Definition of key terms
Performance appraisal is a critical human resource practice and a widely studied topic in organizational behavior It involves formal meetings, typically held annually, between supervisors and subordinates to assess the employee's work performance During these evaluations, strengths, weaknesses, and opportunities for skill development and improvement are identified, facilitating professional growth and enhancing overall productivity.
Performance appraisal is a vital process for identifying, observing, measuring, and enhancing human performance within organizations It has garnered significant interest from both scholars and practitioners due to its critical role in effective human resource management Moreover, performance appraisal is closely linked to overall organizational performance, highlighting its importance in fostering a productive workplace.
Performance appraisal, as defined by Gupta (2006), is the systematic evaluation of an employee's performance and progress in their role, along with their potential for future growth This process encompasses all formal methods employed by organizations to assess the personalities, contributions, and capabilities of their employees.
The concept of performance appraisal has historical roots in both Western and Eastern cultures, but its industrial application gained prominence with Robert Owen's introduction of "silent monitors" in Scottish cotton mills The formal implementation of performance appraisal began in the early 19th century in the United States, primarily serving evaluative purposes through tools such as global ratings, global essays, and trait rating scales.
Management by Objectives (MBO), introduced by Peter Drucker in 1954, emphasizes a collaborative approach to performance appraisal, prioritizing feedback and development This method involves employees and managers jointly setting performance goals, which are then discussed and refined until mutual agreement is reached.
At the conclusion of each evaluation period, employee performance is assessed based on the extent to which established goals have been met Additionally, during meetings between employees and their managers, new objectives for the upcoming period are set.
This research utilizes Trần Kim Dung's (2011) definition of performance appraisal, describing it as a formalized system for evaluating employee performance The process of performance appraisal differs among organizations and encompasses aspects such as personality, behavior, and job performance, which can be assessed through both quantitative and qualitative measures Additionally, performance appraisal includes unstructured narratives regarding the appraiser's evaluation of performance.
Purposes of performance appraisal
Performance appraisal serves multiple purposes, primarily categorized into evaluative and developmental functions According to Bernadin and Beatty (1984), performance appraisal enhances resource utilization and informs personnel decisions like salary and promotions Cleveland, Murphy, and Williams (1989) expand on this by identifying four key purposes: distinguishing between employees, recognizing strengths and weaknesses, implementing human resource systems, and recording personnel decisions Evaluative performance appraisal focuses on measuring work behaviors and identifying gaps between outcomes and standards, influencing decisions such as promotions and terminations In contrast, developmental performance appraisal emphasizes identifying employee strengths, providing feedback, and determining training needs, facilitating individual growth and internal personnel decisions.
Performance appraisals serve various purposes that significantly influence both the processes and outcomes of the evaluations Research indicates that appraisals aimed at developmental goals are less susceptible to rating biases compared to those intended for administrative functions.
The purpose of performance appraisal significantly shapes employees' attitudes towards both the appraisal process and their supervisors Employees' perceptions of how performance appraisals are utilized play a crucial role in influencing their attitudes When the evaluative use of performance appraisals clearly connects performance to rewards, it can positively affect employees' attitudes (Cleveland, Murphy, and William, 1989) Additionally, integrating salary discussions into performance appraisal interviews can further enhance employee satisfaction (Prince and Lawler, 1986).
PA Other researches, however, showed that perception of evaluative use of PA is negatively related to satisfaction with PA and supervisor (Mayer, Kay, and French,
1965) Drenth (1984) proposed that evaluative PA often elicits negative feelings and behaviors such as resistance, discouragement, and aggression, especially when evaluation is negative
Developmental performance appraisal (PA) is viewed positively for its forward-looking and supportive approach (Milkovich and Boudreau, 1997) Research by Boswell and Boudreau (2000) revealed a significant positive correlation between the perception of developmental PA and satisfaction with both performance appraisals and appraisers, while no such relationship was found for evaluative PA Youngcourt, Leiva, and Jones (2007) expanded on this by introducing a third purpose of PA, termed role definition, which emphasizes the job position rather than the individual Their findings indicated a positive link between the perception of developmental PA and affective commitment Additionally, they noted that the perception of evaluative PA was significantly associated with job satisfaction, mediated by satisfaction with performance appraisals, although the connections between developmental PA or role definition PA and job satisfaction were not significant.
