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A performance appraisal (PA) or performance evaluation[1] is a systematic and periodic process that assesses an individual employee’s job performance and productivity in relation to certain pre-established criteria and organizational objectives.[2][3] Other aspects of individual employees are considered as well, such as organizational citizenship behavior,[4] accomplishments, potential for future improvement, strengths and weaknesses, etc. [2][5] To collect PA data, there are three main methods: objective production, personnel, and judgmental evaluation. Judgmental evaluations are the most commonly used with a large variety of evaluation methods.[1] A PA is typically conducted annually.[6] The interview could function as “providing feedback to employees, counseling and developing employees, and conveying and discussing compensation, job status, or disciplinary decisions”.[6] PA is often included in performance management systems. Performance management systems are employed “to manage and align" all of an organization's resources in order to achieve highest possible performance.[1] “How performance is managed in an organization determines to a large extent the success or failure of the organization. Therefore, improving PA for everyone should be among the highest priorities of contemporary” organizations.[7]

Some applications of PA are performance improvement, promotions, termination, test validation, and more.[8] While there many potential benefits of PA, there are also some potential drawbacks. For example, PA can help facilitate management-employee communication; however, PA may result in legal issues if not executed appropriately[9][1] as many employees tend to be unsatisfied with the PA process.[10] PAs created in and determined as useful in the United States are not necessarily able to be transferable cross-culturally.[11]

Applications of Performance Appraisal Results

A central reason for the utilization of performance appraisals (PAs) is performance improvement (“initially at the level of the individual employee, and ultimately at the level of the organization”).[8] Other fundamental reasons include “as a basis for employment decisions (e.g. promotions, terminations, transfers), as criteria in research (e.g. test validation), to aid with communication (e.g. allowing employees to know how they are doing and organizational expectations), to establish personal objectives for training” programs, for transmission of objective feedback for personal development, “as a means of documentation to aid in keeping track of decisions and legal requirements”[8] and in wage and salary administration.[1] Additionally, PAs can aid in the formulation of job criteria and selection of individuals “who are best suited to perform the required organizational tasks”.[2] A PA can be part of guiding and monitoring employee career development.[12] PAs can also be used to aid in work motivation through the use of reward systems.[2]

Potential Benefits of Performance Appraisals

There are a number of potential benefits of organizational performance management conducting formal performance appraisals (PAs). There has been a general consensus in the belief that PAs lead to positive implications of organizations.[13] Furthermore, PAs can benefit an organization’s effectiveness.[12] One way is PAs can often lead to giving individual workers feedback about their job performance.[9] From this may spawn several potential benefits such as the individual workers becoming more productive.[14]

Other potential benefits include:

  • Facilitation of communication: communication in organizations is considered an essential function of worker motivation.[9] It has been proposed that feedback from PAs aid in minimizing employees’ perceptions of uncertainty.[12] Fundamentally, feedback and management-employee communication can serve as a guide in job performance.[9]
  • Enhancement of employee focus through promoting trust: behaviors, thoughts, and/or issues may distract employees from their work, and trust issues may be among these distracting factors.[15] Such factors that consume psychological energy can lower job performance and cause workers to lose sight of organizational goals.[9] Properly constructed and utilized PAs have the ability to lower distracting factors and encourage trust within the organization.[16]
  • Goal setting and desired performance reinforcement: organizations find it efficient to match individual worker’s goals and performance with organizational goals.[9] PAs provide room for discussion in the collaboration of these individual and organizational goals.[17] Collaboration can also be advantageous by resulting in employee acceptance and satisfaction of appraisal results.[18]
  • Performance improvement: well constructed PAs can be valuable tools for communication with employees as pertaining to how their job performance stands with organizational expectations.[12] “At the organizational level, numerous studies have reported positive relationships between human resource management (HRM) practices"[9] and performance improvement at both the individual and organizational levels.
  • Determination of training needs: “Employee training and development are crucial components in helping an organization achieve strategic initiatives”.[9][19] It has been argued that for PAs to truly be effective, post-appraisal opportunities for training and development in problem areas, as determined by the appraisal, must be offered.[20] PAs can especially be instrumental for identifying training needs of new employees.[5] Finally, PAs can help in the establishment and supervision of employees’ career goals.[12]

