Performance Appraisal
Even after individuals have been recruited, hired, and trained, the task of making them maximally productive within the organization is not finished. The fourth step in the process of providing appropriate human resources for the organization is performance appraisal—the process of reviewing individuals’ past productive activities to evaluate the contributions they have made toward attaining management system objectives. Like training, performance appraisal—which is also called performance review and performance evaluation—is a continuing activity that focuses on both established human resources within the organization and newcomers. Its main purpose is to furnish feedback to organization members about how they can become more productive and useful to the organization in its quest for quality.41 Table 10.2 describes several methods of performance appraisal.
Table 10.2 Descriptions of Several Methods of Performance Appraisal
| Appraisal Method | Description |
|---|---|
| Rating scale | Individuals appraising performance use a form containing several employee qualities and characteristics to be evaluated (e.g., dependability, initiative, leadership). Each evaluated factor is rated on a continuum or scale ranging, for example, from 1 to 7. |
| Employee comparisons | Appraisers rank employees according to such factors as job performance and value to the organization. Only one employee can occupy a particular ranking. This method is also known as a “forced distribution” or “forced ranking” system.43 |
| Free-form essay | Appraisers simply write down their impressions of employees in paragraph form. |
| Critical-form essay | Appraisers write down particularly good or bad events involving employees as these events occur. Records of all documented events for any one employee are used to evaluate that person’s performance. |
Why Use Performance Appraisals?
Most U.S. firms engage in some type of performance appraisal. Douglas McGregor has suggested the following three reasons for using performance appraisals:42
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They provide systematic judgments to support salary increases, promotions, transfers, and sometimes demotions or terminations.
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They are a means of telling subordinates how they are doing and of suggesting needed changes in behavior, attitudes, skills, or job knowledge; they let subordinates know where they stand with the boss.
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They furnish a useful basis for the coaching and counseling of individuals by superiors.
Handling Performance Appraisals
If performance appraisals are not handled properly, their benefits to the organization will be minimal.45 Several guidelines can assist management in increasing the appropriateness with which appraisals are conducted. The first guideline is that performance appraisals should focus on performance in the position the individual holds and the success with which the individual is attaining organizational objectives. Although conceptually separate, performance and objectives should be inseparable topics of discussion during performance appraisals. The second guideline is that appraisals should focus on how well the individual is doing the job, not on the evaluator’s impression of the individual’s work habits. In other words, the appraisal should be an objective analysis of the employee’s performance rather than a subjective evaluation of the employee’s work habits.
The third guideline is that the appraisal should be acceptable to both the evaluator and the subject—that is, both should agree that it has benefit for the organization and the worker. The fourth and last guideline is that performance appraisals should provide a foundation on which to improve individuals’ productivity within the organization by making them better equipped to be productive.46
Potential Weaknesses of Performance Appraisals
To maximize the benefit of performance appraisals to the organization, managers must eliminate several potential weaknesses of the appraisal process, including the following pitfalls:47
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Performance appraisals encourage employees to focus on short-term rewards rather than on issues that are important to the long-run success of the organization.
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Individuals involved in performance appraisals view them as a reward–punishment process.
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The emphasis of the performance appraisal is on completing paperwork rather than on critiquing the individual’s performance.
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Individuals being evaluated view the process as unfair or biased.
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Subordinates react negatively when evaluators offer unfavorable comments.
To eliminate these potential weaknesses, supervisors and employees should regard the performance appraisal process as an opportunity to increase the value of the employee’s contributions through constructive feedback rather than as a means of rewarding or punishing the employee through positive or negative comments. In addition, paperwork should be viewed only as an aid in providing this feedback, not as an end in itself. Also, care should be taken to make appraisal feedback as tactful and objective as possible to minimize negative reactions.
In the spirit of continuous improvement, executives at Aetna changed the company’s performance appraisal system. The former system, which was paper-based, required a great deal of time to carry out; as such, many managers did not have the time needed to appraise their employees properly. Aetna’s new system, however, uses technology that allows managers to constantly assess their employees. At any time, managers can access a dashboard that allows them to assess employee skills, evaluate career growth, and suggest training needs. The new system seems to work: In a poll, 83 percent of Aetna’s employees reported that they now better understand how they contribute to the company’s goals. A few years earlier, less than 60 percent of the company’s employees understood their contributions.48