Chapter 7
Introduction
• Major changes in performance appraisal over last
two decades.
• Driven by organisational change rather than
theoretical advances.
• Downsizing, decentralising, delayering, TQM,
BPR, culture change, knowledge management and
competency.
• Changes in payment system, e.g. integrated
reward systems, PRP.
Introduction (Continued)
• Inappropriate to expect appraisal schemes
operating 10 years ago to be effective today.
• New developments stimulated innovation in
appraisal.
• Use in new organisations and occupational
groups.
• New forms of appraisal have emerged.
• Old forms have been revised.
Development of performance appraisal
• Long history of informal performance appraisal.
• Shorter but significant history of formal performance
appraisal.
• Staple element of HR practioners’ role.
• Academic research in occupational psychology
– Improve effectiveness and accuracy.
• Less known about appraisal as organisational change
lever and managerial control tool.
• Many studies on use of performance appraisal.
• Debatable how much influence research has on use of
appraisal.
• Gap between research and practice.
Practice of performance appraisal
How widespread is performance appraisal?
• Performance appraisal has become more widespread in western countries.
• Virtually universally present in large/medium US enterprises.
• Increasing coverage in the UK.
• More common in other non-western countries, e.g. China, India and Japan.
• Prominent in UK financial services and public sector.
• Deployment increasingly across organisational hierarchies. • Employee coverage in public sector less than in private
sector, reflecting relative infancy of such schemes.
• Performance appraisal is strongly linked to expectations of job tenure (Addison and Belfield, 2008).
How is appraisal conducted?
• Wide range of methods.
• Simple ranking schemes, objective and standard systems, competency based systems, behaviourally anchored
systems.
• Schemes tend to reflect managerial beliefs, resources available, expertise.
• Small organisations tend to adopt simple schemes.
• Large organisations may use more sophisticated schemes. • Most employers use only one type of scheme.
• Some use multiple systems.
• This may be to separate reward and non-reward aspects, different parts of the organisation, different occupational groups.
Practice of performance appraisal
(Continued)
What is appraisal used for?
• It is used for a wide range of purposes
– Clarify and define performance expectations – Identify training and development needs
– Career counselling – Succession planning – Motivating employees – Cultural change
– Determining promotion
– Allocating financial rewards
– Improving employee performance
– Facilitating communication and involvement – Controlling employees.
Practice of performance appraisal
(Continued)
What is appraisal used for?
• More judgemental/‘harder’ systems on increase while ‘soft’ approach is declining.
• Shift away from career planning/identifying potential towards allocating rewards/improving performance.
• Broad demands upon appraisal systems.
• Wide use helps integrate HRM areas into coherent package. • Criticism that performance appraisal systems are too ambitious. • ‘Blunt instrument that tries to do too much’
(Boudreaux, 1994). • Conflicting purposes
– ‘Using rearview mirror to drive future performance’ – Rewards and training needs incompatibility.
• Often one element of broader performance management system.
Practice of performance appraisal
(Continued)
Performance management
• Performance management is a US import.
• ‘Systems and attitudes which help organisations to plan, delegate and assess the operation of their
services’ (LGMB, 1994).
• ‘A textbook system’:
– Shared vision of organisations objectives – Individual performance targets
– Regular formal review of progress
– Review identifies training, development and rewards – Evaluation of process and improvements made.
• Connect objectives of organisations’ to employees worktargets
– Objective setting and formal appraisal.
• Trend away from standalone appraisal to performance management.
Performance management (Continued)
• Growing critique of performance management systems
– Encouraging managerial short-termism
– Prescriptive/one best way but neglect important variables
– Questionable ownership and commitment from line managers – Pressure and stress for workers
– Little support that performance management improves performance.
Performance appraisal as managerial
control
• Performance appraisal more important tool in motivating and controlling workforce.
• Maintaining employee loyalty and committment. • Reinforce corporate values and attitudes.
• Important strategic instrument in the control process. • Social, attitudinal and trait attributes.
• Subjective measures, e.g. ‘flexibility’, ‘loyalty’, etc. • Potential for managerial control.
• Managers are not immune to performance appraisal. • Poor performing managers may be ‘culled’.
Recent developments in performance
appraisal
Upward appraisal
• Relatively new in UK • More common in US
• Involves employees rating their managers performance • Anonymous questionnaires
• Benefits
– Improved managerial effectiveness – Employee voice and empowerment – In tune with delayered organisations – Robust to legal challange
• Lack of managerial enthusiasm • Low uptake in UK.
Recent developments in performance
appraisal (Continued)
360 degree appraisal
• Becoming established form of appraisal in UK • Origins in 1970’s US army
• All – encompassing direction of feedback
• Composite ratings from peers, subordinates, supervisors, customers
• Anonymous survey, structured questionnaires, online systems
360 degree appraisal
• Experimentation in linking 360 degree appraisal to reward • Concerns 360 degree appraisal is being overstretched
• Often suggested provides more accurate feedback • Useful for management development
• Effort, time and cost involved is great • Is the data accurate and meaningful?
Recent developments in performance
appraisal (Continued)
Customer appraisal
• Performance standards based upon customer care indicators
• ‘Hard’ and ‘soft’ measures
• The use of service guarantees
• Customer data gathered by variety of methods
– Customer surveys
– Surveillance techniques – Mystery shopping
• Such methods may not be popular with staff • View mystery shoppers as ‘spies’
• Use of internal service level agreements
– e.g. ‘Best value’ in public sector
• Help break down internal barriers.
Recent developments in performance
appraisal (Continued)
Team based appraisal
• Interdependent work teams common • Appraisal often focused on individual
• Sometimes work teams allocate tasks, select new staff and set bonuses
• In such cases, may be appropriate to conduct team appraisal
• Managers may appraise team as a whole
• Individual appraisals made of each team member but not by management (anonymous peer review).
Recent developments in performance
appraisal (Continued)
Competency based appraisal
• Competency based approach to develop integrated HR strategy.
• Increased use for training and development, selection and reward.
• Linking appraisal to competency frameworks • This may provide a number of benefits
– Analysing individual progress
– Identifying improvement opportunities – Feedback on performance problems – ‘How well it is done’.
• Development and running costs may be high.
Recent developments in performance
appraisal (Continued)
Problems of appraisal
• Appraisal often a disliked managerial activity.
• ‘Rarely in the history of business can such a system have promised so much and delivered so little’ (Grint, 1993).
• Criticisms:
– Expensive
– Causes conflict – Limited value – Dysfunctional
– Distorting effects (halo, crony, impression, Veblen, Doppelganger).
• Managers not good at conducting appraisals or trained. • Political manipulation/‘subjective’ problems.
• Legal challenges to personality and trait systems. • Difficulties with subjective schemes as well.
• Focus on short-term rather than long-term • Challenging to achieve equitable ratings.
• Actions of employee may account for little of the variability in the outcomes measured.
• Potential for de-motivation especially if linked to reward. • Excessive paper work/bureaucratic exercise/‘go through
the motions’/lack of follow-up.
• Compatibility with TQM, e.g. Deming. • Disempowering employees.
Conclusion
• Performance appraisal is wide spread • Wide spread criticisms
• New developments may ameliorate some of the problems • Important role in HR practice
• But performance appraisal practice can be problematic • Many concerns with this application
• Need to upgrade and renew systems that are compatible with new business environments.