Kuvaas (2007) examined how perceptions of developmental performance appraisal (PA) influence job performance, discovering that the relationship is mediated by intrinsic motivation rather than affective commitment His findings indicate a positive correlation between the perception of developmental PA and job performance, specifically among employees with low autonomy orientation.
Researchers argue that the multiple purposes of performance appraisal often conflict, hindering its effectiveness and negatively impacting both individuals and organizations (Cleveland, Murphy, and Williams, 1989; Ostroff, 1993; Meyer et al., 1965) Employees tend to favor performance appraisals focused on a single purpose, as combining objectives can obscure accurate feedback regarding their strengths, weaknesses, and development needs (Jordan and Nasis, 1992; Harvey, 1995; McNerney, 1995) Consequently, both researchers and managers advocate for the distinct use of performance appraisal to enhance its effectiveness.
Boswell and Boudreau (2002) investigated the effects of separating evaluative and developmental functions in performance appraisal (PA) systems on employee satisfaction They hypothesized that employees using separated PA systems would experience greater satisfaction with both the PA process and their supervisors compared to those in traditional, combined systems However, their findings revealed no significant differences in PA satisfaction or supervisor satisfaction between the two groups Additionally, employees in separated systems did not demonstrate a higher awareness of development opportunities Interestingly, those in the separated systems expressed a lower intention to utilize development opportunities compared to their counterparts in traditional systems The authors concluded that separating PA functions may diminish the perceived benefits of developmental opportunities, as the connection between development and rewards such as salary increases or promotions becomes less clear.
Previous research indicates that employees' satisfaction with performance appraisals (PA) is influenced by their perceptions of the PA's purpose Specifically, a positive perception of developmental PA is associated with higher satisfaction, while evaluative PA may negatively affect satisfaction Nonetheless, some studies suggest that evaluative PA can yield positive outcomes for employee satisfaction when implemented correctly.
Benefit of performance appraisal
Appraisal is the analysis of the successes and failures of an employee and the assessment of their suitability for training and promotion in the future (Maund,
Performance appraisal is a vital element of employee performance management, as highlighted by Maund (2001) When executed effectively, it enhances an individual's sense of worth and supports the development of their aspirations, focusing primarily on employee growth Introduced in the early 1970s, performance appraisal aimed to establish a formal framework for what was previously an informal practice Accurate appraisals are essential for assessing recruitment, selection, and training processes, identifying training and counseling needs, and boosting employee motivation through constructive feedback Furthermore, performance evaluations can enhance productivity by leveraging strengths and addressing weaknesses, while also improving managerial effectiveness by fostering greater attention to individual employees The objectives of performance appraisal policies are best understood through their potential benefits, as noted by Mohrman et al (1989).
• increase motivation to perform effectively
• gain new insight into staff and supervisors
• better clarify and define job functions and responsibilities develop valuable communication among appraisal participants
• encourage increased self-understanding among staff as well as insight into the kind of development activities that are of value
• distribute rewards on a fair and credible basis
• clarify organizational goals so they can be more readily accepted
• improve institutional/departmental manpower planning, test validation, and development of training programs
Appraisal is essential for assessing achievements and identifying areas for improvement, serving as a tool to clarify how organizations can address employees' training and development needs According to Maund (2001), effective appraisal fosters communication between managers and employees, ensuring a mutual understanding through four key components: the tasks to be completed, the criteria for evaluating success, the objectives of the appraisal process, and the method for providing feedback on performance.
According to Bandura (1977), self-appraisal of performance leads to self-generated outcomes, where positive evaluations foster rewarding self-responses and negative assessments trigger punitive reactions This process of appraisal offers several advantages, enhancing personal growth and motivation.
• The appraiser and the appraisee are forced to meet formally
• The employee becomes aware of what is expected of him/her
• The employee learns or reaffirms his or her exact status
• Valuable feedback can be received by both employee and employer
• The manager can learn what the employee is actually doing rather than what he/she thinks he/she is doing.
Method of performance appraisal
1.4.1 Behavior Anchored Rating Scales (BARS)
Behaviorally Anchored Rating Scales (BARS) is recognized as a comprehensive and systematic rating technique, as noted by Swan (1991) While BARS can be resource-intensive due to the thorough analysis required for each job, it follows a structured five-step process This process begins with critical incidents, where job experts identify specific examples of effective and ineffective behaviors Next, performance dimensions are developed based on these incidents The third step involves retranslation, where a different group of knowledgeable individuals validates and refines the performance dimensions Subsequently, scaling incidents occur, allowing this second group to rate the dimensions The final outcome is the creation of the behavioral anchors that form the BARS instrument.
