Performance Appraisal in Human Resource Management

1. Human Resource Management Appraisal Tessa Owens Module Leader

2. Learning Outcomes • Understand the reasons for appraising staff and the techniques used. • Examine the major weaknesses and criticisms associated with traditional systems of performance appraisal. • Review the tensions associated with performance related pay. • Consider the impact on individuals, teams and organisations of implementing a new appraisal system.

3. Activity What is appraisal? What uses does appraisal have in today’s organisations?

4. Uses of appraisal • A means of assessing, and feeding back on, individual’s performance in a formal manner • Rewarding individual employees with different levels of pay based upon individual effort and achievement • A means of determining training needs • An opportunity to consider possible career progression

5. Activity What are the main problems found with performance appraisal?

6. Problems of Appraisal • Often given a ‘dual’ purpose – to judge and to develop – but these purposes conflict. People will not be open and honest where they feel they are being judged, and unless people are being open and honest you cannot make a fair assessment of their abilities and training needs in order to develop them! • Unknown or unrealistic assessment criteria – you can’t succeed if you don’t know the rules! Communication of assessment criteria is vital – being involved in determining the criteria is seen to be desirable. • Lack of objective criteria – can you really measure what you want to measure? Some things, such as machine error rates, are easy to measure, but how do you measure ‘communication’, ‘customer care’ and ‘teamwork’? So in the end what may matter most is who appraises you and their subjective opinion.

7. Problems with appraisal • Subjective assessment by the boss. Your appraisal may depend upon how well you get on with your boss. • ‘Recency effect’ your boss may only be able to remember what happened recently which is unfair (or this may play to your advantage!) Appraisal should be a review of the whole year. • Poorly trained managers, who don’t understand the rationale for the process and/or have poor skills • Poorly trained employees who don’t understand the rationale for the process

8. The principles of Appraisal… • It is intended to translate goals into individual, team, department and divisional goals • It is intended to clarify corporate goals • It is intended to be a continuous and evolutionary process in which performance improves over time • It is intended to rely on consensus and co-operation rather than control and or coercion • It is intended to encourages self management of individual performance

9. ….principles of Appraisal • It requires a management system that is open and honest, which encourages two way communication between superiors and subordinates. • It requires continuous feedback • It is intended that the feedback loops enable the experience and the knowledge gained on the job by individuals to modify corporate objectives • It is intended to measures and assesses all performance against jointly agreed goals • It should apply to all staff. It is not primarily concerned with linking performance to financial reward.

10. Activity What problems can occur when performance is linked to pay?

11. Linking performance to pay • People can fail to highlight their development needs. A request for training may be regarded as a ‘weakness’ and perhaps illustrate that you weren’t 100% capable of doing your job. Admitting to training needs could detrimentally affect your pay rise! • People can focus on the assessment criteria - the things which will affect their pay rise - and can ignore other parts of their job. This is a particular problem if the organisation has failed to identify the ‘correct’ criteria for each post.

12. Linking performance to pay • Appraisal schemes reward individuals, and should therefore identify individual ability and contribution. Management, however, frequently want people to work in ‘teams’ to achieve the objectives, but it is very difficult to identify in a team who did what – therefore teamwork can be destroyed by individuals selfish interests to impress the boss. • There may be a limited amount of money available for PRP – so other factors can affect the possibility of you gaining a ‘fair’ pay rise.

13. ‘Fairness’ • Reward is critically important in forming an employee’s notion of ‘fairness’ • Any ‘incongruence’ of expectation can lead to a perceived violation of the psychological contract • Managers therefore need to design reward systems that meet the organisations strategic goals and the goals of individual employees See Bratton & Gold (2003)

14. Achieving Fairness An appraisal may feel fair if the employee has: ‘Voice’ – are evaluated employees allowed and/or encouraged to vocally participate in evaluations. ‘Consistency’ – do evaluated employees receive the same treatment at all times? ‘Bias-suppression’ Does bias result against evaluated employee’s group (e.g. sex, race, age, etc) ‘Accuracy’ is the evaluator using accurate information and is the evaluator competent? ‘Correctability’ does the employee have the ability to correct or change results by presenting relevant information ‘Representativeness’ will the evaluated employee’s interests be taken into account ‘Social sensitivity’ is the evaluated employee treated with dignity and respect? ‘Information justification’ is the evaluated employee provided with information concerning how the evaluation results were determined? ‘Ethicality’ are the evaluated employee’s moral and ethical values respected? Fodchuk (2002)

15. Changing the culture through reward Pay for performance is interpreted by some writers as an attempt to • Move towards individual bargaining • Move away from collective bargaining – and destroy the power of trade unions • Change organisational culture • Achieve corporate downsizing aims • Assist in greater globalisation See, Sisson & Storey, 2000

