ASSESSMENT THE EFFECTIVENESS OF PERFORMANCE APPRAISAL EXERCISE IN THE PUBLIC SERVICE
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter presents the theoretical framework and models that are relevant and suitable for the current study; and which will be applied and used to analyze collected data and information.
2.1 The Concept of Performance appraisal
Performance is an outcome, or result of an individual’s actions. An individual’s performance therefore becomes a function of ability and motivation (Ainsworth et al., 2002). Performance Assessment (also performance appraisal, evaluation, measurement) becomes a continual review of the job related task accomplishments or failures of the individuals within the organization. A major consideration in performance improvement involves the creation and use of performance measures or indicators; which are measurable characteristics of products, services, processes, and operations the company uses to track and improve performance.
Shelley (1999) describes performance appraisal as 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. Shelley again considers PA as a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future. It is a powerful tool to calibrate, refine and reward the performance of the
employee. By focusing the attention on performance, performance appraisal goes to the heart of HR management and reflects the management's interest in the progress of the employees.
Moats (1999) corroborate Shelley’s (1999) position and further add that performance appraisal is a process by which organizations evaluate employee performance based on preset standards. Moats describes the main purpose of appraisals as helping managers effectively staff companies and use human resources, and, ultimately, improving productivity. According to Moats when conducted properly, appraisals serve the purpose Shelley describes by: (1) showing employees how to improve their performance, (2) setting goals for employees, and (3) helping managers to assess subordinates' effectiveness and take actions related to hiring, promotions, demotions, training, compensation, job design, transfers, and terminations.
The above expositions given by Moats and Shelley collectively establish performance appraisal as a clear and concise, regular and unbiased system of rating an employee's performance in her current position, which can also be used to determine how far the employee can go in career development. The benchmarks of such an appraisal, according to Moats, are usually the job description in tandem with stated company objectives, and often includes rewards and incentives.
An organization engages a person for the purpose of employing his skills to achieve certain goals and objectives. Every so often, the employer needs to take stock and
determine the value of each employee, his potential, and what his future in the company is likely to be. In the researcher’s opinion this is accomplished through the practice of performance appraisal.
Moats (1999) explains that in the early part of the twentieth century performance appraisals were used in larger organizations mostly for administrative purposes, such as making promotions and determining salaries and bonuses. Since the 1960s, however, companies and researchers have increasingly stressed the use of employee evaluations for motivational and organizational planning purposes. Indeed, for many companies performance appraisal has become an important tool for maximizing the effectiveness of all aspects of the organization, from staffing and development to production and customer service (Moats, 1999).
As Moats puts it, that shift of focus was accompanied during the 1970s, 1980s, and 1990s by a number of changes in the design and use of appraisals. Those changes reflected new research and attitudes about organizational behavior and theory. Traditional appraisal systems were often closed, meaning that individuals were not allowed to see their own reports. Since the mid-1900s, most companies have rejected closed evaluations in favor of open appraisals that allow workers to benefit from criticism and praise.
Moats asserts further that another change in appraisal techniques since the mid-1900s has been a move toward greater employee participation. This includes self-analysis, employee input into evaluations, feedback, and goal setting by workers. Appraisal
systems have also become more results-oriented, which means that appraisals are more focused on a process of establishing benchmarks, setting individual objectives, measuring performance, and then judging success based on the goals, standards, and accomplishments.
Likewise, appraisals have become more multifaceted, incorporating a wide range of different criteria and approaches to ensure an effective assessment process and to help determine the reasons behind employees' performance (Bodil, 1997).
Again, Moats State that performance appraisals and standards have also reflected a move toward decentralization. In other words, the responsibility for managing the entire appraisal process has moved closer to the employees who are being evaluated; whereas past performance reviews were often developed and administered by centralized human resources departments or upper-level managers, appraisals in the 1990s were much more likely to be conducted by line managers directly above the appraisee.