The BARS instrument features vertical scales anchored by specific incidents, with each incident rated according to established criteria (Swan, 1991) This system ensures precise measures that are directly relevant to job performance and provides strong legal defensibility.
The appraisal system evaluates employees based on key personality traits such as motivation, innovativeness, and adaptability Managers assign numerical values to each trait, reflecting the employee's level of proficiency An alternative approach involves assessing employees against various trait labels accompanied by brief definitions and a range of descriptive adjectives Typically, these trait-rating scales undergo informal analysis to determine which personality traits should be integrated into the appraisal system.
Trait-rating scales lack clear definitions for criteria like "meet requirements" or "exceed requirements," making them challenging to legally defend due to the difficulty in proving job relevance This ambiguity increases the risk of rater errors, such as the halo effect, leniency biases, and central tendency Additionally, these scales hinder managers from effectively identifying employees' training and development needs, as they focus on employee traits rather than job performance (Swan, 1991).
Erasmus et al (2003) highlight that the Management by Objectives (MBO) system emphasizes the alignment of individual and organizational goals, serving as a tool for performance evaluation By involving employees in the goal-setting process, managers can effectively monitor performance by comparing outcomes to the objectives established collaboratively Bagraim et al (2003) further assert that the MBO system helps maintain employee focus on job deliverables, ultimately ensuring that the organization fulfills its strategic commitments.
The manager is required to write a report on each employee (Erasmus et al
In 2003, it was noted that evaluating an individual's strengths and weaknesses is subjective, as the format of such assessments can vary The outcome largely relies on the manager's writing abilities and the comparative rating techniques employed, where an employee's performance is assessed in relation to a peer performing similar tasks.
The system evaluates individuals from top performers to the lowest based on specific performance factors, but it is applicable only to a limited number of employees Importantly, this method does not facilitate comparisons between teams, and the feedback generated is not directed at the employees themselves (Erasmus et al., 2003).
The system enables managers to individually compare employees against one another, determining rankings based on the frequency of favorable evaluations This method highlights each employee's performance relative to their peers, although certain limitations exist within the evaluation process.
According to Erasmus et al (2003), managers should allocate a percentage of employees to designated categories for each performance factor when implementing this system The chosen forced distribution can define any percentage per category and does not have to adhere to the norms of a standard distribution.
Multi-source performance appraisal
Traditional performance appraisals (PA) rely heavily on evaluations from direct supervisors, emphasizing a top-down flow of information However, recent changes in organizational structures, including decentralization and the adoption of matrix organizations, necessitate a broader approach to performance feedback This evolution has led to the emergence of multi-source performance appraisals, which incorporate horizontal and bottom-up information flows alongside traditional top-down assessments, thereby enhancing the speed and quantity of feedback in modern performance appraisal systems.
Self-appraisal is a process where employees evaluate their own work performance, leveraging the belief that they are best positioned to assess their behaviors and provide accurate ratings Research highlights the benefits of self-appraisal, suggesting it enhances the effectiveness of performance appraisal systems and boosts employee satisfaction, as noted by Farh et al (1991) Gomez-Meija (2001) emphasized that self-appraisal encourages employees to identify the root causes of their performance issues, while Jackson and Schuler (2003) pointed out that it fosters greater involvement and commitment to organizational goals Additionally, involving employees in the appraisal process minimizes goal ambiguity and conflict, leading to improved communication and acceptance of appraisal outcomes (Caroll & Schneider, 1982; Fletcher, 1986; Latham and Wexley, 1981) Farh et al (1988) found that self-appraisal is often perceived as fairer, more accurate, and more effective than supervisor evaluations.
Several researchers have recommended limiting the use of self-appraisal as a performance evaluation tool due to concerns about self-enhancement tendencies among self-raters, which can lead to biased and unreliable assessments (Denisi & Shaw, 1977; Anderson et al., 1984) Mixed findings regarding the effectiveness of self-appraisal have been reported, with Thorton (1980) noting a consistent pattern of leniency, where employees often rate themselves higher than their supervisors and peers Thorton’s review of 22 studies highlighted several issues with self-ratings, including reduced variability, lower discriminant validity, and fewer halo effects, ultimately concluding that self-appraisals are less reliable than evaluations from supervisors and peers.
