LIMITATIONS OF PERFORMANCE APPRAISAL SYSTEM - HUMAN RESOURCE MANAGEMENT



LIMITATIONS OF PERFORMANCE APPRAISAL SYSTEM.
BY
SMART LEARNING WAY

CONTENTS 

1.)Introduction of Performance Appraisal System
2.)What is a Performance Appraisal?
3.)What is Performance Management?
4.)Definition of Performance Appraisal System
5.)Objectives of Performance Appraisal
6.)Process of Performance Appraisal System
7.)Limitations of Performance Appraisal System
8.)Case Study
9.)Conclusion
10.)Bibliography


Introduction of Performance Appraisal System

Performance Appraisal is the formal conclusion to a performance management process at the end of a prescribed term. 

Prescribed terms may be any length but are usually a 12 month period. 

The Performance Appraisal process involves an interview between a staff member and their manager where the objectives and deliverables for the staff member are reviewed, and an overall assessment of the staff member's performance is agreed. 

It must be understood that a Performance Appraisal is only a component part of a Performance Management System. Many people confuse the two and interchange the terminology.

Performance appraisal is a management tool which is helpful in motivating and effectively utilizing human resources. Assessment of human potential is difficult, no matter how well designed and appropriate the performance planning and appraisal system is. 

Management cycle and is the process of assessing an employee’s performance in the current position. Thus ‘Appraisal’ is an annual affair while performance ‘management’ is a year round activity. Appraisal focuses on ratings while ‘management’ focuses on the work , the stakeholders, service levels, productivity, motivation effort and all such performance related variables.

The performance appraisal system should: 

      1.)be correlated with the organizational mission, philosophies and value system;
      2.)cover assessment of performance as well as potential for development;
      3.) take care of organizational as well as individual needs; and help in creating a clean environment by
     
   - linking rewards with achievements,
  - generating information for the growth of the employee as well as of the organization, and
  - suggesting appropriate person-task matching and career plans.

Feedback is an important component of performance appraisal. While positive feedback is easily accepted, negative feedback often meets with resistance unless it is objective, based on a credible source and given in a skilful manner.

What is a Performance Appraisal?

A performance appraisal is an evaluation of job performance over a period of time.  It is basically an annual report card on an employee and how they performed over the prior year. 

Unfortunately not all performance appraisal processes are the same and some are designed to not only fail, but to create a negative experience for both the employee and the manager.

Performance Appraisal is the formal, systematic assessment of how well employees perform their jobs in  relation to established standards .

What is Performance Management?

It is a system which manages performance. Potgieter(Human Capital Magazine, undated) says it sets performance objectives aligned to strategic and/or operational plans It is the system for managing, leading, organising it and controlling performance.

Performance Appraisal is the tool used to assess how well a person completes their job – a process which is part of the overall performance management system.

Definition of Performance Appraisal System

1.)The process by which a manager or consultant examines and evaluates  an employee's  work behavior by comparing it with preset standards,  documents the results of the comparison, and  uses the results to provide feedback to the employee to show where improvements are needed and why.

2.)Performance appraisals are employed to determine who needs what training, and who will be promoted, demoted, retained, or fired.

3.)Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does.

4.)According to Flippo, A prominent personality in the field of Human resources, "performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in the matters pertaining to his present job and his potential for a better job." 

5.)Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future.

6.) Performance appraisal is defined by Wayne Cascio as “the systematic description of employee’s job relevant, strength, weakness.”

Objectives of Performance Appraisal

To effect promotions based on competence and performance.
To confirm the services of probationary employees
To assess the Training and Development needs of employees
To decide upon a pay rise
To let the employees know where they stand in their performance
To improve Communication
 To determine whether HR programs like Selection,Training and Transfers have been effective or not.

Process of Performance Appraisal System

1.)Planning Phase:

 Set mutually agreed upon goals and guidelines for employee evaluation. Determine the key objectives for measuring success in the position and set developmental goals to encourage greater productivity and results.

2.)Performance Phase: 

The longest phase that allows the employee to meet goal and objectives, develop new skills and track accomplishments or set backs in the system throughout the process. Managers are reviewing performance and making notes as well.

3.)Assessment Phase: 

Employees are given an opportunity near the end of the performance cycle to provide feedback on the preset goals, competencies and objectives to deliver to their manager. This is when the manager will document feedback on the employee performance as well. The system allows senior managers to review all submitted documentation and sign off before the actual review is complete.

4.)Review Phase: 

Manager and employee sit down together to discuss the year in review. Reviews can be presented online or printed and e-signature that the review took place can be captured in the system to protect the organization if legal review should occur.

How can Performance Appraisal be used?

The Performance Appraisal is usually used to identify:
1.)Development needs for the individual
2.)A positioning of the staff member's performance for remuneration review

Limitations of performance appraisal system

1. Halo effect :- 

In this case the superior appraises the person on certain positive qualities only. The negative traits are not considered. Such an appraisal will no give a true picture about the employee. And in some cases employees who do not deserve promotions may get it.

