "system" works well only when all employees incl. the managers are thoughtful of their personal responsibility to create and to maintain a work environment where people want and can excel.
As far as I'm concerned, the most important step related to the whole performance appraisal process is the set up of SMART objectives (Specific - Measurable - Achievable or Agreed - Realistic - Time bounded).
As an employee, you will have to fulfill the objectives given to you by your manager (his objectives and the company's one). But I think it is important to take as well the time to define your own objectives you want to reach, in accordance with your career plan.
What is fundamental as well in this process is that the company makes the resources available to every employee to reach the set objectives. Even if the employee finally is responsible to perform positively, the employer has to act as a Partner and support his staff to grow within the company.
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In some cases, employees are even not aware of their role in the organisation and they don't have any track of their goals and key result areas.
Modern performance methods like KPIs or KRAs has shaped the employee productivity, their goal setting, and their personal growth as well.