Peer appraisal is a performance evaluation method that utilizes feedback from an employee's colleagues, making it one of the most reliable sources for assessing job performance (Murphy and Cleveland, 1995) Research by Korman (1968) indicates that peer ratings are strong predictors of job performance across various roles, including industrial managers, sales representatives, and police officers (Roadman, 1964; Waters & Waters, 1970; Landy et al., 1976) Additionally, studies have shown that peer appraisals maintain consistent reliability, attributed to daily interactions among peers and the input from multiple raters (Dejung & Kaplan, 1962; Fiske & Cox, 1960; Latham et al., 1979; Miner, 1968).
Peer appraisals have notable shortcomings, as highlighted by Farr (1983), who noted that personal relationships and friendships among peers can lead to leniency in performance evaluations This tendency results in inflated ratings, as peers may give higher scores to maintain positive relationships Additionally, Murphy and Cleveland (1995) pointed out that peers often rate their colleagues similarly to foster harmony and cohesion within their groups, which can compromise the accuracy of the evaluations.
Subordinate appraisal is a performance evaluation method where employees assess their supervisors, contrasting with the conventional top-down appraisal approach This system is grounded in the understanding that subordinates interact more frequently with their supervisors than higher-ups do, enabling them to provide more accurate and insightful feedback on their supervisors' behaviors and effectiveness (Bernadin, 1986).
Subordinates are significantly influenced by their supervisors' behaviors, making them a valuable source of first-hand feedback on management styles Additionally, some experts argue that subordinate ratings, similar to peer evaluations, can mitigate potential biases associated with single-rate appraisals (Redman & Snape, 1992).
Research indicates that upward or subordinate appraisals can effectively drive positive changes in supervisor behavior Studies by Reily, Smither, and Vasilopoulos (1996) and Walker and Smither (1999) show that the ongoing use of subordinate appraisals can lead to lasting behavioral improvements over periods ranging from 2.5 to 5 years Additionally, subordinate appraisals can enhance management skills, as demonstrated by Atwater et al (1995), who found that managers rated poorly to moderately by their subordinates experienced skill improvements six months post-appraisal, provided their self-ratings were not also low.
While subordinate ratings can offer valuable insights, they also present several drawbacks According to Bernadin, Dahmus, and Redmon (1993), one major issue is that managers might prioritize pleasing their subordinates to secure favorable evaluations, which can undermine their authority and status Additionally, subordinates are only equipped to assess certain aspects of a supervisor's role, leading to potential inaccuracies when evaluating other job dimensions This limitation can result in managers doubting the effectiveness of subordinate evaluations, ultimately jeopardizing the success of the appraisal system.
Each appraisal source has its unique strengths and weaknesses, which must be carefully evaluated to achieve optimal results Additionally, a key concern in multi-source appraisals is the level of agreement among these sources.
Bias in performance appraisal
Performance appraisal plays a crucial role in organizational functioning and individual development, yet these systems often have significant shortcomings (Cascio, 1987) Lee (1989) identified several factors contributing to the ineffectiveness of performance appraisals, such as poor design, inadequate communication, ambiguity, lack of support, and inappropriateness Among these, biases in performance appraisal emerged as one of the most critical issues impacting their effectiveness.
Biases in performance appraisal occur when there is a discrepancy between actual performance levels and the ratings assigned by evaluators These biases can be minimized when performance ratings accurately mirror true performance However, various factors can introduce biases, stemming from the raters, the ratees, or their interactions (McKinney and Collins, 1991).
Rater biases in performance appraisal, as highlighted by Lazer (1980), stem from the subjective nature of evaluations based on individual observations and judgments While objective measures can help reduce these biases, establishing them for all job types, particularly at higher organizational levels, remains challenging Common biases include the halo and horn effects, leniency and strictness errors, central tendency error, recency effect, contrast error, and similarity error This section will explore various factors influencing rater biases, including characteristics of both raters and ratees, such as gender, age, prior expectations, performance knowledge, and their familiarity with each other, as well as grievance activities.