2.2 Objectives of Performance Appraisal
The objectives of the appraisal scheme should be determined before the system is designed in detail. The objectives will to a large extent dictate the methods and performance criteria for appraisal so they should be discussed with employees, managers and trade unions to obtain their views and commitment (Fletcher, 1994). The main objectives of an appraisal system are usually to review performance, potential and identify training and career planning needs. In addition the appraisal system may be used
to determine whether employees should receive an element of financial reward for their performance (Derven, 1990).
Performance reviews give managers and employees opportunities to discuss how employees (1) are progressing and to see what sort of improvements can be made or help given to build on their strengths and enable them to perform more effectively (Grote, 2002). Review of potential and development needs predicts the level and type of work that employees will be capable of doing in the future and how they can be best developed for the sake of their own career and to maximise their contribution to the organisation. Reward reviews - determine the 'rewards' that employees will get for their past work. The reward review is usually a separate process from the appraisal system but the review is often assisted by information provided by the performance appraisal (Einstein, 1989).
Wesley (2004) also identifies some objectives of performance appraisal s indicated below: 1) To review the performance of the employees over a given period of time. 2) To judge the gap between the actual and the desired performance. 3) To help the management in exercising organizational control. 4) Helps to strengthen the relationship and communication between superior – subordinates and management – employees. 5) To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future. 6) To provide feedback to the employees regarding their past performance. 7) Provide information to assist in the other personal decisions in the organization. 8) Provide clarity of the expectations and responsibilities of the functions to be performed by the employees. 9) To judge the effectiveness of the other
human resource functions of the organization such as recruitment, selection, training and development. 10) and last but not least to reduce the grievances of the employees.
Competent appraisal of individual performance in an organization or company serves to improve the overall effectiveness of the entity. McGregor in Moats (1999) describes the three main functional areas of performance appraisal systems as: administrative, informative, and motivational. According to Addison-Wesley (2001), appraisals serve an administrative role by facilitating an orderly means of determining salary increases and other rewards, and by delegating authority and responsibility to the most capable individuals. Again, Moats says the informative function is fulfilled when the appraisal system supplies data to managers and appraisees about individual strengths and weaknesses. Bodil finally describes the motivational role to entail creating a learning experience that motivates workers to improve their performance. When effectively used, performance appraisals will be seen to be playing a major role in helping employees and managers establish goals for the period before the next appraisal (Addison-Wesley, 2001).
According to McNamara (2000) Performance Appraisal can be done with following objectives in mind:
a) To maintain records in order to determine compensation packages, wage structure, salaries raises, etc.
b) To identify the strengths and weaknesses of employees to place right men on right job.
c) To maintain and assess the potential present in a person for further growth and development.
d) To provide a feedback to employees regarding their performance and related status.
e) It serves as a basis for influencing working habits of the employees.
f) To review and retain the promotional and other training programmes.
Wesley (2004) also identifies some objectives of performance appraisal s indicated below:
a) To review the performance of the employees over a given period of time.
b) To judge the gap between the actual and the desired performance.
c) To help the management in exercising organizational control.
d) Helps to strengthen the relationship and communication between superior – subordinates and management – employees.
e) To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.
f) To provide feedback to the employees regarding their past performance.
g) Provide information to assist in the other personal decisions in the organization.
h) Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.
i) To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.
j) To reduce the grievances of the employees.
2.3 Effectiveness of Performance appraisal
The effectiveness of a system is defined as an external standard “of how well the system is meeting the demands of the various groups and organizations that are concerned with its activities” (Pfeffer and Salancik 1978) which approximately is a construct “for doing the right things” or having validity of outcome (Hines et al. 2000).
Effectiveness is by definition a qualitative measure set by evaluator. Möller and Törrönen (2003) argue that effectiveness “refers to the system’s ability to invent and produce solutions that provide more value to stakeholders of the institution”.
Moats (1999) points out that most effective systems of appraising performance are: (1) pragmatic, (2) relevant, and (3) uniform. Bodil (1997) describes pragmatism as important because it helps to ensure that the system will be easily understood by employees and effectively put into action by managers. Moats further stresses that appraisal structures that are complex or impractical tend to result in confusion, frustration, and nonuse. Commenting further, Moats says that systems that are not specifically relevant to the job may result in wasted time and resources. Undeniably, most successful appraisal programs identify and evaluate only the critical behaviors that contribute to job success. Systems that miss those behaviors are often invalid, inaccurate, and result in discrimination based on nonrelated factors (Bodil 1997).
