All for-profit organizations are sustained by the returns that they are able to generate as profits and incentives relating to their operations. With reference to human capital which is one of the most crucial resources of an organization, performance is a key factor. While organizational managements thrive to create surplus by training and developing employees for maximum output, a tool for measuring employees’ viability is essential. For example, organizations that adapt the training and development approach do so for a scheduled duration and then deploy employees to various positions that suit their abilities. In this case, it is obvious that all employees cannot be equally productive. It is in this case, that performance appraisal is adapted to rank, evaluate, and reward excellence within the line of duty. Performance appraisal is a crucial and a must-have managerial requirement for all for-profit organizations.
Performance appraisals have objectives that make them valid, valuable, and effective for implementing. In most cases, employees assume that performance appraisals are organizational means of keeping them in check. However, reality has it that, performance appraisals are managerial tools that are designed to maintain records so that an organization can determine compensation packages, salary raises, and wage structures. In addition, performance appraisals are designed to keep records of employee strengths and weaknesses, hence, providing room for position shuffling. This means that, performance appraisals help the organization or the management in placing the right workforce on the right position for maximum production. Organizations function under one universal business goal of expansion. This goal drives the relevance of performance appraisal through the assessment of individual potential, hence, giving room for further growth and development. While performance appraisal can be regarded as an organization-based tool, presentation of performance reports to the employees as feedback rejuvenates their potential. The effect of the feedback approach is to influence the working habits of the employees. For employees whose full potentials have not been fully cultivated, the use of performance appraisal dictates the retaining of promotional and other training programs (London & Smither, 2009).
Before any strategic consideration, decision, and/or plan can be adapted by an organization, its viability requires being specific and goal oriented. Performance appraisal can be foregone if it had no strategic advantages. This is because its implementation hosts a number of financial obligations that can be damaging if misappropriation of the program is resulted. To organizations that have and others that consider adapting performance appraisal, six main strategic advantages are at disposal.
Firstly, an organization develops proportionally as its employees. It is unethical for an organization to keep developing while its employees remain in the same positions for years. In this case, performance appraisal gives the employees an opportunity to be promoted. To do so, performance appraisal requires supervisors to chalk out the promotional programs for the benefit of efficient employees. With regards to this role of performance appraisal, inefficient employees can be dismissed or demoted. The importance of this aspect to the organization is cutting back on ineffective human capital while at the same time rewarding the efficient ones to boost their job morale (Candy & Leonard, 2011).
Secondly, performance appraisal influences the compensation of employees in that it helps in the review of the compensation packages. In this case, performance appraisal allows employees to be rated regarding their merits. For this reason, the use of performance appraisal gives worth to a performance, hence, boosting employees’ outputs (Candy & Leonard, 2011). The compensation packages that include the bonuses, high salary rates, allowances, extra benefits, and pre-requisites are based on merits rather than seniority when it comes to performance appraisal’s strategic advantages.
Thirdly, employee development is depended on the amount and quality of work performed. Performance appraisal aids the management to evaluate training and development programs in order to streamline employees with the expectations of the organization. New jobs can be created mainly for efficient workers in order to utilize their ratings in the delivery of quality work. This also aids in the sorting of employees with regards to their strengths and weaknesses (Candy & Leonard, 2011). To the organization, this program dictates the future plans of the organization. To the employees on the other hand, the performance appraisal dictates the duration they ought to remain in training and development schemes.
As a forth strategic advantage to an organization, performance appraisal helps supervisors in the understanding of the validity and importance of the selection procedure. The supervisors come to know and understand the validity and strengths of the selection procedure. The selection procedure adapted by most organizations is the tradition credential-review approach (Arthur, 2006). This selection procedure has been revoked by a number of organizations that would rather put potential employees under job review for some period of time. For those organizations that follow the traditional credential-review approach, performance appraisal is handy in the scrutiny of the selection procedure. Too many employees that do not fit within the job expectation criteria points out a defective selection procedure – future changes can be made in this regard.
The fifth and six strategic advantages of performance appraisal include communication and motivation. For communication, effective communication between seniors and juniors helps in the acceptance and transfer of skills to subordinates. On the other hand, communication creates confidence between supervisors and subordinates, hence, creating conducive working environment for all Arthur, 2006). For motivation, performance appraisal serves as a motivational tool. Through the appraising of an individual’s performance, an employee’s efficiency can be determined if the standing targets are achieved. This motivates the individual for better job and builds the urge for performance improvement in the future (Arthur, 2006).
Performance appraisal is a must-have management requirement for organizations because it creates evaluation grounds for employees. This enables the organization to reward efficient employees accordingly while at the same time redirecting finances to beneficial projects rather than compensating inefficient workforce. To the employees, performance appraisal aids them in the evaluation of their performance, hence, enabling them to make sound adjustments towards meeting their personal objectives and contributing to the organizational business goals.