Performance appraisal is the process of evaluating an employee's performance and providing feedback. It is necessary not only for the individual to improve his/her performance on the job so that s/he can earn the rewards (e.g., money, prestige, power) for which s/he is working, but also important so that the organization can determine the degree to which its employees are contributing toward meeting strategic goals and objectives. There are many ways to judge an employee's performance on the job ranging from objective performance data to global rating scales to more detailed rating scales that represent each of the important aspects of the job. No matter the method used, however, it is vital that the rating scales be anchored to objective, well-defined criteria of job success. This will help ensure that the performance appraisal system is not only accurate, but fair.
Keywords: 360-Degree Feedback; Criterion; Empirical; Feedback; Human Resources; Job Analysis; Management by Objectives (MBO); Pay for Performance; Performance Appraisal; Rating; Return on Investment (ROI)
There is an old saying that advises, "if you do not know where you are going, you will never get there." Certainly, nowhere is this truer than in a business or organizational setting. From an employee's perspective, knowing where one wants to go may mean wanting to do the things on the job that will help ensure a pay raise or promotion. From the organization's perspective, knowing where one is going may mean wanting to do the things that will improve its effectiveness and efficiency and, in general, help it become a high performing organization. However, neither the employee nor the organization can meet these goals unless they know how they are currently performing and can determine what changes must be made in order to improve overall performance. For the individual, this information usually comes in the form of feedback from a performance appraisal or review. Performance appraisal is the process of evaluating an employee's work performance and providing feedback on how well s/he is doing, typically against some standard of performance for that job. Performance appraisal can also provide the organization with some of the information that it needs in order to make strategic decisions to help it succeed in the marketplace.
Uses for Performance Appraisal Information
Performance appraisal is one of the key functions of an organization's human resources department. Organizations use the data collected in performance appraisal systems for several purposes. Perhaps the most well known of these is to establish standards and an evaluation system that can be used to form the basis of judgments as to whether to reward employees for good performance or punish them for poor performance. For example, management might set an individual productivity target of manufacturing 200 widgets per day. Those who meet this standard might be given a pay raise or bonus and those who do not might not receive a monetary reward or may be put on probation. Performance appraisal data are also used to provide the criterion information that is used to select new candidates for the job. For example, the results of a job analysis might tell management what tasks a production worker needs to perform on the job. This information is used in conjunction with performance appraisal data that provide information regarding the standards to which employees must be able to perform these tasks in order to develop criteria to be used in hiring new employees for the job.
Another use for performance appraisal data is to provide objectives for organizational training programs. For example, if a department-wide performance appraisal finds that widget makers do not have the necessary skills to meet the organization's goal of 200 widgets per employee per day, the human resources department might design or contract for a training program that would teach line workers the skills necessary to be better able to meet this goal. Finally, performance appraisal data can provide management with the data needed to provide feedback to employees and to better control their behavior on the job. In most cases, both the employees and management would like to see improved performance on the job. From the employees' perspective, improved performance can be the key to raises, bonuses, perks, and promotions. Such things can help them better meet their needs on the job or in other areas of their lives (e.g., a bigger house, recognition, status). Similarly, management would like to see improved performance because it helps to improve the effectiveness and efficiency of the organization, improves the return on investment for hiring and training, and helps the organization reach its strategic goals and become a high performing organization.
Before an objective performance appraisal system can be developed, one must first perform a job analysis to determine what tasks are actually performed on the job, the standards to which these tasks need to be performed, and the knowledge, skills, abilities, and other characteristics necessary in order to adequately perform these tasks. Job analysis is the systematic, empirical process of determining the exact nature of a job, including:
- The tasks and duties to be done;
- The knowledge, skills and abilities necessary to adequately perform these; and
- The criteria that distinguish between acceptable and unacceptable performance.
The results of a job analysis are typically used in writing job descriptions and setting standards for use in performance appraisals.
Performance appraisals need to be based on the tasks that are actually required to be performed on the job rather than on some general impression of the performance of the employee. These tasks and the standards to which they must be performed are usually based on a solid job description based on an objective, thorough job analysis. Good job descriptions and the performance appraisals that are based on them are competency based, describing the job in terms of measurable, observable, behavioral competencies that the employee must demonstrate in order to perform the job well. For example, rather than saying that a salesperson needs to have good customer rapport, the employee would be required to do such things as greet the customer within 30 seconds of entering the store, immediately drop any tasks not directly related to helping customers in the store if a customer needs help, or any other requirement found to be important to good work performance as determined by the job analysis. The performance standards developed as a product of a thorough job analysis are then used not only to frame the performance appraisal criteria, but also to communicate to employees what kind of behavior will be rewarded (or not rewarded) by the organization. Performance appraisal data are then used to give the employee feedback on how well s/he is meeting the standards in order to encourage high performance.
Methods of Data Collection
There are many sources of data that can be used in developing a performance appraisal system. For some jobs, empirical, quantitative data are available to objectively judge the quality of an employee's work. For example, for production workers, one might use a combination of quantitative data such as the average number of widgets produced per hour, the amount of waste material produced as a byproduct of manufacturing that number of widgets, and the number of widgets produced that are within specification.
In addition to objective production data, in some situations there are personnel data that are available that need to be taken into account when judging an employee's performance. For example, one might want to consider the number of days the employee was late to work, excessive days taken off, or other hard data that might be found in the employee's personnel file that address the employee's level of performance on the job. Although sometimes personnel data can be useful adjuncts when judging performance, they are typically not a substitute for more directly related data concerning performance.
Of course, not every job can be neatly reduced to quantifiable data. Although one can judge the performance of manufacturing workers, for example, based on the number of widgets they produce per hour, such objective data are not available for every position. In the 21st century, an increasing number of employees are knowledge workers and deal in the realm of information and expertise rather than in the realm of tangible products. For example, although it is possible to collect data on the number of calls a technical support employee takes on a help line, this datum does not provide information on how difficult the problem was, how well it was solved, or how polite the employee was to the customer. As most of us who use technical support lines know, these are important pieces of information and are not captured in the easily collectible "number of calls per hour" statistic. To help management make better-informed decisions regarding an employee's performance, it is often necessary to collect subjective, judgmental data regarding performance. An example of this kind of data collection instrument is the "short survey" that often pops up after an online interaction with a sales or support employee.
There are many approaches to designing a rating scale to be used in performance appraisal. The simplest of these is the global rating scale in which each employee is given a single score which rates his/her overall performance. However, global ratings do not give the employee sufficient data for how to improve his/her performance. In addition, such scales are very prone to various kinds of rating error (see below). Therefore, many organizations develop rating scales based on job-related data and standards. One can use a job description, for example, to break out the major aspects of the job and then rate employees on each of these aspects. However, without well-defined standards for poor, acceptable, and outstanding performance, such rating scales can also be very subjective in nature and prone to rating errors. Behaviorally-anchored rating scales and mixed standards rating scales are two techniques...
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