Performance Appraisals

The competitive market structure operating within today’s society dictates that the survival of any businesses can only be achieved through the maintenance of maximised output, and minimised expenses. Being that the direct and indirect costs of employing labour remain one of the highest expenses to any business, it is only feasible that a reliable method of optimising labour output be implemented at all times. By doing so, businesses can almost guarantee their viability within the market system.

Performance appraisal is one such method that allows for the optimisation of labour. In a broad sense , it is a formal structure that allows for the continued measuring and evaluation of individual behaviour and performance, whilst influencing an employees job related attributes through such factors as increased job satisfaction and recognition (with the use of promotional aids such as better equipment, duties, and wages). The purpose of any such system, is not only to measure the performance of human resources but also to find areas of skill deficit for further development (through employee feedback), identify excess potential that could be better utilised, and communicate objectives more accurately to workers . By doing so, businesses move one step closer to the achievement of their set goals and objectives. Included here is also one other factor that is not a direct objective of appraisals, but becomes a valuable asset within itself. This simply is the provision for maintaining records of workers that are legally viable, that can protect the business when dealing in cases of dismissals and demotions. This is especially important in today’s society because of the "increasing legislation and regulation dealing with victimisation and discrimination" making employers liable for all their actions.

In establishing such a system, it is important to firstly determine realistic goals that will be expected of workers, and then make these goals known so workers have direction. Once set, appraisals can be undertaken, in three steps. The first involves the observation and identification of an employee’s work behaviour, and the outcomes and achievements that are a direct result of them. These outcomes then must be compared against the original goal standards that were set for them. The second step revolves around the evaluation and action to be taken to counter the first step. If an employee’s performance is lacking, analysis as to the reasons why must be undertaken, and corrected through such means as increasing motivation, training or even termination. If the performance was as good, or better than requested, then considerations of reward must take place. Such rewards can be increased wages, and at times, movement to jobs requiring more expertise . The last step is fundamentally review and correction of the initial goals, and the development of new ones. In doing so, the person who set up the goals to begin with, must examine them and decide if they were realistic and viable, in contrast to the resources available and other such aspects of the work environment.

In order to execute performance appraisals, it is necessary to have a performance appraisal system. In essence, such a system refers to the form or method that will be used to gather and appraise data, the job analysis that will be conducted to identify criteria that will be gauged universally, establishing not only the validity but also reliability of data collection methods (validity and reliability are two separate factors all together), selecting who would best suit the position of appraiser and their influence on the over all appraisal, the interviewing processes, the way in which results will be utilised, and how the appraisals system itself will be appraised for quality and usefulness . In total, appraisal systems fall into four categories, depending on the particular approach taken. These are the comparative standards, absolute standards, objective based approaches, and direct indexes. "Within each of these methods, appraisals take on a number of different forms" .

The comparative standards category of appraisal is considered one of the easiest forms, due to the ease with which it is administered . It features a number of systems for comparing and contrasting one individual worker to another, in order to better distinguish their capabilities and efforts. Within this system, exist several comparative methods, the first of which is known as ‘Simple’ or ‘Straight’ ranking. It works by rating individuals on their performance from best to worst . This particular method assumes that the appraising party is able to make judgments on over all performance without any criteria or benchmarks to guide them. This generally causes ratings to be based more so on opinions, as opposed to actual figures of output, sales or labour turn over . The second comparative method is known as the ‘Alternate’, and is similar to the prior in its failings and design. Appraisal is done by listing the best performer first, then the worst last, once this has been done, the second best and worst performers are selected, and placed according. This process continues until the entire group of subordinates are ranked. The third method known as the ‘Paired Comparison’ suffers the same defects as the other two, but allows for slightly more objectivity to be included in comparisons by contrasting two subordinates at a time against all others on a single standard criterion, such as overall performance. Unfortunately, the amount of "time taken increases geometrically as the size of the group increases" . The fourth form of comparison is that of ‘Forced Distribution’. This method subdivides assessment into categories, allowing for more criteria to be used in judging individuals. The subordinates are then selected and placed into these individual groups for comparison. The problem with this approach is that employees may not naturally fit into the categories they are placed in, possibly causing the creation of artificial results. Throughout all four comparative standards systems, there exists one undermining factor that is ignored. This is the belief that workers are not capable of identical work standards, and that there is always one person who is better than the rest . This factor is presumptuous and unrealistic.