2. Horn effect :- 

In this case only the negative qualities of the employee are considered and based on this appraisal is done. This again will not help the organization because such appraisal may not present a true picture about the employee.

3. Central tendency :- 

In this case the superior gives an appraisal by giving central values. This prevents a really talented employee from getting promotions he deserves and some employees who do not deserve any thing may get promotion.

4. Leniency and strictness :-

Some bosses are lenient in grading their employees while some are very strict. Employee who really deserves promotions may loose the opportunity due to strict bosses while those who may not deserve may get benefits due to lenient boss. 

5. Spill over effect :-

In this case the employee is judged +vely or –vely by the boss depending upon the past performance. Therefore although the employee may have improved performance, he may still not get the benefit.

6. Fear of loosing subordinates and spoiling relations :-

Many bosses do not wish to spoil their relations with their subordinates. Therefore when they appraise the employee they may end up giving higher grades which are not required. This is an injustice to really deserving employees. 

7. Goodwill and techniques to be used :-

Sometimes a very strict appraisal may affect the goodwill between senior and junior. Similarly when different departments in the same company use different methods of appraisal it becomes very difficult to compare employees.

8.Lack Of Clarity:-

The objective of performance appraisal is to evaluate and develop employees. An organization should avoid using one appraisal system to achieve both objectives. The particular system of the appraisal system should clarify before it is designed and should be discussed with all managers and employees to gain their commitment. Any performance appraisal system, however good the design, is unlikely to succeed if the managers and employees are suspicious of its objectives. 

It is extremely difficult if not impossible to device a system that will be able to satisfy both performance and reward. It happens because employees are likely to resist negative feedback and tend to be defensive when weakness in current performance is identified. It is because of this type of overlap in purposes that the appraisal loses it’s practically and increases the conflict between the manager and the employees.

9. Appraisal Errors:-

These are as follows; Halo, Recency, Contrast effects: the Halo effect occurs when a manager rates an employee high or low on all teams, because of one characteristic. For instance; if an employee has few absences, his manager might give him high rates in all other area of work. 

The recency effect happens when a rater gives greater weight to recent occurrence when appraising an employee’s performance. This sort of effect is an understandable rater’s error. It may not be easy for the manager to remember all events that happened like for instance; six months ago.

Contrast error occurs when employees are rated relatively to other employees rather than to performance standards. For example; if everyone else in a group is doing mediocre job, an employee performing somewhat better may be rated as excellent because of the contrast effect.

10. Unequal Performance:-

    Unequal Performance Standards People differ from each other in the way they perceive things. What is good for some may be bad for others. Therefore managers have different judgments in appraising their employees. Managers’ attitudes to their employees differ, so different managers will appraise the same people quite differently which could make appraisal system subjective and manipulative.

11. Cultural Factors:-

Culture has profound impact on the appraisal system as it should be in consonance with the organizational culture. A system based on the employee participation and openness would be non-starter if the organizational culture is authoritarian and non-participative in its approach to other employee related policies. ‘Readymade’ performance review system imported from other organization rarely function satisfactorily. Their failure is partly due to culture differences. Thus culture is a vital factor to look after.

 12. Time Consuming

It is recommended that a manager spend about an hour per employee writing performance appraisals and depending on the number of people being evaluated, it can take hours to write the department’s PA but also hours meeting with staff to review the PA.  I’ve know managers who had 100 plus people to write PAs on.

13. Discouragement

If the process is not a pleasant experience, it has the potential to discourage staff.  The process needs to be one of encouragement, positive reinforcement and a celebration of a year’s worth of accomplishments. It is critical that managers document not only issues that need to be corrected, but also the positive things an employee does throughout the course of a year, and both should be discussed during a PA.

14. Inconsistent Message

If a manager does not keep notes and accurate records of employee behavior, they may not be successful in sending a consistent message to the employee. We all struggle with memory with as busy as we all are so it is critical to document issues (both positive and negative) when it is fresh in our minds.

15. Rater Biases

It is difficult to keep biases out of the PA process and it takes a very structured, objective process and a mature manager to remain unbiased through the process. this occurs when manager values distort the rating. Reasons for bias differ, for instance, religion, age,Gender, appearance or other arbitrary classifications. If a manager strongly dislikes a certain ethnic group, this will be negatively reflected in appraisal if the appraisal scheme is not properly designed.

16.  The review is done in retrospect and is an average of six months old so recollection of events is poor

17. The opinions of staff and manager are often in opposition, causing de-motivation

18. The process is usually Manager driven and the staff member is expected to be compliant in the interview

19. The process usually involves the Manager giving their opinion and the staff member having to defend the position, rather than a positive discussion

20. There is no room for remedial action during the year

21.The process is usually done in a rushed manner to meet a budget development process and therefore loses its relevance to performance

22.If not done appropriately, can be a negative experience.

23.Are very time consuming, especially for a manager with many employees.

24.Are based on human assessment and are subject to rater errors and biases.

25.If not done right can be a complete waste of time.