1.6.1 Rater and ratees personal characteristics
1.6.1.1 Gender bias in performance appraisal
Researches on the impacts of raters‘ gender on performance appraisal have suggested mixed results Studies by Pulakos and Wexley (1983), Landy and Farr
Research on supervisor appraisal ratings reveals mixed findings regarding the influence of rater gender While studies by Shore and Thorton (1986) and others indicated no significant differences in ratings based on the gender of the supervisor, McKinney and Collins (1991) found that female raters tended to give higher ratings than their male counterparts Additionally, Benedict and Levine (1988) demonstrated that female raters were more lenient towards poor performers in a controlled laboratory setting Conversely, Furnham and Stringfield (2001) reported that female raters were stricter when evaluating male subordinates, with no notable differences observed among male raters.
Performance appraisal biases regarding ratees‘ gender attracted many more studies Findings from these studies, however, are inconclusive with the emergence of three different stances (Millmore, Biggs and Morse, 2007)
Numerous studies indicate a pro-male bias in performance ratings among both students and employees For instance, Rosen et al (1975) found that male candidates received more favorable ratings in dimensions such as acceptability and service potential Similarly, Gutek and Stevens (1979) identified this bias across various job types Dipboye et al (1975) revealed that 72% of top candidates for a managerial role were male, despite identical qualifications between genders Nieve and Gutek (1980) attributed this bias to attribution theory, suggesting that women’s successes are often credited to external factors rather than their abilities Deaux and Emswiller further explored these dynamics, highlighting the persistent favoritism towards male performance evaluations.
Research from 1974 revealed a gender bias in performance attribution, where women's success in male-dominated tasks was often credited to external factors like luck, while men's success was linked to inherent skills Additionally, studies indicated that women's high performance is frequently seen as temporary, in contrast to men's performance, which is viewed as a lasting capability.
Multiple studies indicate that there are no significant differences in performance evaluations between males and females Frank and Drucker (1977) reported similar ratings for men and women regarding sensitivity, organization, planning, and written communication Additionally, Shore and Thornton (1986) examined a group of 35 male and 35 female assemblers along with their supervisors and found no gender differences in self and supervisor ratings Likewise, Hall and Hall (1976) concluded that there were no sex differences in overall task performance ratings.
Research has shown that there is no significant sex difference in job performance evaluations, as evidenced by a study in 1985 that utilized job analysis to create a task-based performance appraisal tool Additionally, Tsui and Gutek (1984) found that supervisors exhibited no bias in their attitudes toward male and female employees Griffeth and Bedeian (1989) suggest that the evolution of many occupations into gender-neutral roles has contributed to the diminishing presence of gender bias in the workplace.
Research indicates that females often receive more favorable ratings than males in performance evaluations Jacobson and Effertz (1974) found that followers rated male leaders lower than female leaders, despite similar actual performance Similarly, Furnham and Stringfield (2001) reported that male ratees received lower evaluations compared to their female counterparts A study by Millmore, Biggs, and Morse (2007) involving 66 managers revealed that females scored significantly higher than males when assessed by self, supervisors, peers, and subordinates McKinney and Collins (1991) also found that female ratees received notably higher ratings in public parks and recreation, suggesting either superior performance or a leniency effect Additionally, Dobbins, Cardy, and Truxillo (1988) discovered that female professors were rated higher by students Neiva and Gutek (1980) acknowledged the existence of gender bias in performance appraisals, noting that its effects vary across different contexts and are influenced by several factors.
The likelihood of evaluation bias increases with the higher level of inference required in appraisals Evaluations based on past performance, which necessitate minimal inference, tend to exhibit less bias Conversely, when assessments hinge on judgments regarding an individual's abilities, causes, and the value of their performance—factors that demand a greater level of inference—bias is more prevalent Additionally, the presence of clear performance criteria or specific, concrete information reduces the required level of inference, leading to a decrease in bias.
The concept of sex role congruence highlights that behaviors deviating from societal gender expectations are often negatively perceived Research indicates that both men and women face challenges when applying for gender-typical roles Additionally, women who act in ways inconsistent with these expectations may experience social rejection, diminished group acceptance, and their abilities may be undervalued or attributed to external factors rather than their actual skills.
Research indicates that gender bias is influenced by levels of qualification and performance, with males typically exhibiting higher qualifications in challenging tasks Consequently, men receive greater recognition for their successes, while women are often viewed more favorably in failure Additionally, unsuccessful women face lighter penalties compared to their male counterparts, yet successful women do not receive equivalent rewards as successful men.