Moats stresses again that the uniformity of the appraisal structure is vital because it ensures that all employees are evaluated on a standardized scale. Appraisals that are not
uniform are less effective because the criteria for success or failure become arbitrary and meaningless. Furthermore, uniformity allows a company to systematically compare the appraisals of different employees with each other. Moats contends that companies must address four decisions when structuring their appraisal systems: (1) What should be assessed? (2) Who should make the appraisal?; (3) Which procedure(s) should be utilized?; and (4) How will the results be communicated? In determining what to evaluate, designers of an appraisal system usually consider not only results, but also the behaviors that lead to the results (Bodil, 1997)
According to Shelley (1999) the actions and results that are measured will depend on a variety of factors specific to the company and industry. Most importantly, criteria should be selected that will encourage the achievement of comprehensive corporate objectives. This, Moats says, is accomplished by determining the exact role of each job in accomplishing company goals, and which behaviors and results are critical for success in each position. Furthermore, different criteria for success should be weighted to reflect their importance.
2.4 Challenges of Performance Appraisal
There are chances of opposition for valuation due to fear. If the evaluation system is poor, it will not give adequate effect. Rater’s problems like leniency or harshness error, central tendency error, personal bias error, contrast error are also affecting the performance appraisal of an employee (Rasch 2004).
Each employee should evaluate by his supervisor and to discuss each other to set objectives for upcoming evaluation. This discussion should cover the review of overall progress, problems encountered, performance improvement possibilities, long term career goals, specific action plan about job description and responsibilities, employee development interest and needs, to concentrate specific areas of development, to review performance objectives and performance standard, ongoing feedback and periodic discussions
Performance appraisals are important for staff motivation, attitude and behavior development, communicating organizational aims, and fostering positive relationships between management and staff. Performance appraisals provide a formal, recorded, regular review of an individual's performance, and a plan for future development. In short, performance and job appraisals are vital for managing the performance of people and organizations.
2.5 Employees’ Perception of Appraisal Systems
Most employees have mixed feelings with performance appraisal systems. Whilst some believe it carry some biases and largely fails to meet its objectives, others find it a means to justify their performance (Rasch 2004). According to Rasch (2004), managers commit mistakes while evaluating employees and their performance. Some of these biases are perceived by employees as ways of unfairly interpreting their performances.
Biases and judgment errors of various kinds may spoil the performance appraisal process. Bias, according to Shelley (1999), refers to inaccurate distortion of a measurement. Moats points out that, even when a performance evaluation program is structured appropriately, its effectiveness can be diluted by the improper use of subjective, as opposed to objective, measures.
Objective measures are easily incorporated into an appraisal because they are quantifiable and verifiable. In contrast, subjective measures are those that cannot be quantified and are largely dependent on the opinion of an observer. Subjective measures have the potential to dilute the quality of worker evaluations because they may be influenced by bias, or distortion as a result of emotion (Moats 1999). To overcome the effects of prejudice, many organizations must train appraisers to avoid biases. McNamara (2000) identifies eight common forms of biases discussed below:
First Impression (primacy effect)
This bias, according to McNamara occurs when raters form an overall impression about the ratee on the basis of some particular characteristics of the ratee identified by them. The identified qualities and features may not provide adequate base for appraisal.
Halo Effect
In his words, Moats says the term "halo" stems from the distortion that the appraisee, like an angel with a halo over its head, can do no wrong. This type of bias, however, also applies to foes of the rater, and may not job-related. The effect is particularly pronounced
when the appraisee is an enemy or very good friend of the evaluator. McNamara adds that the individual’s performance is completely appraised on the basis of a perceived positive quality, feature or trait. In other words this is the tendency to rate a man uniformly high or low in other traits if he is extra-ordinarily high or low in one particular trait. If a worker has few absences, his supervisor might give him a high rating in all other areas of work.
