Management Functions
One of the cornerstone’s of is the employee appraisal. This is the most formalized component of direct feedback that most employees receive. It can be used to reinforce positive behaviors and to identify negative ones that need to be corrected. Yet often managers and employees alike approach the task with trepidation. In part, this is because such appraisals are deemed to be a needless and painful process. The painful part is understandable, as performance appraisals can foster resentment if the employee does not agree with the assessment or outcome. Performance appraisals, however, should not be needless. Instead, they can and should be an important component in the firm’s human resources strategy.
Too often, the performance appraisal is not tied to any particular strategic objectives. There is a lack of a “clear, mutual understanding of their purpose.” What this means is that many firms insist upon conducting performance appraisals without communicating their purpose to the people administering them, much less the people on whom they are conducted. This leads to all manner of negative outcomes. The appraisals may not have any strategic function, whereas a properly designed appraisal will. Even if the appraisal has a strategic function, the lack of communication can result in the conductor drifting away from that strategy. This means that desired outcomes are not achieved. Worse, the performance appraisal may have unintended negative outcomes. Moreover, the lack of proper administration of a performance appraisal will make it more difficult to track those outcomes. A properly designed performance appraisal system will not have these negative outcomes, but will instead support the organizations’ strategic objectives.
Planning
The first step in the planning process for performance appraisals is to understand the goals of the organization. The performance appraisal is tool by which employee behavior can be managed. The behavior will therefore be shaped in order to suit the organization’s strategic objectives. Thus, those objectives are the starting point in the planning process for performance appraisals. The organizational objectives should be kept in mind at all times while the appraisal process is being designed.
One of the most significant expected outcomes of any performance appraisal is the job description. In order to conduct the next performance appraisal, the tasks and standards for the next period will be defined in the current appraisal. The job description must work to meet the organization’s strategic objectives. Thus, the manager must define the employee’s role within the organization. Then, the appraisal process must be designed to communicate this role and to develop a job description and objectives that allow the role to make the desired contribution to the organization’s strategic goals.
In addition to organization goals and job goals, the appraisal itself should have a set of goals. This will allow the appraisal process itself to be appraised, and perhaps improved for the next cycle. The appraisal’s design will incorporate the organization’s rewards system, its culture, and the degree of change in employee behavior that is desired. There is significant variation in different performance appraisal systems, so it is important that the specific system adopted by congruous with the goals the company has. At this stage, if the organization realizes that the performance appraisal system has no particular goals, then should then re-evaluate the need for such a system at all.
The next step of the planning process is to develop the specific techniques. These will be dependent on the objectives. An appraisal that is largely designed to correct negative behaviors will utilize different techniques than an appraisal that is designed mainly to reinforce a shift in the corporate culture. Each basic technique must then be specifically tailored to the organization’s circumstances and the unique objectives of the appraisal. When appraisal techniques are developed on the fly, the appraisal risks failure in terms of meeting the organization’s needs and objectives. The measurement techniques that will be used with each employee should be communicated to the employee at the previous appraisal but if this is not possible they should be communicated as soon as possible. This helps to engage the employee in the process and keep the process equitable.
The last step in the process of planning a performance appraisal is to develop a system of controls and measures. These can be both broad-based and narrow in focus. Broad-based measures can be used to evaluate the performance of the appraisal system overall. The most effective measures, however, will be more specific to the appraisal system. Significant outputs such as job descriptions provide the opportunity to measure the appraisal process directly. The performance appraisal system must itself by appraised, as with any component of an organization’s activities. This will assist in the planning process for the next appraisal cycle.
Implementation poorly implemented performance appraisal can have a myriad of negative consequences, from disrupting teamwork, impeding personal development, poisoning the labor-management relationship to improperly aligning employee behavior and strategic goals. Yet, a properly implemented performance appraisal can strengthen the labor-management relationship, align performance to strategic objectives and strengthen employees’ development. There are several important aspects regarding the implementation of a successful performance appraisal system.
The first is that the system and the managers conducting it need to avoid bias. Bias, or the perception of it, can cause significant damage not only to a performance appraisal but to employee morale in general. Managers need to understand the sources of bias, which include factors such as personal style, short-term time orientation bias, personal relationships, assumptions based on culture or race and group rating. The program that has been developed should incorporate an education program that trains the appraisers to avoid these biases. Training is critical to implementation and both are critical to the performance appraisal process.
The second factor is that the appraisal must be consistent in its focus on accuracy and effectiveness. This serves two functions. One is that it avoids the perception on the part of the employee that there is bias, or that the review is personal in nature. The other is that it helps to drive the appraisal towards the overall strategic objectives that were identified in the planning process. If the performance appraisal and job description are aligned with the organization’s goals then accuracy in the appraisal will retain that alignment. Focusing on effectiveness keeps the employee focused on what is required, which helps to better align behavior. Communication style is critical – the appraisal must be implemented in a fair, equitable way. This requires calm, reasoned communication that is focused and succinct. Directness and honesty are essential components of the ideal communication style.