Potential Complications of Performance Appraisals

Even with all the potential advantages of formal performance appraisals (PAs), there are still potential drawbacks as well. It has been noted that determining the relationship between individual job performance and organizational performance can be a difficult task.[19] Generally, there are two overarching problems from which several complications spawn. One of the problems with formal PAs is there can be detrimental effects to the organization(s) involved if the appraisals are not used appropriately. The second problem with formal PAs is they can be ineffective if the PA system does not correspond with the organizational culture and system.[9]

Complications stemming from these issues are:

  • Detrimental to quality improvement: it has been proposed that the use of PA systems in organizations adversely affect organizations’ pursuits of quality performance.[21] It is believed by some scholars and practitioners that the use of PAs is more than unnecessary if there is total quality management.[17]
  • Negative perceptions: “Quite often, individuals have negative perceptions of PAs”.[13] Receiving and/or the anticipation of receiving a PA can be uncomfortable and distressful[12] and potentially cause “tension between supervisors and subordinates”.[14]
  • Errors: PAs should provide accurate and relevant ratings of an employee’s performance as compared to pre-established criteria (i.e. organizational expectations).[22] Nevertheless, supervisors will sometimes rate employees more favorably than that of their true performance in order to please the employees and avoid conflict.[9] “Inflated ratings are a common malady associated with formal" PA.[23]
  • Legal issues: when PAs are not carried out appropriately, legal issues could result that place the organization at risk.[14] PAs are used in organizational disciplinary programs[12] as well as for promotional decisions within the organization.[9] The improper application and utilization of PAs can affect employees negatively and lead to legal action against the organization.
  • Performance goals: performance goals and PA systems are often used in association. Negative outcomes concerning the organizations can result when goals are overly challenging or overemphasized to the extent of effecting ethnics, legal requirements, or quality.[24] Moreover, challenging performance goals can impede on employees’ abilities to acquire necessary knowledge and skills.[15] Especially in the early stages of training, it would be more beneficial to instruct employees on outcome goals than on performance goals.[9]
  • Derail merit pay or performance-based pay: some researchers contend that the deficit in merit pay and performance-based pay is linked to the fundamental issues stemming from PA systems.[20]

Who Conducts Performance Appraisals

Human Resource Management & Performance Management

Human resource management (HRM) conducts performance management. Performance management systems are comprised of the activities and/or processes embraced by an organization in anticipation of improving employee performance, and therefore, organizational performance.[25] Consequently, performance management is conducted at the organizational level and the individual level. At the organizational level, performance management oversees organizational performance and compares present performance with organizational performance goals.[20] The achievement of these organizational performance goals depends on the performance of the individual organizational members.[20] Therefore, measuring individual employee performance can prove to be a valuable performance management process for the purposes of HRM and for the organization.[20] Many researchers would argue that “performance appraisal is one of the most important processes in Human Resource Management”.[10]

The performance management process begins with leadership within the organization creating a performance management policy.[20] Primarily, management governs performance by influencing employee performance input (e.g. training programs) and by providing feedback via output (i.e. performance assessment and appraisal).[26] “The ultimate objective of a performance management process is to align individual performance with organizational performance”.[27] A very common and central process of performance management systems is performance appraisal (PA).[20] The PA process should be able to inform employees about the “organization's goals, priorities, and expectations and how well they are contributing to them”.[27]

When Performance Appraisals are Conducted

Performance appraisals (PAs) are conducted at least annually,[20] and annual employee performance reviews appear to be the standard in most American organizations.[6] However, “it has been acknowledged that appraisals conducted more frequently (more than once a year) may have positive implications for both the organization and employee.”[9] It is suggested that regular performance feedback provided to employees may quell any unexpected and/or surprising feedback to year-end discussions.[10] In a recent research study concerning the timeliness of PAs, “one of the respondents even suggested that the performance review should be done formally and more frequently, perhaps once a month, and recorded twice a year.”[10]

Other researchers propose that the purpose of PAs and the frequency of their feedback are contingent upon the nature of the job and characteristics of the employee.[28] For example, employees of routine jobs where performance maintenance is the goal would benefit sufficiently from annual PA feedback. On the other hand, employees of more discretionary and non-routine jobs, where goal-setting is appropriate and there is room for development, would benefit from more frequent PA feedback.[28][6]

Methods of Collecting Performance Appraisal Data

There are three main methods used to collect performance appraisal (PA) data: objective production, personnel, and judgmental evaluation. Judgmental evaluations are the most commonly used with a large variety of evaluation methods.[4]