Horn Effect
McNamara describes this bias as the situation where the individual’s performance is completely appraised on the basis of a negative quality or feature perceived. This results in an overall lower rating than may be warranted.
Excessive Stiffness or Lenience
Depending upon the raters own standards, values and physical and mental makeup at the time of appraisal, ratees may be rated very strictly or leniently (Moats 1999) According to Kurt (2004) some of the managers are likely to take the line of least resistance and rate people high, whereas others, by nature, believe in the tyranny of exact assessment, considering more particularly the drawbacks of the individual and thus making the assessment excessively severe.
The leniency error can render a system ineffective. If everyone is to be rated high, the system has not done anything to differentiate among the employees. Moats Points out that, leniency and strictness bias results when the appraiser tends to view the performance of all of his employees as either good and favorable or bad and unfavorable. Although these distortions are often the result of vague performance standards, they may also be the consequence of the evaluator's attitudes.
Central Tendency
McNamara says this bias occurs where appraisers rate all employees as average performers. That is, it is an attitude to rate people as neither high nor low and follow the middle path. According to Moats, the error of central tendency occurs when appraisers are hesitant to grade employees as effective or ineffective. They pacify their indecisiveness by rating all workers near the center of the performance scale, thus avoiding extremes that could cause conflict or require an explanation.
Personal Biases
Shelley says the way a supervisor feels about each of the individuals working under him - whether he likes or dislikes them - has a tremendous effect on the rating of their performances. Personal Bias can stem from various sources as a result of information obtained from colleagues, considerations of faith and thinking, social and family background and so on. Likewise, Moats judges that personal prejudice results from a rater's dislike for a group or class of people. When that dislike carries over into the appraisal of an individual, an inaccurate review of performance is the outcome.
Spillover Effect
McNamara in describing this bias says that the present performance is evaluated much on
the basis of past performance. “The person who was a good performer in distant past is assured to be okay at present also” (McNamara 2000)
Recency Effect
In the case of this bias, rating is influenced by the most recent behaviour ignoring the commonly demonstrated behaviours during the entire appraisal period. The recency effect is a corollary of the natural tendency for raters to judge an employee's performance based largely on his most recent actions rather than taking into account long-term patterns ( McNamara 2000 ).
As indicated, Moats Corroborates McNamar’s position on the nature of these biases, and further identifies a ninth bias which McNamara failed to indicate. Moats calls this the cross-cultural bias, which he describes as the consequence of an evaluator's expectations about human behavior. Those expectations often clash with the behavior of appraisees who have different beliefs or cultural values.
Gabris & Mitchell (2000) have reported a disruptive bias in performance appraisal known as the Matthew Effect. It is named after the Matthew of biblical fame who wrote, "To him who has shall be given, and he shall have abundance: but from him who does not have, even that which he has shall be taken away." According to Gabris & Mitchell, in performance appraisal the Matthew Effect is said to occur where employees tend to keep receiving the same appraisal results, year in and year out. That is, their appraisal results tend to become self-fulfilling: if they have done well, they will continue to do well; if
they have done poorly, they will continue to do poorly. The Matthew Effect suggests that no matter how hard an employee strives, their past appraisal records will prejudice their future attempts to improve (Gabris & Mitchell 2000).
In addition to bias, Moats (1999) contends that flaws in the execution of an appraisal program can be destructive. Moats cites the example of managers downgrading their employees because high performance reviews would outstrip the department's budget for bonuses; or, some managers using performance appraisals to achieve personal or departmental political goals, thus distorting assessments.
