10.5. PERFORMANCE APPRAISAL AND ORGANIZATION PRODUCTIVITY
Organizational productivity can be defined as the ratio of outputs to inputs. Inputs can be determined by the level of resources invested. Outputs can be conceived as income minus costs. For a profit-making organization, profitability can provide a good measure of the organization's productivity. We must keep in mind that behavior is shaped by its consequences. If we want specific behaviors to occur, we need to use an appraisal system that rewards them when they occur.
Output measures for a research organization can be subjective or objective, quantitative or nonquantitative, and discrete or scalar and can include some measure of quality (Anthony and Young, 2002). While the measurement of quality requires extra effort and, at times, human judgment, this dimension of output should not be ignored.
Since R&D organizations have multiple objectives and their outputs are often incommensurate, the output measures are usually nonquantitative and subjective. Quantitative measures for the output elements are usually in different units, thus defying precise comparison between different quantitative outputs. Anthony and Young (2002) suggest that it might be feasible to combine a multidimensional array of indicators into aggregate units, which could then provide trends, indicators, and patterns of the individual (and organizational) output measures.
One suggested categorization of output measures includes the following:
Process measures (related to activities carried out in an organization; useful for the measurement of the current, short-run performance)
Social indicators (stated in broad terms, related to overall objectives of the organization rather than specific activities; useful for strategic planning) (Anthony and Young, 2002)
Thus, based on these output measures one could construct requisite performance appraisal elements.