1.6.1.2 Race biases on performance appraisal
Concerns about race bias in performance appraisals have been widely discussed, yet research findings remain inconsistent A study by Mobey (1982) involving 1,035 employees across various job levels examined the influence of race on performance ratings By analyzing previous year's appraisal data alongside the sex and race of both supervisors and employees, the study concluded that the race of the raters generally did not significantly affect their ratings of subordinates.
Research indicates significant racial disparities in performance appraisal ratings, with white employees consistently receiving higher evaluations than their black counterparts A review by Kraiger and Ford (1985) highlighted that supervisors often favor employees of their own race, leading to biased ratings This finding is supported by various studies (Schmitt and Hill, 1977; Schmitt and Lappin, 1980; Bass and Turner, 1973), which collectively demonstrate that black employees are rated lower on global performance dimensions, although they may achieve comparable ratings to white employees on specific behavioral metrics, as noted by Brugnoli, Campion, and Basen (1979).
(1989) studied managers sample and found evidences in support of their hypothesis that managers from minority groups were rated lower than managers from majority groups
Several studies indicate that race does not significantly influence performance ratings McKinney and Collins (1981) concluded that the race of both raters and ratees had no meaningful impact on evaluations Similarly, Hall and Hall (1976) reported no differences in performance ratings when analyzing sex and race independently, attributing their results to the study's conditions Additionally, Mobley (1982) provided evidence countering the notion that supervisors favor employees of their own race in performance assessments.
Uses of Performance Appraisal
1.7.1 Linking performance appraisal with pay
Performance appraisal serves two primary purposes: evaluative and developmental (Boswell and Boudreau, 2000; Nguyen Van Điem & Nguyen Ngoc Quan, 2012) A key aspect of evaluative performance appraisal is the connection between performance and pay Pay-for-performance, or performance-related pay, directly ties an employee's compensation to their performance, contrasting with traditional seniority-based or time-based pay structures This section explores the existing literature on pay-for-performance practices.
Pay-for-performance systems are grounded in equity theory, which suggests that employees desire fair treatment in the workplace According to Adams (1962), individuals often compare their input-output ratios to those of their peers, leading to a perception of equity This perception does not necessitate identical outputs; rather, it focuses on the equality of input-output ratios When employees feel they are in an inequitable situation, they may attempt to address this imbalance through cognitive distortion, altering their inputs or outputs, or even leaving the organization altogether, as noted by Carrell and Dittrich.
Pay for performance is anticipated to enhance perceptions of equity by linking compensation directly to individual performance outcomes rather than relying on seniority or time-based pay structures.
Expectancy theory, introduced by Vroom in 1964, posits that employee motivation hinges on their belief that increased effort leads to improved performance, which in turn results in meaningful rewards such as pay raises or promotions For motivation to be effective, Vroom identified three critical variables: the effort-to-performance expectancy and the performance-to-reward expectancy, both of which must be significantly positive, along with the attractiveness of the rewards Implementing a pay-for-performance system can enhance motivation by directly linking compensation to performance outcomes.
Pay for performance encompasses various models, with Kessler (1994) identifying three primary forms The first form includes individual merit and performance appraisal-based systems, which replace traditional time-based salaries Merit pay and piece rates exemplify this model, with piece rates being highly regarded for their direct correlation between pay and output In contrast, merit pay relies on supervisor evaluations of employee performance, which can introduce potential errors (Brown, 1990).
Individual bonuses are awarded based on the achievement of specific targets, which can be determined by a single factor or a combination of several criteria These criteria may include productivity, quality, financial performance, cost management, and sales, among others.
Group-based bonus schemes, including profit sharing and gain sharing, assess performance at the group level, rewarding employees based on collective achievements These incentives enhance communication and teamwork within organizations Profit sharing allocates a portion of company profits to employees, while gain sharing distributes cost savings, emphasizing productivity Both methods serve as variable pay options that connect compensation to performance without permanently raising overall payroll expenses.
1.7.2 Linking performance appraisal with career development
Pay-for-performance systems are commonly utilized by organizations, yet the relationship between performance appraisals and career development or promotions remains underexplored A key method for connecting performance evaluations with career advancement is the merit-based promotion system This section will examine the features, advantages, and disadvantages of performance-based promotions, along with the contexts in which they are most effective Additionally, a comparison will be made with traditional seniority-based promotion systems.