Objective production

The objective production method is comprised of direct, but limited, measures such as sales figures, production numbers, the electronic performance monitoring of data entry workers, etc.[4] The measures used to appraise performance would depend on the job and its duties. Although these measures deal with unambiguous criteria, they are usually incomplete because of criterion contamination and criterion deficiency. Criterion contamination refers to the part of the actual criteria that is unrelated to the conceptual criteria.[4] In other words, the variability in performance can be due to factors outside of the employee’s control. Criterion deficiency refers to the part of the conceptual criteria that is not measured by the actual criteria.[4] In other words, the quantity of production does not necessarily indicate the quality of the products. Both types of criterion inadequacies result in reduced validity of the measure.[4] Regardless of the fact that objective production data is not a complete reflection upon job performance, such data is relevant to job performance.

The Happy-Productive Worker Hypothesis

The happy-productive worker hypothesis states that the happiest workers are the most productive performers, and the most productive performers are the happiest workers[29] Yet, after decades of research, the relationship between job satisfaction and job performance produces only a weak positive correlation. Published in 2001 by Psychological Bulletin, a meta-analysis of 312 research studies produced an uncorrected correlation of 0.18.[30] This correlation is much weaker than what the happy-productive worker hypothesis would predict. There is no clear relationship between job satisfaction and job performance.[29]

Personnel

The personnel method is the recording of withdrawal behaviors (i.e. absenteeism, accidents). Most organizations consider unexcused absences to be indicators of poor job performance, even with all other factors being equal;[29] however, this is subject to criterion deficiency. The quantity of an employee’s absences does not reflect how dedicated he/she may be to the job and its duties. Especially for blue-collar jobs, accidents can often be a useful indicator of poor job performance,[4] but this is also subject to criterion contamination because situational factors also contribute to accidents. Once again, both types of criterion inadequacies result in reduced validity of the measure.[4] Although excessive absenteeism and/or accidents often indicate poor job performance rather than good performance, such personnel data is not a comprehensive reflection of an employee’s performance.[4]

Judgmental Evaluation

Judgmental evaluation appears to be a collection of methods, and as such, could be considered a methodology. A common approach to obtaining PAs is by means of raters.[1] Because the raters are human, some error will always be present in the data. The most common types of error are leniency errors, central tendency errors, and errors resulting from the halo effect.[1] These errors arise predominantly from social cognition and the theory in that how we judge and evaluate other individuals in various contexts is associated with how we “acquire, process, and categorize information”.[1]

An essential piece of this method is rater training. Rater training is the “process of educating raters to make more accurate assessments of performance, typically achieved by reducing the frequency of halo, leniency, and central-tendency errors”.[1] Rater training also helps the raters “develop a common frame of reference for evaluation” of individual performance.[31] Many researchers and survey respondents support the ambition of effectual rater training.[10] However, it is noted that such training is expensive, time consuming, and only truly functional for behavioral assessments.[10]

Another piece to keep in mind is the effects of rater motivation on judgmental evaluations. It is not uncommon for rating inflation to occur due to rater motivation (i.e. “organizationally induced pressures that compel raters to evaluate ratees positively”).[1] Typically, raters are motivated to give higher ratings because of the lack of organizational sanction concerning accurate/inaccurate appraisals, the rater's desire to guarantee promotions, salary increases, etc., the rater's inclination to avoid negative reactions from subordinates, and the observation that higher ratings of the ratees reflect favorably upon the rater.[1]

The main methods used in judgmental performance appraisal are:[1]

  • Graphic Rating Scale: graphic rating scales (see scale (social sciences)) are the most commonly used system in PA.[1] 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.[1]
  • 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.[1] 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.[1] 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".[1] The forced-distribution method is good for large groups of ratees. The raters evaluate each subordinate on one or more dimensions and then place (or ”force-fit”, if you will) each subordinate in a 5 to 7 category normal distribution.[1] The method of top-grading can be applied to the forced distribution method.[32] 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: behaviors are more definite than traits. The critical incidents method (or critical incident technique) concerns “specific behaviors indicative of good or bad job performance”.[1] 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 (BARS) 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.[1] Note that BARS are job specific.

