Criticism of performance appraisal 33

Despite the widespread use of performance appraisal today it is not without its critics, with the acclaimed benefits and operation of PA having been widely questioned by managers and employees alike on both empirical and theoretical grounds (Grint 1993; Williams 1998; Fletcher 2001). In terms of employees, Newton and Findlay (1996), found that PA rarely benefits individual employees, primarily because it is predominantly concerned with surveillance and control, and is perceived as such by employees, resulting in a dampening effect on morale and performance. These views are supported by Townley (1990, 1992), Winstanley and Stuart-Smith (1996) and Scholtes (1999), while Viljoen and Dann (2000) concur, arguing that the appraisal of performance has now evolved to become a sophisticated control mechanism by which management can exert their desires. The inability of performance appraisal to motivate staff was identified in early research (Meyer, Kay & French 1965; Pearce & Porter 1986). Part of the reason for the failure to motivate staff may be, as Grint (1993)

suggests, because performance appraisal does not so much discover the truth about the appraised, as construct it.

Performance appraisal processes have also been widely criticised. Smither (1988) identifies a range of social biases in the conduct of PA. Women, for example, tended to receive lower ratings when appraised by men; common ethnicity between appraiser and appraised tended to lead to higher than usual scores for the latter; and older workers tended to score lower than younger workers regardless of performance. Swan (1991) also notes common errors in the operation of performance appraisal such as inadequately defined measurement standards, inadequately trained appraisers, inadequate performance documentation and inadequate time for discussion. Others (Somerick 1993; Kluger & De Nisi 1996) identify the lack of employee involvement in the process, and inconsistency in and lack of feedback as major weaknesses. Additionally the complexity and difficulty in assessing the ability of another requires skills many managers do not have. As a consequence the original intent of appraisal, to assess outcomes of performance, has failed and been replaced by management of the ‘impression’ of effective organisational policies and processes including performance appraisal (Bowles & Coates 1993).

Gaining the commitment of line managers to engage in performance appraisal, and getting them to do it well, has been identified as a problem in a number of empirical studies. Coens and Jenkins (2000) identified that PA was used in 80% of workplaces in the US, however 90% of both appraisers and appraisees were dissatisfied with the process. In the UK, similar research found that 90% of human resource executives said they would modify, totally revise, or eliminate current performance processes due to lack of success with the systems (Institute of Personnel Management 1992). In their research of HRM professionals in Australia, Nankervis and Compton (2006) found considerable change to the purpose, use and nature of performance management systems from their previous survey. In addition, satisfaction levels had also deteriorated since earlier studies, the training of system users had declined, and the involvement of employees in the review of their own and their team’s performance was not well implemented.

Many of the criticisms levelled at PA stem from the complexities of the variables being assessed or subjective elements that confuse the assessment (Grint 1993). As a consequence, performance appraisal has come to be one of the most contentious and least popular HRM activities; managers do not like doing them, employees see little point in them, and HR managers see their work being devalued every time they are conducted (Bratton & Gold 1999).

At the strategic level, many of the failings attributable to performance appraisal come about because of management’s failure to manage the system effectively (Khoury & Analoui 2004). Others have reported that performance appraisal is almost ineffective in achieving organisational goals, either because PA is rarely undertaken properly (Longenecker & Gioia 1988; Engelmann & Roesch 1996), is prone to misconstrue the truth about what is being appraised (Grint 1993), or is ineffective because the people concerned have to work together after the appraisal is completed (Bergmann, Scarpello & Hills 1998).

A number of writers have identified the political aspects of PA including the belief that it is a mechanism for justifying decisions already made (Grint 1993) and non- performance factors which influence managers assessment of staff (Tziner et al. 1986; Longenecker & Ludwig 1990). Smith & Goddard (2008 p. 120) are more forthright in arguing that, ‘performance management is about organisational control with an established set of objectives.’ Milliman et al. (2002), in an exploratory study of performance appraisal across 10 countries, identified that the purpose of performance appraisal was not implemented as intended and that it varied considerably between nations. Research into cultural variables which influence performance behaviour is however limited (Fletcher & Perry 2001; Milliman et al. 2002), although Hahn and Stanton (2011) note that PM practices in Asian countries have similarities and differences that reflect cultural and contextual factors. The increasingly international nature of business, changing economic and cultural conditions, and the dynamic environment organisations operate within requires greater research into the possible effects of culture and performance appraisal (Fletcher 2001).