1.7.2.1 Seniority-based and performance-based promotion system
Promotion refers to the upward movement within an organization's hierarchy, aligning employees with roles that match their skills while swiftly advancing talented individuals (Gibbons, 1997) Promotions serve multiple purposes, including rewarding previous employee contributions, encouraging investments in specific human capital, and reducing job turnover (Lazear, 1998) Organizations typically make promotion decisions based on a combination of seniority and performance metrics.
Seniority is defined as the duration of an employee's service within an organization In a seniority-based system, job allocation primarily depends on this length of service, allowing employees to start at entry-level positions and progress to higher roles as they gain experience and when opportunities arise.
In performance-based or merit-based systems, promotion decisions are determined by candidates' past and current performance, alongside their ability to excel in the new role This approach prioritizes employees who demonstrate the highest quality and performance over those with the longest tenure Consequently, performance appraisal becomes essential in evaluating suitability for promotions within this framework.
1.7.2.2 Advantages and disadvantages of performance-based promotion system
Performance-based promotion systems select employees for promotion based on their quality and performance The advantages of such system include:
2 Employees with suitable knowledge and skills can be matched with the jobs and thus high performance can be expected
3 Highly motivated and ambitious employees can be rewarded for outstanding performance The system can be a source of motivation as the connection between performance and rewards is clear
Research indicates that performance-based promotion systems outperform traditional seniority-based systems A study by Phelan and Zhiang (2001) examined various promotion models, including absolute merit-based, relative merit-based, seniority-based, and random promotion systems Their findings revealed that the absolute merit-based system, which requires candidates to meet a specific performance threshold, leads to the highest organizational performance Conversely, the relative merit-based system, where candidates are ranked and promoted based on performance relative to others rather than absolute achievements, resulted in the lowest performance Additionally, the study highlighted that various contingency factors significantly influence the effectiveness of promotion systems on organizational performance.
Sandleben (2005) proposed a promotion rating system that evaluates officers based on their potential performance at the next level, alongside assessments of their past and current performance Her research demonstrated that this evaluation method was both reliable and valid, offering significant variance for administrative decisions Participants accepted the process and its outcomes, and subsequent promotions typically aligned with the evaluation results.
A study by Baugher, Varanelli, and Weisbord (2008) explored the effects of a performance-based promotion system on employee attitudes, comparing it to an older content-based exam system The research involved 57 employees from professional and upper-level management positions who were familiar with both systems Using a set of 11 bipolar adjectives on a six-point scale, the study revealed that employees reacted more positively to the performance-based system Participants perceived it as more successful, innovative, effective, fair, and comprehensive compared to the content-based oral exam.
Hasman, Bryman, and Webb (1993) conducted a comprehensive study on performance appraisal in UK universities through extensive phone surveys and case studies involving four universities Their findings revealed that many respondents felt the appraisal process lacked adequate support for career advancement and were doubtful about its effectiveness in enhancing staff performance Approximately two-thirds believed that appraisals should influence staff development policies, yet they perceived a disconnect between appraisals and promotion procedures Interviews with staff and senior management indicated that in two universities, the performance appraisal summaries were utilized in promotion applications, highlighting that linking appraisals to promotions significantly boosted staff motivation, with a preference for official connections over unofficial ones.
Factors determining PA effectiveness
Performance evaluations are essential periodic reviews of employee performance, but many organizations lack clear objectives that maximize their benefits Without defined goals, appraisals can become mere formalities, leading employees to perceive them as necessary evils To be effective, a performance appraisal system must be centered around specific, unambiguous objectives that address the needs of all levels and areas within the organization Additionally, the purpose of the appraisal system should be clearly communicated, ensuring that it serves its intended goals.
Evaluations aim to enhance employee performance by identifying areas for improvement and encouraging growth Highlighting strengths reinforces positive feelings about their work, fostering motivation Ultimately, the goal is to ensure employees feel confident in their current performance while inspired to achieve even greater results.