2.6 Limiting the Effects of Supervisory Bias
McNamara suggests reasonable steps which can be taken to limit the effects of supervisory bias.
a) Awareness Training: Supervisors need to be informed of the types of subtle bias that can interfere with their performance as appraisers. They need to understand that the ingroup/outgroup bias, for instance, reduces the morale and motivation of their subordinates.
b) Developing Poor Performers: Incentives, financial or non-financial, may be offered to encourage supervisors to make special efforts to help poor performers improve. Supervisory appraisals, for example, might stress the importance of working with poor performers to upgrade their performance. The possibilities are extensive.
c) Counselling, Transfer, Termination: There is always the possibility that an employee who receives poor appraisal results is in fact a chronic poor performer. No employer is obliged to tolerate poor performance forever. Consistently poor appraisal results will indicate a need for counseling, transfer or termination. The exact remedy will depend on the circumstances.
2.7 Performance Appraisal Techniques
As Moats (1999) points out, different performance appraisal techniques can be classified as either past-oriented or future-oriented.
2.7.1 Past-Oriented Techniques
According to Moats, past-oriented techniques assess behavior that has already occurred. They focus on providing feedback to employees about their actions, feedback that is used to achieve greater success in the future. Moats presents techniques under this form as discussed below:
Rating Scales and Checklists: According to Moats, some of the traditional forms of performance appraisals such as rating scales and checklists remain popular despite their inherent flaws. They entail an assessor providing a subjective assessment of an individual's performance based on a scale effectively ranging from good to bad or on a checklist of characteristics. Typically, basic criteria such as dependability, attitude, and attendance are listed.
The obvious advantage of these techniques is that they are inexpensive and easy to administer. Primary disadvantages include the fact that they are: highly susceptible to all forms of bias; often neglect key job-related information and include unnecessary data; provide limited opportunities for effective feedback; and fail to set standards for future success. Furthermore, subjective techniques such as rating scales are vulnerable to legal attack.
Behaviorally Anchored Rating Scales (BARS)
According to Moats a fairer approach to performance appraisal is behaviorally anchored rating scales (BARSs), which are designed to identify job-related activities and responsibilities and to describe the more effective and less effective behaviors that lead to success in specific jobs. The rater observes a worker and then records his or her behavior on a BARS. The system is similar to checklist methods in that statements are essentially checked off as true or false. Moats points out however that, BARS differ in that they use combinations of job-related statements that allow the assessor to differentiate between behavior, performance, and results.
Forced-Choice Appraisals
Forced-choice appraisals consist of a list of paired (or larger groups of) statements. According to Moats the statements in each pair may both be negative or positive, or one could be positive and the other negative. The evaluator is forced to choose one statement from each pair that most closely describes the individual He contends that Forced-choice
appraisals are typically easy to understand and inexpensive to administer, but they lack job relatedness and provide little opportunity for constructive feedback.
Critical Incident Evaluation Techniques
Critical incident evaluation techniques require the assessor to record statements that describe good and bad job-related behavior (critical incidents) exhibited by the employee. According to Moats, the statements are grouped by categories such as cooperation, timeliness, and attitude. An advantage of this system is that it can be used very successfully to give feedback to employees. Furthermore, it is less susceptible to some forms of bias. On the other hand, critical incident assessments are difficult because they require ongoing, close observation and because they do not lend themselves to standardization and are time consuming (Kurt 2004).
Field Review Appraisal Techniques: Field review appraisal techniques entail the use of human resource professionals to assist managers in conducting appraisals. Moats says that the specialist asks the manager and sometime coworkers’ questions about an employee's performance, records the answers, prepares an evaluation, and sends it to the manager to review and discuss with the employee. This type of system improves reliability and standardization because a personnel professional is doing the assessment. For the same reason, it is less susceptible to bias or to legal problems. But field reviews are generally expensive and impractical for most firms, and are typically utilized only in special instances—to counteract charges of bias, for example ( McNamara 2000).
Future-Oriented Techniques
In contrast, Moats says that future-oriented appraisal techniques emphasize future performance by assessing employees' potential for achievement and by setting targets for both short- and long-term performance. He discusses these forms of techniques as presented below:
Management by Objectives (MBO) Approach
Moats describes this technique as usually goal oriented. In MBO, managers and employees work together to set goals with the intent of helping employees to achieve continuous improvement through an ongoing process of goal setting, feedback, and correction. As a result of their input, employees are much more likely to be motivated to accomplish the goals and to be responsive to criticism that arises from subsequent objective measurements of performance (McNamara 2000).