Peer and Self Assessments

While most judgmental PA research is evaluated by a superior (e.g. supervisor, manager), peer assessments are evaluated by one’s colleagues. With self-assessments, individuals evaluate themselves.[1]

  • Peer Assessments: members of a group evaluate and appraise the performance of their fellow group members.[1] There are three common methods of peer assessments. Peer nomination involves each group member nominating who he/she believes to be the “best” on a certain dimension of performance. Peer ratings has each group member rate each other on a set of performance dimensions. Peer ranking requires each group member rank all fellow members from “best” to “worst” on one or more dimensions of performance.
  • Self-Assessments: for self-assessments, individuals assess and evaluate their own behavior and job performance.[1] It is common for a graphic rating scale to be used for self-assessments. Positive leniency tends to be a problem with self-assessments.[4]
  • 360-Degree Feedback: 360-degree feedback is multiple evaluations of employees which often include assessments from superior(s), peers, and one’s self.[1]

Organizational Citizenship Behavior

Also referred to as contextual behavior, prosocial behavior, and extra-role behavior, organizational citizenship behavior (OCB) consists of employee behavior that contributes to the welfare of the organization but is beyond the scope of the employee’s job duties.[4] These extra-role behaviors may help or hinder the attainment of organizational goals. Research supports five dimensions of OCB: altruism, conscientiousness, courtesy, sportsmanship, and civic virtue.[33] Researchers have found that the OCB 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.[34] The degree to which OCB can influence judgments of job performance is relatively high. Controversy exists as to whether OCB should be formally considered as a part of performance appraisal (PA).

Performance Appraisal Interviews

The performance appraisal (PA) interview is typically the final step of the appraisal process.[1] The interview is held between the subordinate and supervisor. The PA interview can be considered of great significance to an organization’s PA system.[6] It is most advantageous when both the superior and subordinate participate in the interview discussion and establish goals together.[1] Three factors consistently contribute to effective PA interviews: the supervisor’s knowledge of the subordinate’s job and performance in it, the supervisor’s support of the subordinate, and a welcoming of the subordinate’s participation.[6]

Employee Reactions to Performance Appraisal

Numerous researchers have reported that many employees are not satisfied with their performance appraisal (PA) systems.[10] Studies have shown that subjectivity as well as appraiser bias is often a problem perceived by as many as half of employees.[10] Appraiser bias, however, appears to be perceived as more of a problem in government and public sector organizations.[10] Also, according to some studies, employees wished to see changes in the PA system by making “the system more objective, improving the feedback process, and increasing the frequency of review.”[10] In light of traditional PA operation defects, “organizations are now increasingly incorporating practices that may improve the system. These changes are particularly concerned with areas such as elimination of subjectivity and bias, training of appraisers, improvement of the feedback process and the performance review discussion.”[10]

According to a meta-analysis of 27 field studies, general employee participation in his/her own appraisal process was positively correlated with employee reactions to the PA system.[18] More specifically, employee participation in the appraisal process was most strongly related to employee satisfaction with the PA system.[18] Concerning the reliability of employee reaction measures, researchers have found employee reaction scales to be sound with few concerns through using a confirmatory factor analysis that is representative of employee reaction scales.[35]

Researchers suggest that the study of employees’ reactions to PA is important because of two main reasons: employee reactions symbolizes a criterion of interest to practitioners of PAs and employee reactions have been associated through theory to determinants of appraisal acceptance and success.[35] Researchers translate these reasons into the context of the scientist-practitioner gap or the “lack of alignment between research and practice.”[35]

There are federal laws addressing fair employment practices, and this also concerns performance appraisal (PA). Discrimination can occur within predictions of performance and evaluations of job behaviors.[1] The revision of many court cases has revealed the involvement of alleged discrimination which was often linked to the assessment of the employee’s job performance.[36] Some of the laws which protect individuals against discrimination are “the Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA).”[1] Lawsuits may also results from charges of an employer’s negligence, defamation, and/or misrepresentation.[1] A few appraisal criteria to keep in mind for a legally sound PA is to keep the content of the appraisal objective, job-related, behavior-based, within the control of the ratee, and related to specific functions rather than a global assessment.[36] Some appraisal procedure suggestions for a legally sound PA is to standardize operations, communicate formally with employees, provide information of performance deficits and give opportunities to employees to correct those deficits, give employees access to appraisal results, provide written instructions for the training of raters, and use multiple, diverse and unbiased raters.[36] These are valuable but not exhaustive lists of recommendations for PAs.