Absolute standards is the second category of the appraisal systems, and works in direct contrast to the comparative standards. It evaluates employees independently, whilst at the same time establishing several standards for evaluation. In total, there exist six methods of appraisal under this system, the first of which is known as the ‘Essay Narrative’. As it’s name suggests, it involves documenting in written format, each person’s strengths, weaknesses, and development needs . Because of it’s nature, the task of setting promotions is made more difficult because each document is rarely written in a set format, causing evaluations to vary from one appraiser to the next, through use of language, and comprehension. Further limiting this system is it’s dependence on supervisory event recall. In most cases, events that are closest to evaluation dates are best remembered, and evaluations on these memories are inaccurate because workers tend to make more effort during such periods, hoping that any prior failings might be overlooked . One major benefit of this system unlike others, is it’s ability to freely record unique characteristics of individuals because the appraiser is not boxed in with set questions. The second method, ‘Critical Incident’ does not center around average performance, but instead extreme levels of performance. The only records kept are for "effective or ineffective accomplishments" and the situations surrounding the ratee’s behaviour and situation. While this form of appraisal is not quantitative, it is objective, and save much time for the appraiser who only has to complete notes when events occur . This system does not allow for comparison between subordinates because it does not differentiate the importance of jobs. ‘Weighted Checklists’ are the third type of absolute standard, and are developed through the collaboration of information gained from ‘critical incidents’ reports, and the collection of frequency of events. From this list, it is then possible to see the total failings or outstanding performances of subordinates, and later decide the importance of these happenings on successful job fulfillment. The benefit of such a system lies in time reduction and "it’s characteristics of objectivity" . The fourth method is ‘Forced Choice’, designed in a similar fashion to the weighted checklist, but with the ability to over come the common errors of leniency, strictness and central tendencies that sometimes are present in some evaluations. This is done by requiring the appraiser to select "which of two descriptions in a pair better describe the subordinate" . The choice of answers are written in such a way that both seem equally favourable or possibly unfavourable, thus removing to a large degree the possibility of bias (for example - both these answers seem favourable, "works hard" and "works fast", but only one correctly answers the question). However, because this is based namely on behaviours rather than personal attributes, it does not allow for employee interaction (such as feedback), that can lead to the possible distancing of workers, and completely forgoes any area in which a worker may excel, that is not included in the questionnaire. The fourth, and most commonly used absolute standard appraisal, is the ‘Graphic Rating Scale’ (also known as ‘Conventional Rating"). This is used to asses a person’s "quality and quantity of work, as well as a variety of personality traits, such as reliability and cooperation" . Popularity for this system stems from the ease with which it can be developed, administered, and understood by appraisers. "It can also be adapted to a large range of jobs, provided they have a range of common elements" , and be as reliable and valid as more complicated forms such as ‘Forced Choice’ .The drawbacks here include the standard errors common to all absolute standards, as well as a lack of potential for development, leaving subordinates none the wiser to continue with their mistakes. Because this system’s nature attempts to cover a wide variety of areas, it can sometimes overlook fine detail that needs to be considered. In some instances, companies have incorporated this system with parts from the essay/narrative method to create a more adequate approach. This action would allow for more details to be noted that would normally not be addressed correctly or substantially (it should be noted that by adding the element of essay/narrative, you are also consequently adding the failings associated to that system). The final method in the series of absolute standards is the ‘Behaviourally Anchored Rating Scales’, that consists of "five to ten vertical scales - one for each important dimension of a job performance anchored by the incidents judged to be critical. Critical incidents occurs when employee behaviours result in unusual success or failure on some part of the job" (effective and ineffective behaviour). These incidences are then assigned values that have been prearranged by managers (job experts), as to their importance to performance. The most obvious disadvantage with this technique is "the amount of time and professional expertise that is required to develop appropriate anchors" . Another problems arises from the fact that observations are of conduct as opposed the actual results. On the other hand, the main highlight of this system is simply it’s ability to allow superiors to offer feedback to their workers in order to better their performances .

