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  :Performance Appraisal Methods and Some Cautionary Notes (A Briefing)
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M.L. Caron,
Managing Partner

First, let's be sure about what we mean by performance appraisal. W.R. Tracey (1991) defines performance appraisal as a "systematic, periodic review and analysis of employees' performance. (p.263) It's important to be clear about how performance appraisal differs from performance management, i.e., "a means of maintaining and improving work behaviour...daily, year-round..."(p. 263)

There are many acceptable definitions of both performance appraisal and performance management, but the key difference to bear in mind is that performance management is an ongoing process, while performance appraisal is one method often used by management as part of an ongoing performance management scheme.

Performance appraisals are used for many purposes, including:

  • deciding promotions
  • determining transfers
  • making termination decisions
  • identifying training needs
  • identifying skill and competency deficits
  • providing employee feedback
  • determining reward allocations

There are many types of performance appraisal. What follows is a listing of only some of the more common traditional approaches to performance appraisal approaches, together with general cautionary notes.

1) Global essay and rating system

This method has two variations.

1.) The first variation of this method involves a manager writing an essay about what they consider to be an overall assessment of an employee's performance. It is important to note that nothing obligates the manager to justify anything within their assessment.

2.) The second variation has the manager rating the employee using a list of terms such as "above average; fair; or poor."

Cautionary Notes...

  • The appraisal content is not necessarily job related. Managers subjectively choose their evaluation criteria.
  • The subjectivity of this method denies employees reliable feedback about their performance.
  • The lack of objectivity and assessment of relevant performance criteria may hinder an employee's ability to improve job performance, and further hinders the organization's potential to optimize employee capacity, consequently impeding overall organizational improvement.
  • T. Philp (1990) points out that an absence of objective measures by which to determine performance levels is an invitation to tension-ridden employee-employer relations, because employees and managers often hold diametric views about 1) which performance inputs/ outputs ought to be evaluated,  and (2) what evaluative judgments ought to be made about those performance inputs/ outputs.

2) Trait Rating

At the center of this method is a list of personality/ disposition traits to which the appraiser must assign a numerical rating or a descriptive rating of adjectives. Traits may include items such as cooperation, motivation, flexibility, and attitude.

        Cautionary Notes...

  • This approach assumes that one can define and rate traits objectively, but in practice, traits are too broadly defined and so are the criteria for evaluating each trait.
  • Because the trait approach is unreliable and invalid, it is highly questionable as to whether it is able to offer any useful information about employee performance and development. Furthermore, because of its reliance on erroneous assumptions, the trait method is likely to be de-motivating to employees and create tension between employees and managers.

3) Peer ranking

In the peer ranking approach, the manager is typically asked to assess the overall performance of an employee by ranking them in relation to other employees.

Some attempted to deal with the inherent subjectivity of this method by using a forced-ranking method, which meant distributing ratings so they conformed to a normal distribution curve. But as T. Peters (1987) points out, this means creating a statistical imperative to evaluate a pre-determined portion of employees as losers.

        Cautionary Notes...

  • Fairly obvious is the negative potential performance effects of labelling an individual as a loser.
  • Inherent in the ranking approach, is the pitting of one employee against another, thus inhibiting the potential for a collaborative work environment.
  • The larger the number of employees a manager has to evaluate and rank, the less likely there will be sufficient familiarity with each person's work to adequately complete the ranking exercise.

4) Critical Incidents Approach

Critical incidents focus the evaluator's attention on those behaviours that are key in making the difference between executing a job effectively and executing it ineffectively.

The manager documents the employee's on-the-job behaviours; separates each behaviour or incident as either unsatisfactory or satisfactory (or some analogous classification scheme), and essentially compares the two categories of incidents, concerned mostly with the higher pile.

        Cautionary Notes...

The degree of objectivity can vary greatly depending on the appraiser and what different appraisers view as critical incidents. Managers need to ensure they have sufficient quantity and quality of employee observational opportunities.

5) Behaviourally based scales and behaviourally anchored rating scales (BARS)

BARS use the constituents of critical incidents and graphic rating scales (similar to trait rating except it measures performance factors rather than personality factors).

BARS use careful job analysis to determine the behaviours required for a particular job. The required behaviour patterns become "anchors" for a rating scale. Concrete job behaviour is displayed from best to worst. For any particular job, BARS involve identifying the complete range of relevant job behaviours, and a design of the appropriate performance dimensions. 

        Cautionary Notes...

  • BARS are complex and difficult scales to construct. Organizations usually need an expert to coordinate the process as well as an individual with statistical skills.
  • It is not only costly to set up, but costly to maintain as well.

6) Objectives and goal-setting procedures (MBO)

The principle behind this approach is to compare expected performance with actual performance. This approach was devised as a method of incorporating performance planning into performance appraisal. In essence, the manager, or manager and employee decide which goals must be achieved by the employee. The goals are connected to a time schedule, are specific and measurable, and become the measure of the employee's performance.  Typically, the goals are established at the beginning of the appraisal period and measured at the end of the appraisal period.

        Cautionary Notes...

  • According to Peters (1987), Drucker proposed MBO as a method of non-bureaucratic self-management, but the method has been debased over time because it has become burdened by top-down forces.

    Generally speaking, most, if not all, performance appraisal approaches have some fault. R. Aguayo (1990), a Deming student, offers some of Deming's more common criticisms of performance appraisals:

    Performance appraisals:

    • Encourage everyone to try to outdo everyone else, thus discouraging cooperative behaviour;
    • Act as a major barrier to people experiencing joy in their work;
    • Tend to be descriptive and do not help performance to improve;
    • Artificially create winners and losers;
    • Tend to be a measure of past performance instead of present performance;
    • Do not adequately tap internal motivation;
    • Artificially separate individual performance from that of the whole company; and
    • Focus on the individual to the exclusion of the system in which the individual operates.

    Performance appraisals are not inherently evil. There are useful purposes for them, and it is possible to effectively integrate performance appraisal into an overall performance management system. The key is to have both performance appraisal methods and performance management processes tailored to each organization's needs - 'cookie cutter' approaches never have worked, and never will work.




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