Criticisms of PA, based on theory, are just as damning. Equity Theory, for example, as applied to performance appraisal, focuses on the fairness of appraisal outcomes, whereby individuals compare what they do with what others do, and how the allocation of rewards is adjudicated. It suggests that if a discrepancy is perceived, whether real or imagined, then the individual concerned will adjust their behaviour to meet what is believed to be an appropriate level (Adams 1965). The inference in this type of observation is that there may be little relationship between employee behaviour and expected outcome of a given performance appraisal. Geary (1992) arguing along similar lines, suggests there is a fundamental ambiguity with appraisal and reward strategies, and this is the product of two competing utopias: the ‘utopia of equality’ and the ‘utopia of equity’. The former is where there is equal pay for work of equal value, and the latter is where people are paid in accordance with their work effort and performance. Thus, by definition, inequality is an inevitable outcome of the pursuit of equity, and inequity is an inevitable outcome of the pursuit of equality (Geary 1992). Seen in this context, the aim of achieving ‘fair’ outcomes from performance appraisal systems would seem similarly utopian. Fairness in performance appraisal processes does matter (Brown & Benson 2003). Brown and Benson (2003) found that unfair procedures or unfair outcomes could lead to emotional exhaustion as employees strive to achieve higher ratings. Employee acceptance and support of performance has been shown to rest on the perception of staff regarding the fairness of the process (Cawley, Keeping & Levy 1998). Their acceptance of the process, or otherwise, is a major determinant of its effectiveness (Lawler 1994; Jawahar 2007).

Procedural Justice Theory looks at how the perception of individuals towards the fairness of managerial decisions is reached. Applied to performance appraisal, the theory suggests that individuals will perceive an outcome is fair if they have some input into the procedural elements of the process, and, conversely, unfair if this is not the case (Bergmann, Scarpello & Hills 1998). Kavanagh, Benson and Brown (2007) found that when control of the process is vested in participants, the more likely they will consider it fair. This is because if the individual has control of the process then that will result in outcomes favourable to the individual. They note that it is the use of particular practices within a PA system that enhances the perception of fairness. In earlier work, Brown and Benson (2003) suggest the organisation consider a range of techniques for promoting

employee performance, rather than PA, as the latter might not generate the desired outcomes for either party.

Gabris and Ihrke (2000) believe that, in particular, the perception of “procedural justice”, i.e., the equity and transparency of the process, and “distributive justice”, i.e., the fairness and appropriateness of reward and recognition, are often a source of discontent. Research undertaken by Greenberg (1986) identified two important determinants of distributive justice: 1. the relationship between performance and ratings and 2. the relationship between rating and subsequent management action. He cautioned that distributive factors should not get lost in the ‘shadow of’ procedural determinants of performance. Thus the effectiveness of a performance appraisal system may have more to do with participation practices than identifying objective means to improve employee productivity.

Implicit Contract Theory proposes that workers will be paid in accordance with their marginal contribution to productivity. In this regard it is assumed there are invariably differences in the productivity of different workers, and that pay and promotion prospects should vary accordingly (Bergmann, Scarpello & Hills 1998). Yet this is hardly a universal proposition; for example, measuring the productivity of certain sophisticated service professions is almost impossible to achieve with any certainty. In an environment that does not embrace ‘pay for performance’ the ability to differentiate contributions and reward accordingly works against the basic premises of implicit contract theory as this theory applies to PA (Bergmann, Scarpello & Hills 1998).

Multiplicity and diversity of objectives is, according to Collins (2000), the primary reason performance appraisal is as problematic as designing and implementing a system that meets so many objectives requires compromises that suboptimise functionality. In supporting this view Pollitt (1987) contends that those schemes that emphasise economy and efficiency may reduce the chances of achieving other goals such as those concerned with professional development and collegiality. Given these wide ranging empirical and theoretical criticisms, perhaps Grint (1993, p. 64) is understating the case when asserting performance appraisal in that ‘rarely in the history of business has such a system promised so much and delivered so little’.