Communication is an essential part of the implementation process. Both the managers conducting the appraisals and the employees receiving them must fully understand not only the process, but rationale for the process. There is the potential for significant resistance to the performance appraisal process. That resistance, however, can be overcome if all parties involved understand fully the reasons why the appraisal process is important, and how the process meets the organization’s strategic objectives.
There is a temptation for managers to view the performance appraisal process as a one-way street. It is not – performance appraisal is a collaborative process. Communication must flow in both directions. Therefore, in implementing the performance appraisal there must be room for feedback and employee input. Employees need the opportunity to voice their issues and help to discuss their own performance. This is useful in reducing the possibility of labor-management tension, it initiates and encourages the feedback process and it allows the employees to voice their own concerns either about the process or about their work.
The last important aspect of implementation is to ensure that benchmarks are established and communicated. These benchmarks can be established by decree or collaboratively, but it is essential that the employee understand what they are intended to achieve in the upcoming cycle. It will also be of benefit for the employee to review some of the benchmarks that were used in the current appraisal. The standards that are used to measure performance are an essential component in the alignment of behavior with strategic objectives. Therefore, managers not only develop clear and reasonable standards but they must do so based on solid information, so that the standards are realistic, communicable and congruous with objectives.
Performance appraisal is a control mechanism, but that does not exclude it from the control process itself. During the planning process a set of goals was established for the performance appraisal process. The manager’s role is to ensure that those goals are met. Ideally, in meeting the goals of the appraisal process, that process has made the expected contribution to the organization’s strategy objectives. Therefore, the performance appraisal system must include some aspect of outcome measurement. This measurement system will gather data that the manager must analyze. Selecting the appropriate measure is also important. Measures that do not accurately reflect the goals of the process will not provide useful information. Once the outcomes are measured, they are then evaluated against the stated goals of the appraisal.
Should the outcomes perform well against the goals, then the performance appraisal process must undergo a re-evaluation. Theories about the underperformance of key outcomes can be matched against feedback from the appraisers and the employees. From that point, a course of action can be developed that will alter the appraisal process to better align it with its objectives. The final step in the control mechanism is the adjustment process. The new ideas must be incorporated into the existing appraisal system. These new ideas must then be tested to determine if they have been as effective as intended, or if they have even moved the outcomes further from the objectives. At this point, the manager is engaged in a feedback loop that exists to continuously improve the performance appraisal process.
Conclusion
Performance appraisals are often conducted poorly, and this has led to considerable criticism of the tool. There are three fundamental functions a manager can perform in order to avoid poor performance of their performance appraisal program. The first is planning. It is essential the management has a clear sense of the objectives of the program, both in terms of the program itself and in terms of its contribution to the organization’s objectives. The second is implementation. The plans must be implemented as they have been determined, without deviation. Additionally, there are many subtle implementation tactics that can negate the best-laid plans. Avoiding this pitfalls will require significant soft skills on the part of the appraisers but can be supported with a strong training program. Lastly, a system of measurement and control must be established with respect to the performance appraisal system. Measures must be appropriate to the objectives of the program, and then the measures evaluated. A feedback loop allows management to continuously measure and improve upon their performance appraisal system. The ultimate goal of the system is to help support the organization’s strategic goals. It is therefore imperative for managers to continuously ensure that the style, measures and other aspects of the performance appraisal system are aligned with those strategic goals.
Works Cited
Heskett, Jim (2006). What’s to be Done About Performance Reviews? Harvard Business School. Retrieved November 26, 2008 at http://hbswk.hbs.edu/item/5563.html
No author. (2008). Performance Reviews. Carnegie Mellon University. Retrieved November 26, 2008 at http://www.cmu.edu/hr/hr_services/performance/reviews.html
Culbert, Samuel a. (2008) Get Rid of the Performance Review! MIT Sloan Management Review. Retrieved November 26, 2008 at http://sloanreview.mit.edu/wsj/insight/hr/2008/10/20/
No author. (2004) Performance Appraisal Handbook. United States Department of the Interior. Retrieved November 26, 2008 at http://www.doi.gov/hrm/guidance/370dm430hndbk.pdf
Murphy, Kevin R. & Cleveland, Jeanette. (1995). Understanding Performance Appraisal. Sage Publishing, Thousand Oaks, 1995.
Lloyd, Joan (2006). Implementation & Training Key to Success with New Performance Review Process. Chicago Job Resource. Retrieved November 26, 2008 at http://www.chicagojobresource.com/career_manager_04.htm
Heskett, Jim (2006). What’s to be Done About Performance Reviews? Harvard Business School.
No author. (2008). Performance Reviews. Carnegie Mellon University.
Lloyd, Joan (2006). Implementation & Training Key to Success with New Performance Review Process. Chicago Job Resource.
Murphy, Kevin R. & Cleveland, Jeanette. (1995). Understanding Performance Appraisal. Sage Publishing, Thousand Oaks, 1995. pp 12-14
