We live in a competitive world and one of the most important topic of attention for any organization is performance improvement and the role of performance management systems. A typical performance management system involves numerous activities, far more than simply reviewing what an employee has done. A performance management or performance management should be able to clearly express to an employee how he or she has performed with a certain time period and on the established goals. It’s also essential that this system and process support the employee and supervisor to mutually agree and set the goals for measurement. Additionally, it is also important that performance management not only focuses on feedback but also helps the employee to improve performance on looking the deficiencies or weaknesses.
Another important aspect of performance management system is documentation and any performance management would be incomplete if the proper documentation has not taken place. The documentation is not only required from the legal perspective such as if a supervisor has taken a decision to terminate an employee on the basis of performance basis, then the supervisor should be able to support his decision on the basis of past few (usually three or four) performance management reviews. Apart from this, the documentation helps the employees themselves to build up their goals, objectives and improvement areas on the basis of past review documentation.
Difficulties in Performance Management Systems
In any performance management system, there are three entities involved i.e. employees, appraisers or supervisors and the organization. The difficulties in any performance management system can be categorised into two categories with focus on individuals and process itself. An appraisal process is challenging for both employee and appraiser as it involves a lot of emotions. A difference on performance outcomes may lead to emotions overcoming both parties, a poor way for evaluations to be handled.
Wherever performance evaluations are conducted, a particular structure must be followed. An organisation’s policies and procedures may present barriers to a properly functioning appraisal process. For e.g., appraisers are poorly trained in how to evaluate an employee’s performance. This lack of training may lead appraisers to make judgment errors or permit biases to enter into the process.
The Performance Management Process
An appraisal or performance management process can be summarised by the figure below. The process should start early in the cycle for the period which employee would be appraised.
Figure 1: The appraisal process
The first step should be to establish the performance standards in accordance with the organization’s strategic goals. These performance standards should also be clear and objective enough to be understood and measured.
Once these standards are in place, they should be clearly communicated to the employees so that they do not have to guess what is expected from them.
The third step in the appraisal process is performance measurement. To determine what actual performance is, we need information about it. Four common sources of information frequently used by managers address how to measure actual performance: personal observation, statistical reports, oral reports, and written reports.
The fourth step in the appraisal process is the comparison of actual performance with standards. This step notes deviations between standard performance and actual performance.
One of the most challenging tasks facing appraisers is to present an accurate assessment to the employee. Appraising performance may touch on one of the most emotionally charged activities—evaluation of another individual’s contribution and ability.
The final step in the appraisal is the identification of corrective action where necessary. Corrective action can be of two types: one is immediate and deals predominantly with symptoms, and the other is basic and delves into causes.
There are various existing approaches for performing appraisal. Authors have argued that no approach is always best and all of them have their own strength and weaknesses.
Evaluating Absolute Standards
The first group of appraisal methods uses absolute standards. This means that employees are compared to a standard, and their evaluation is independent of any other employee in a work group. Included in this group are the following methods: the critical incident appraisal, the checklist, the graphic rating scale, forced choice, and behaviourally anchored rating scales.
Relative Standards Methods
Another category of appraisal methods compares individuals against other individuals. These methods are relative standards rather than absolute measuring devices. The most popular of the relative methods are group order ranking, individual ranking, and paired comparison.
Using Achieved Outcomes to Evaluate Employees
The third approach to appraisal makes use of achieved performance outcomes. Employees are evaluated on how well they accomplished a specific set of objectives determined as critical in the successful completion of their job. This approach may be referred to as goal setting but is more commonly referred to as management by objectives (MBO).
Factors That Can Distort Appraisals
A completely error-free performance appraisal is only an ideal HRM professionals can aim for. In reality, most appraisals fall short, often through one or more actions that can significantly impede objective evaluation. The following shows the factors which can change the appraisals:
Leniency Error happens when the supervisor rates the employees either high or low compared to other appraisers. Based on that it can be either positive leniency or negative leniency error.
The Halo error or effect happens when the appraiser or evaluator rates all on all the competencies high or low on the basis of one particular competency.
Appraisers who are prone to the central tendency error are those who continually rate all employees as average.
When evaluators rate other people in the same way that the evaluators perceive themselves, they are making a similarity error.
Due to this perception that evaluators have of themselves, they project those perceptions onto others.
Attribution theory attempts to differentiate between elements the employee controls (internal) versus those the employee cannot control (external).
Creating More Effective Performance Management Systems
(A. DeCenzo, et al., 2009) suggest the following to be consider to create an effective performance management system.
Figure 2: Measures to create Effective Performance Management Systems
Though the list above is no cookbook for success, it can definitely help while formulating an effective appraisal system. To extend on the point of having multiple raters, there are few systems as described which can be of help.
Peer evaluations are conducted by the employees’ co-workers—people explicitly familiar with the behaviours involved in their jobs. A slight deviation from peer assessments is a process called the upward appraisal, or the reverse review. An appraisal device that seeks performance feedback from such sources as the person being rated, bosses, peers, team members, customers, and suppliers has become popular in organizations. This is known as 360 degree feedback system.
There are various theories and methodologies while it comes to performance management systems and doing an appraisal. There is no “one size fits all” way while establishing the performance management. The Managers and the appraisers involved in the process have to clearly understand that the performance management can be based on a certain guideline or methodology but it cannot be full proof as it involves emotional aspects of human beings both appraiser and the employee being rated.
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