Effective goal setting is essential for motivating employees and evaluating their performance During performance reviews, it's important to align evaluations with the specific goals established for each employee For instance, if a sales employee has a target of $50,000 in monthly sales, her actual performance can be directly compared to this goal If she faces challenges in achieving her targets, it opens the door for discussions about additional coaching and training Conversely, if she consistently meets or exceeds her objectives, the evaluation serves as an opportunity to set higher goals and further enhance her performance.
A key goal of employee evaluations is to demonstrate that employees are valued within the organization Providing constructive feedback allows employees to understand their role and significance in the company Although this attention cannot replace the impact of long-term neglect, it complements other initiatives aimed at enhancing employee morale.
Effective employee evaluations are integral to a comprehensive development system, fostering collaboration between managers and employees to establish skill development and career advancement goals Each evaluation serves as an opportunity to assess an employee's current skill levels in relation to their job and future roles By discussing training and methods for skill enhancement, employees can acquire new competencies that prepare them for career progression This approach not only boosts employee retention but also fortifies the organization with more committed and knowledgeable staff over time.
Employee evaluations are essential for businesses to periodically assess employee performance, serving as crucial evidence for promotions and salary increases These evaluations also help managers identify employees who may require additional training or support To effectively guide employees toward future success, evaluators must include all relevant criteria in their assessments.
Evaluating an employee's organizational and interpersonal skills is essential for understanding their interactions with others and their ability to prioritize tasks effectively Key traits assessed by managers include commitment to customer satisfaction, teamwork, communication skills, and time management To gain a comprehensive view of these skills, managers often consider feedback from customers and colleagues in different departments regarding their experiences with the employee.
Performance assessment criteria focus on evaluating the core responsibilities outlined in an employee's job description Objective measurement of an employee's ability to consistently fulfill these duties is typically more straightforward compared to other evaluation aspects For instance, if a key responsibility includes creating monthly marketing plans, a manager can easily verify the employee's adherence to this task each month To facilitate this evaluation, managers should develop a checklist that outlines the expected duties of the employee.
If the appraisal shows that the employee periodically fails to meet these responsibilities, the manager must give the employee an opportunity to explain
Employees should establish clear, challenging, yet attainable goals for each evaluation period in collaboration with their immediate supervisors This evaluation segment focuses on assessing whether employees have met their set goals Managers can utilize this information to decide if they should raise the bar for future goals or maintain the current standards Additionally, some employees often engage in significant projects beyond their job descriptions, and managers may incorporate these contributions into the assessment, recognizing employees who exceed their required duties.
In the job description section, managers should highlight employee achievements and accomplishments, which can help balance any shortcomings in performance For instance, if an employee occasionally missed goals while attending night classes, acknowledging their graduation can mitigate negative evaluations Additionally, managers should recognize any career-related training, certifications, or licenses obtained during the evaluation period, as these accomplishments may justify a potential pay increase.
Quarterly reviews align seamlessly with the natural rhythm of business, making it easier to connect with the company's overall objectives Instead of requiring employees to track their annual performance, these reviews provide actionable feedback Additionally, quarterly evaluations simplify the year-end Q4 review process, as managers can compile insights from the previous three reviews to create a comprehensive annual overview.
While some companies provide quarterly reviews for new employees to help them adjust to their roles, this approach may overlook the needs of veteran staff who desire regular feedback Although it streamlines the performance review process, it can leave experienced employees feeling undervalued and lacking the guidance they seek.
Quarterly reviews work best when they're quick, easy, and used across the organization to help course-correct on the path to achieving annual milestones
Many employees and managers share a common frustration with the traditional annual review process, as it primarily evaluates past performance rather than current capabilities This raises a valid point: individuals would prefer to be assessed based on their present skills and contributions rather than their historical successes or failures.
The beginning of a new year brings a unique momentum that many cannot overlook Whether embraced or resisted, the annual review remains a crucial opportunity for individuals to link immediate feedback with overarching outcomes.
Fairness in performance appraisals (PA) is crucial for effective evaluation, as research indicates that perceived fairness significantly influences PA effectiveness Organizations implement PAs to enhance overall effectiveness, guiding decisions on pay, promotions, training needs, and performance documentation Consequently, appraisals play a vital role in shaping employees' careers As employees increasingly focus on the fairness of these evaluations, any perceived unfairness can damage the employee-manager relationship, reduce loyalty, and lead to negative outcomes for the organization Given that perceptions of fairness are subjective, understanding employees' views is essential, as the success of the appraisal process largely depends on their perceptions.