16. Appraisal Schemes Appraisal schemes can make a major contribution to: • Systematic evaluation of individual training needs • Reward and encouragement of individual effort and ability • Informing staff concerning their standing and progress in the organisation • The supply of data about staff capabilities / capacities. See, for example, Cowling (1983) cited in Torrington et al (2002)

17. Organisation’s gain from appraisals Some evidence that great advantages are to be gained from performance reviews by appraising: • Past Performance • Meeting Objectives • Identify training needs • Problems which prevent / hinder performance See, for example, Randell et al (1984)

18. Individual’s gain from appraisal Employees can gain • Feedback on their performance • Reassurance • Praise • Encouragement • Help in performing better • Guidance about their future career possibilities See Torrington, Hall and Taylor (2002)

19. But…..be critical! “The appraisal survives more out of unfounded belief and habit than any demonstration of success” Coens and Jenkins (2000) “Institutionally elaborated systems of management appraisal and development are significant rhetorics in the apparatus of bureaucratic control.” Barlow (1989, p.500)

20. Assessment Criteria These describe something that has to be accomplished, the point to aim for. Goals (a term often used interchangeably with objectives), define what the organisation, departments, individuals are expected to achieve over a period of time.

21. Objectives The SMART acronym is often used to define clear objectives: S Specific (clear and unambiguous) MMeasurable (Quality, quantity, time) AAchievable (challenging but within the reach of a competent and committed person) RRelevant (aligned to goals of organisation) T Time Framed (to be completed within an agreed time frame)

22. Difficulties in establishing performance criteria Legge (1995) points to difficulties in establishing performance criteria. These include: • Quantifiable criteria are difficult to set where there is no tangible end product and where a range of stakeholders have differing views on what criteria are appropriate.

23. Legge 2 • Focusing on individual performance goals may run counter to attempts to develop teamwork. • If employees focus only on aspects of the job which are measured/appraised other aspects may be neglected – reducing the exercise of initiative.

24. Performance Criteria • Many aspects of ability and performance can be appraised, using MBO or rating scales. • Fletcher (1997) suggests that a growing number of organisations are putting together results-oriented appraisal with competency-based appraisal. He states:

25. Fletcher (1997) “This is a combination that can work well. It allows the more immediate and legitimate concern for achieving performance targets to co-exist with a focus on developing the appraisee – which in turn is related to the future performance of the organisation. It combines the two most motivational elements of appraisal, namely goal-setting and personal development. To maximize motivation and performance improvement, this would be the most promising way forward.”

26. Subjective and inconsistent Kessler (1990) suggests that performance appraisal is prey to ‘the twin vices of subjectivity and inconsistency’. He raises the following points: • Rate of change in organisations. Criteria would need constant revision • Appraisal process is subjective and its inherent inconsistency may be compounded where appraisal is used for different ends such as pay awards, promotion and management development.

27. Social and political realities • Social and political realities of organisations often make it easier for a manager not to rank subordinates harshly, or indeed to rank the inadequate highly, to remove them via promotion or the competent as inadequate, or below average, in order to prevent their removal via promotion. • If taken seriously appraisal can be time consuming and managers may not understand the reasons for the process; or be reluctant to, or may not have the time, to devote to it. They must be appropriately trained.

28. For your assignment consider….. • Implications for individuals • What are the assessment criteria that the staff will be appraised on. What problems can you foresee? • Will Emma be happy with her pay rise? Will the others? • Will this feel like a ‘just’ organisation to work for? • What will happen if it feels unjust? • Implications for teams • What will this do to teamwork? • Will it be easy to appraise individual effort from team effort? • Implications for the team as a whole • What might be the consequences for retention of staff? • What are the possible consequences for parents, children, rivals)

29. references Armstrong, M (1994) Human Resource Management 4th Edition, Kogan Page Barlow, G(1989) Deficiencies and the perpetuation of power:latent functions in management appraisal Journal of management Studies, Sept 89, (26) 5:499-517 Bratton, J & Gold, J (2003) Human Resource Management: Theory and Practice. 3rd Edition, Palgrave, London Coens, T and Jenkins, M (2000) Abolishing Performance appraisals: Why they backfire and what to do instead’ Berret-Koehler Publications Fletcher, C (1997) Appraisal – Routes to improved performance 2nd Edition, London, IPD. Fodchuk,K (2002) Is your performance evaluation fair at all? The Public manager, summer: pp.11-15 Foot,M & Hook, C (1999) Introducing Human Resource Management 2nd Edition, Longman Modular Texts Sisson, K & Storey, J (2000) The realities of Human Resource Management: managing the employment relationship. Oxford University Press, Buckingham. Randell G, Packard, P and Slater, I (1984) Staff Appraisal. London: IPM Torrington,D & Hall, L, Taylor, S (2002) Human Resource Management 5th Edition, Financial Times Prentice Hall, London.