26.Can be stressful for all involved.
                                       
                                                     Case Study

A Sweet Employee Performance Appraisal System for Jelly Belly

To meet their strategic goals, Poulos and her team drew up a list of the criteria that a new system had to meet. Top on the list was ease of use. "We didn't want to end up with a system that is so complicated that the managers wouldn't use it," Poulos said. A new system also had to save time. Because employees were in multiple locations, it needed to be web-based for accessibility. And it had to be flexible, easily incorporating core competencies into different forms.
Jelly Belly's selection committee looked at products from different software vendors. "We eliminated right away those that were geared to very large companies and those that were not web-based," Poulos said. "We also eliminated those that offered too many options for customization. It's one thing to offer options, but another thing when the product requires so much customization that it becomes overwhelming."

Solution

The committee selected Halogen  Appraisal , a web-based employee performance and talent management application from Halogen Software. "We liked the way it looked, and we really liked the user-friendliness of it. It's easy for the managers to use and it's customizable without overwhelming them," Poulos said. After two days of training by Halogen staff, four members of Jelly Belly's HR team set out to train the company's supervisors on the new system. About 50 managers received a crash course in using Halogen Appraisal, and then used it to complete annual employee evaluations  in May. Jelly Belly's HR team is now customizing the software to include more relevant competencies  and to respond to comments from managers and staff on the new system.
        "The feedback has been really positive, from both managers and employees as well. Some staff said this was the best appraisal they've had," Poulos said, "They felt the evaluations were fair and realistic, and supervisors had the scope to provide more relevant and legitimate comments than they could before. Rather than just clicking on a bunch of canned comments, they were accurately reviewing the employee."
        The new automated employee performance appraisal system has completely formalized and organized Jelly Belly's employee evaluation process. "It allows us to standardize competencies across job classifications, add signature and comment sections to make our process more interactive, and increase accessibility for remote managers," Brown said.
        Under Jelly Belly's old system, employees conducting reviews started from scratch once a year with new performance journals . Halogen eAppraisal will let them log notes throughout the year and regularly update their on-line appraisals. Employees use one consistent employee evaluation form to add comments and to sign their appraisals.

Results

The web-based product helps remote and traveling managers maintain access to the forms and the data they need to evaluate their staff. "In our old system, a few folks in Chicago would have access to the system. But we have managers in California with Chicago subordinates. It's important that they can share the same forms across the board. And we have folks who are on the road a lot or are working out of home offices, so having them be able to access this is a huge point for us," Brown explained. Organizing and automating the appraisal process results in performance appraisals that are more accurate and fair, Brown noted. "This is important because, after all, an employee appraisal is a legal document," he said.

The new system is also helping Jelly Belly track training requirements and development in its staff, Poulos added. "We've always had a separate training manual. Now we can go in to the evaluations and more easily monitor employees' skills development, see what training is needed by individuals and check the due dates for training and renewal. That makes it much easier for us to keep track," Poulos noted.

The new employee performance and talent management system has proven to be a big time-saver for Jelly Belly's HR team. "Since this year was the first time using the new system, it took us a little longer than it will next year. But the process was a whole lot faster," Poulos said. "It has already saved us a lot of time, and we got everybody's appraisals done in one shot." The new system is also helping Jelly Belly to better align employee goals with the company's business objectives. And for one of America's best-known candy companies, it doesn't get any sweeter than that.
The feedback has been really positive, from both managers and employees as well. Some staff said this was the best appraisal they've had .
                              
                                                      -Margie Poulos, Manager of HR

Conclusion

Finally ,a performance appraisal is only as good as the performance management, system it is part of. If an organization merely does performance appraisals for the sake of doing them, they are wasting their time. But if they strategically incorporate performance management into their strategic plan to implement business goals, they will provide a process to accomplish those goals.

 It is a powerful tool to calibrate, refine and reward the performance of the employee.

 It helps to analyze his achievements and evaluate his contribution towards the achievements of the overall organizational goals.

 By focusing the attention on performance, performance appraisal goes to the heart of personnel management and reflects the management's interest in the progress of the employees.
      
 Performance appraisal may be conducted once in every 6 months or once in a year. The basic idea of the appraisal is to evaluate the performance of the employee, giving him a feed back. Identify areas where improvement is required so that training can be provided. Give incentives and bonus to encourage employees etc
  
Bibliography

1.) Management of Performance Appraisal.
          By  Monga, M. L. 1983.
      Bombay: Himalaya Publishing House. 

2.) Performance Appraisal Theory and Practice.
          By  Rao, T. V. 1985.
   New Delhi: Vikas Publishing House. 

3.)Make performance appraisal relevant
      Oberg, W. 1972.
      Harvard Business Review

4.)A Manager's Guide to Performance Appraisal.
    Patten, T. H., Jr. 1982. 

5.) Human Resource Management
-C.B.Gupta
Sultanchand & Sons

6.)Human Resource &Personnal Management
K.Aswathappa
Tata Mc Graw hill

7.)www.google.com
       - www.appraisal-smart.com
       -www.soft tech.com
       -www.newmanglobal.biz




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