Cross-Cultural Implications of Performance Appraisal

Performance appraisal (PA) systems, and the premises of which they were based, that have been formed and regarded as effective in the United States may not have the transferability for effectual utilization in other countries or cultures, and vice versa.[11] Performance “appraisal is thought to be deeply rooted in the norms, values, and beliefs of a society”.[37] “Appraisal reflects attitudes towards motivation and performance (self) and relationships (e.g. peers, subordinates, supervisors, organization), all of which vary from one country to the next”.[38] Therefore, appraisal should be in conjunction with cultural norms, values, and beliefs in order to be operative.[39] The deep-seated norms, values and beliefs in different cultures affect employee motivation and perception of organizational equity and justice. In effect, a PA system created and considered effectual in one country may not be an appropriate assessment in another cultural region.[38]

For example, some countries and cultures value the trait of assertiveness and personal accomplishment while others instead place more merit on cooperation and interpersonal connection. Countries scoring high on assertiveness consider PA to be a way of assuring equity among employees so that higher performing employees receive greater rewards or higher salaries.[38] Countries scoring low on assertiveness but higher in interpersonal relations may not like the social separation and pay inequity of higher/lower performing employees; employees from this more cooperative rather than individualistic culture place more concern on interpersonal relationships with other employees rather than on individual interests.[38] High assertive countries value performance feedback for self-management and effectiveness purposes while countries low in assertiveness view performance feedback as “threatening and obtrusive”.[40][38] In this case, the PA of the high assertive countries would likely not be beneficial for countries scoring lower in assertiveness to employ. However, countries scoring lower in assertiveness could employ PA for purposes of improving long-term communication development within the organization such as clarifying job objectives, guide training and development plans, and lessen the gap between job performance and organizational expectations.[41]

See also

References

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  20. ^ a b c d e f g h Selden, S. C., Ingraham, P. W., & Jacobson, W. (2001). Human resource practices in state government: Findings from a national survey. Public Administration Review, 61(5), 598-607. Cite error: The named reference "Selden" was defined multiple times with different content (see the help page).
  21. ^ Soltani, E. (2005). Conflict between theory and practice: TQM and performance appraisal. The International Journal of Quality and Reliability Management, 22, 796-818.
  22. ^ Amsterdam, C. E., Johnson, R. L., Monrad, D. M.,& Tonnsen, S. L. (2005). A collaborative approach to the development and validation of a principal evaluation system: A case study. Journal of Personnel Evaluation in Education, 17(3), 221-242.
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  24. ^ Schweitzer, M E., Ordonez, L., & Douma, B. (2004) Goal setting as a motivator of unethical behavior. Academy of Management Journal, 47, 422-432.
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  32. ^ Smart, B. D. (2005). Topgrading: How leading companies win by hiring, coaching, and keeping the best players. New York, New York: Penguin Group.
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  34. ^ MacKenzie, S. B., Podsakoff, P. M., & Fetter, R. (1991, October). Organizational citizenship behavior and objective productivity as determinants of managerial evaluation of salespersons’ performance. Organizational Behavior and Human Decision Processes, 50(1), 123-150.
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  36. ^ a b c Malos, S. B. (1998). Current legal issues in performance appraisal. In J. W. Smither (Ed.), Performance appraisal: State-of-the-art methods for performance management, (49-94). San Francisco: Jossey-Bass.
  37. ^ Seddon, J. (1987). Assumptions, cultures and performance appraisal. Journal of Management Development, 6, 47-54.
  38. ^ a b c d e Chiang, F. & Birtch, T. (2010, November). Appraising performance across borders: An empirical examination of the purposes and practices of performance appraisal in a multi-country context. Journal of Management Studies, 47(7), 1365-1393. doi:10.1111/j.1467-6486.2010.00937.x
  39. ^ Sparrow, P., Schuler, R., & Jackson, S. (1994). Convergence or divergence: Human resource practices and policies for competitive advantage worldwide. International Journal of Human Resource Management, 5, 267-299.
  40. ^ Sully de Luque, M. & Sommer, S. (2000). The impact of culture on feedback-seeking behavior: An integrated model and propositions. Academy of Management Review, 25, 829-849.
  41. ^ Cardy, R. & Dobbins, G. (1994). Performance appraisal: Alternative perspectives. Cincinnati, OH: South-Western.
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