Performance Appraisal

Definition and Brief History

A performance appraisal system that is commonly referred to as performance review or employee evaluation, is the process that is primarily purposed to evaluate performance of employees and their overall contributions to the growth, development, and success of the company (Obisi, 2011). According to the estimations of the researchers, performance appraisal is considered to be a formal system that aims at identifying and evaluating the quality of employee’s skills, personal qualities, characteristics that contribute to organizational performance (Khan, 2013). Although the assessment of employee’s performance is often perceived as a complicated and challenging task, the role of performance appraisal is an incredibly significant process because it is directly linked to organizational objectives and missions, every performance of employees, personal as well as professional development of the workforce, and, finally, rewards and incentives (Khan, 2013). Although the term “performance appraisal” is formally defined as a systematic and structured assessment of employee’s performance, performance appraisal is a very complex term. It encompasses numerous variables, especially knowledge, experience, and skills of employees, quality as well as quantity of output, initiative, important leadership qualities and abilities, supervisions, adaptability to challenging environment, cooperation and collaboration with other employees, judgment, versatility, and many other interdependent factors (Khan, 2013). Taking into consideration the historical perspective of performance appraisal it is possible to stress that the origin of performance appraisal dates back to the period of Wei dynasty on the territory of China (Toppo & Prusty, 2012). In general, performance appraisal systems helped to justify functions, and were created with the primary purpose to clarify whether an employee deserves and justifies a certain wage (Toppo & Prusty, 2012). Numerous empirical studies provide convincing evidence that after 1940s the concept of performance appraisal has undergone drastic changes and modifications (Toppo & Prusty, 2012).

Types of Performance Appraisal

Performance appraisal system that is often used synonymously with such terms as performance review, evaluation, assessment, and, finally service rating, is subdivided into directly quantifiable as well as subjective measures which are not included in the list of directly quantifiable measures (Aggarwal & Thakur, 2013). However, performance appraisals or performance measurements are generally classified as traditional or, in other words, past –oriented appraisals, and modern or future-oriented (Shaout & Yousif, 2014). To begin with, traditional methods of employee’s performance evaluations include the following types of assessments: ranking method which is primarily purposed to rank employees from the best to the worst; critical incident method which is focused on important critical behaviours, attitudes and actions of employees that make considerable difference in the effectiveness of their performance; narrative method which concentrates on numerous strengths and weaknesses of employees, including overall impression and effectiveness of performance, existing capabilities, skills, and qualifications, and, finally, previous performance; and graphic ranking method of performance appraisal which helps to enumerate and assess traits and skills of employees that influence the efficiency of their performance (Shaout & Yousif, 2014). On the contrary, modern or, in other words, future-oriented methods include the following types of performance appraisals: management by objectives which concentrates on achievement of organizational missions and objectives by employees; BARS which is directly linked to measurement of reliability, validity, and accuracy of performance ratings; human resource accounting which treats employees as valuable sources that positively impact organizational growth, development, and success, and judges employee performance in terms of their contribution to organizations; assessment centre which assesses employees by professional observers on the basis of a series of exercises and work samples; 360 degree which includes performance measurement and assessment from numerous stakeholders, especially supervisors, team members, and even clients; 720 degree which focuses on a feedback that is usually taken from various external sources, including stakeholders, families, peers, suppliers, and the entire communities (Aggarwal & Thakur, 2013). Finally, there are many alternative employee appraisal techniques that are often recognized as no less effective than traditional and modern appraisal methods, especially 90 degree, electronic performance control and monitoring, mixed standard scale, and many others (Kampkotter, 2014).

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Benefits of Performance Appraisal System

Although there are many opposing and contradictory views concerning the significance of performance appraisals in contemporary world, the majority of successful organizations understand the importance and the urgent need of incorporating various traditional and modern types of performance evaluations into their performance management process and strategy (Akinbowale & Lourens, 2013). The researchers differentiate a vast scope of potential benefits of formal employee performance appraisals, including positive influence on continuous organizational growth and development, increased organizational effectiveness, accurate feedback about performance of every employee, employee’s commitment, job satisfaction, enhanced motivation, continuous individual professional training, and personal development, future career aspirations, positive effect on recruitment and induction practices within organizations, and many other benefits (Koshy & Suguna, 2014). Moreover, Daoantis (2012) who investigates the impact of performance appraisal system on employees’ performance claims that appraisal system has a tremendously positive influence on commitment, communication, satisfaction, and development of specific skills and qualities among employees (Daoantis, 2012). In other words, performance measurement system considerably increases employees’ loyalty and commitment to their work, environment, and organization (Daoantis, 2012). Thus, maintenance of effective appraisal system is directly linked to the process of establishment of an extremely effective, professional, and, finally, productive workforce within companies and organizations.

Employee Perception of Conducted Performance Appraisals

Regardless of the common sense logic the attitudes of employees about performance evaluations depend on their effective use, researchers only recently began to explore the nature of attitudes of the workforce towards performance appraisals. As perceived by Boachie & Seidu (2012), perceptions of the majority of employees about the targets, possible outcomes, and, finally, positive effects of performance appraisals depend on numerous factors, especially fairness of appraisals, equality, satisfaction with the system, absence of biases and weaknesses, impacts on group dynamics, superior-subordinate relationships, influence on organizational climate and atmosphere, and many other factors (Boachie & Seidu, 2012). Therefore, according to the research on employees’ perceptions of performance measurements conducted by Khan (2013) the supervisor is considered the most significant determinant who influences employee’s attitudes toward various types of appraisals. However, numerous research studies provide convincing evidence that many employees are dissatisfied with performance appraisals because of biases, subjectivity, ineffective feedback process, and negative impacts of appraisals on employees’ motivation and enthusiasm (Toppo & Prusty, 2012).

Challenges of Performance Appraisal System

Conducting performance appraisals is often a frustrating and challenging management task that neither motivates employees nor strengthens their willingness to develop and pursue organizational missions and objectives (Ahmad & Bujang, 2013). Furthermore, the research studies provide data that faulty design as well as improper administration of employee performance appraisals leads to serious dysfunctional behaviour among managers and employees (Ahmad & Bujang, 2013). In general, the lack of objectivity and fairness is recognized as the most significant weakness of performance appraisal systems that puts at risk employees’ commitment and job satisfaction (Ahmad & Bujang, 2013). Moreover, a halo error is one more challenge of performance evaluation system that usually occurs when managers and supervisors generalize one positive performance feature or negative incident to all other aspects of performance among employees (Deb, 2009). Finally, leniency as well as strictness of performance appraisal systems, behaviour biases, stereotyping, various forms of manipulations, and, finally, employee anxiety are included in the list of challenges of appraisals that hinder the effectiveness and positive outcomes of appraisal systems (Deb, 2009).

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Performance Appraisal and Development

Thus, having shed light on the significance of employee performance appraisal systems, assessed its benefits and positive outcomes, identified and discussed controversial employee perceptions of performance appraisals, and reviewed major challenges of performance measurement systems, it is possible to infer that effective development of performance appraisal systems is important for various spheres of businesses. In addition, accurate, fair, and objective appraisals enhance companies’ productivity, influence personnel decision-making processes concerning promotion, necessary changes, and termination, objectively assess employees’ performance and willingness to pursue organizational missions and objectives, positively impact communication, healthy organizational environment, job satisfaction, and, finally, loyalty and commitment of employees.

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