The Objective Based category of appraisals, is specifically designed to appraise management on all levels. The popularity of this system stems from trait of rewarding those people who are deserving because of their accomplishments. This system works in four steps. The first is to develop goals in conjunction with subordinates that will achieve desired outcomes benefiting the business. The second step is that of monitoring subordinate goals, over the set period of time, and modifying them to better suit changes caused by external circumstances . The third step begins at the end of the predetermined period that was allowed for tasks to be completed. At this stage, actual outcomes can be contrasted to planned outcomes. Investigation can then take place as to why certain outcomes were experienced. If less was done than expected, it may be necessary for example, to allocate tasks to different people, or possibly better educating them (if they were the cause). If the performances surpassed expected limits, goal setting processes should be reviewed to find possible failures (i.e. Did not demand enough). If it is found that the outcomes were caused by workers having more capabilities than at first acknowledged, appropriate steps should be taken to place them in a position that their skills are better utilised. The final step is to over view outcomes, consider all new factors discovered, and then develop future goals for subordinates based on current and future business needs.

The last category of appraisal systems is known as Direct indexes, and differs from the first three categories primarily in how performance is measured. The first three (except for the objective based approach) "depend on a superior evaluating a subordinate’s performance. There is a certain amount of subjective evaluation in these cases. However, the direct index approach measures subordinate performance by objective, impersonal criteria (such as productivity), absenteeism, and turnover" . In the case of managers, performance is calculated via the effectiveness of their subordinates, through such means as "scrap rates, the number of defects produced, customer complaints, output per hour, new customers orders, sales " and other such measures that are directly related to the organisation’s efficiency. Subjectivity within this system is rather removed, and for such reasons it is rarely ever used solely by itself .

Just as important as it is to have a performance appraisal system, is having the correct one. The effects of an incorrect system can cause a business to chase it’s own tail, never solving issues, and quite possibly causing less productivity than before the system was initiated. In determining which is the best method, the question "best for what?" arises. Currently trends show an amalgamation of several methods being used , such as the ‘essay/narrative’ system and ‘graphic’ method in an attempt to better cope with the limitations of single methods, and thus better reach goals.

One of the world’s largest legal publishers (CCH) of personal management series has set out general guidelines for the implementation of performance appraisal systems, stating that each system should be reviewed and weighed up in the light of several factors to best determine which would be the effective. The factors included: resources available to businesses, particularly time and money (there would be no point in taking on a system that generated less than it consumed); the aims and importance of staff appraisals to the businesses overall output (using a system that over appraised individuals beyond the needs of the business would only amount to wasted time and increased expenses); which employees and which jobs would need to be appraised (little or no use would be obtained by appraising jobs that have little or no importance in obtaining the business’s main objectives); the size of the organisation (once again there would be no need for a in-depth appraisal system if the business had few employees - in such cases, the comparative standards method of appraisal is probably best); training and development; and the ability of present staff in carrying out individual performance appraisals (the more difficult the appraisal task, the more likely a business will need to resort to a professional for expert advice, which is not feasible for small business). If these factors are adhered to correctly, certain cases such as that of six high paid managers (who subsequently earn several thousand dollars a week) spending two to three days in deliberation deciding over a subordinates pay rise (that would only amount to one thousand dollars extra per year) would not occur.

Undoubtedly, much debate remains about the effectiveness of even the best thought out appraisal methods. Appraisers are said to be ineffective due to their strictness, leniency, personal biases and prejudices, suffering from central tendencies, unknowingly distorting the truth (halo effect), stereotyping and other such errors. While others will argue that employees leave interviews believing that they had wasted their time, and in some cases leave feeling hostility that only proves detrimental to the business in the long run. Doubts are also expressed as to the lack of information contained by some appraisal records - allowing for misinterpretations of valuable information that may lead to acts of unfair dismissals, which in turn can cause lengthy and costly legal litigations for unfair dismissal through such acts as the ‘Australian Anti-Discrimination act (1984)’. One final valid debate regarding reliance on performance appraisals lies with the question "what is the point of having bosses if they are not giving their employees regular feedback" . It is true that regular interaction and direction maintenance by a superior would help the performance of individuals; this is a managerial job that should never be removed. But at the same time, it must be noted that performance appraisal techniques serve more functions than that of a slave driver and his whip.

With a correct and well implemented appraisal system, small businesses and companies alike may look forward to improved competencies, added value to the organisation , and productivity growth through the development of partnerships between workers and their superiors. This may allow for issues previously ignored, such as the availability and benefits of new machinery, to be reviewed for future consideration. Of course there remain many more areas that must be understood fully before being able to effectively utilise performance appraisals (other such areas include interview techniques and implementation programs), but due to the shear magnitude of this area, this document can only briefly overview the concept of appraisals and it’s key points.

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