Assessment center evaluation
Moats refers to this as a more complex assessment method that is usually applied to managerial or executive prospects. It is a system of determining future potential based on multiple evaluations and raters. Typically, a group meets at a training facility or evaluation site. They are evaluated individually through a battery of interviews, tests, and exercises. In addition, they are evaluated within a group setting during decision-making exercises, team projects, and group discussions. Psychologists and managers work together to evaluate the employees' future management potential and to identify strengths and weaknesses (Bodil 1997).
Psychological tests
Psychological tests are a much less intricate method of determining future potential. Moats says they normally consist of interviews with the employee and his supervisors and coworkers, as well as different types of tests and evaluations of intellectual, emotional, and work-related characteristics. The psychologist puts his or her findings and conclusions in a report that may or may not be shared with the employee.
Self-Appraisal
Another appraisal technique included in the future-oriented category is self-appraisal, which entails employees making evaluations of their own performance. According to Moats although self-assessment techniques may also be coordinated with past-oriented evaluations, they are particularly useful in helping employees to set personal goals and identify areas of behaviors that need improvement. The advantage of such appraisals, which may be relatively informal, is that they provide an excellent forum for input and feedback by superiors. In addition, they allow supervisors to find out what employees expect from themselves and from the organization or department (Bodil 1997).
In addition, Bodil suggests that evaluators often combine various future- and past- oriented techniques, forming hybrid approaches to performance appraisal. According to Kurt (2004) using several different techniques enables managers to measure both behavior and results and to set goals for employees to improve their performance and to increase their motivation. For example, an evaluator might use both the BARSs and MBO techniques to reap the benefits of both and compensate for the drawbacks of each.
Chopek (2003) from a different angle discusses the following four methods in order to provide examples of current methods in use and to illustrate the varying complexity of available methods.
The Balanced Scorecard
Chopek defines this as a process that focuses on clarity and is useful in evaluating both internal processes and external results. The balanced scorecard focuses on four key perspectives in which individual assessments take place and are then combined to provide an overall assessment. These perspectives are learning and growth, business process, customer, and financial (bsc.org).
2.8 Developing Employee Performance Appraisal Plans (EPAP)
According to Wesley (2003), regulatory requirements for planning an employee’s performance include first establishing the elements and standards in their EPAP. An EPAP outlines the specific elements and standards that the employee is expected to accomplish during the rating cycle. Wesley points out that performance elements and standards should be measurable, understandable, verifiable, equitable, and achievable. In addition, EPAPs should be flexible so that they can be adjusted for changing program objectives and work requirements.
Elements
According to Wesley elements established in appraisal plans should all be considered critical. Through these elements, employees are held accountable as individuals for work
assignments and responsibilities of their position. A critical element is an assignment or responsibility of such importance that unsatisfactory performance in that element alone would result in a determination that the employee’s overall performance is unsatisfactory.
Standards
The performance standards, according to Wesley (2003) are expressions of the performance threshold(s), requirement(s), or expectation(s) that must be met for each element at a particular level of performance. Kurt (2004) says they must be focused on results and include credible measures such as:
Quality
This addresses how well the employee or work unit is expected to perform the work and/or the accuracy or effectiveness of the final product. It refers to accuracy, appearance, usefulness, or effectiveness. Measures can include error rates (such as the number or percentage of errors allowable per unit of work) and customer satisfaction rates (determined through a customer survey/feedback).
Quantity
This addresses how much work the employee or work unit is expected to produce. Measures are expressed as a number of products or services expected, or as a general result to achieve.
Timeliness
This addresses how quickly, when, or by what date the employee or work unit is expected to produce the work.
Cost-Effectiveness
This addresses savings or cost control. These should address cost-effectiveness on specific resource levels (money, personnel, or time) that can generally be documented and measured. Cost-effectiveness measures may include such aspects of performance as maintaining or reducing unit costs, reducing the time it takes to produce or provide a product or service, or reducing waste (Wesley 2003).