As a strategic management tool, performance appraisal is a significant element within Human Resource Management (HRM) on which organisational employees’ efficiency can be assessed and enhanced. Performance appraisal has become an essential idea to promote in all organisations and has developed and adapted how it is used in an organisation.
This article provides a detailed explanation of performance appraisal, its process, various types and advantages. By examining these aspects, businesses can benefit from learning how performance appraisal can make a difference through improved employee performance productivity.
Performance appraisal is a systematic procedure through which an employee’s work performance is compared to established standards or objectives. It is also a systematic way of evaluating employee performance since it highlights their strengths, improvement areas, and development opportunities within an organisation.
The first purpose of a performance appraisal in the field of HRM is to ensure that organisational objectives are met by the employees’ performance. Thus, when management determines an employee’s performance level, it can make the right decisions about promotions, training and even a change in rank or salary. Some other goals include, to recognise the employee accomplishments, encourage realistic goals, and career development.
Performance appraisal is a key systematized activity for examining employee accomplishment in an organisation. The performance appraisal process can be usually divided into about five fundamental stages to make sure that all the operations are fair and consistent when it comes to evaluating a person’s performance.
The first step is to establish specific, measurable performance expectations up front. For any change in the management process to be effective, employees should know what must be accomplished and what benchmark must be attained. These should be in line with the overall organisational goals and may comprise key performance indicators (KPIs) or other essential job performance targets. These standards also help in the development of benchmarking to provide a standard measure for assessing progress.
Once objectives are set, they need to be effectively communicated to the employees. Managers must guarantee that subordinate staff knows what is expected from them in terms of time, behaviour or performance rate. Clear communication minimizes the chances of conflict of interpretation as well as provides the direction on the conduct of the workers. Frequent updates or reminders can also help the employees to keep on with the targets that have been set.
In this step, the managers gather data and observations on the employee’s performance in the job. This could include tracking specific measures, observing behaviours, gathering feedback from peers and managers or analysis of project performances. The performance measurement is key to fair appraisal and, therefore, the data should be collected using credible techniques.
Here, the employee’s performance is evaluated in relation to the laid down benchmarks, goals and objectives of an organisation. Through the comparison, managers can easily identify areas where the employee was more productive or needed some kind of assistance. It is also important especially while making the comparison for all the team or department assessments to be consistent.
Feedback is highly relevant for both appreciation and identification of operations which need improvement. Supervisors should offer positive criticism, acknowledging strengths while recommending methods that can be used to improve their performance. Regarding future development, this step also discusses opportunities like training programmes for all the employees, possible workshops or mentoring.
There are various methods that organisations can use to assess their employees' performance. All of them provide certain perspectives and are useful for organisations in certain scenarios. Here are the 7 main types of performance appraisal methods:
This method includes employees conducting an analysis of their performance, which will increase their performance accountability. It helps the employee to evaluate their accomplishments, strengths, and improvement areas. When treated to their performance, employees can determine their personal developmental objectives and professional development requirements.
In peer evaluation, workers judge the performance of their co-workers within their company or organisation. This type of evaluation enhances team cohesiveness and provides a detailed account of an employee's contribution, especially in teamwork. Feedback received from peers may give a different perspective than the supervisory feedback, mainly concerning teamwork, communication as well as support from other team members.
This is one of the most often used procedures in appraisal, where the superior ranks the performance of the subordinate employees. The managerial review is generally official and conducted based on what the manager perceived or measurable outcomes. Managers also offer comments on the individual competencies within specific jobs, helping employees to understand how their job activities correspond to the organisational objectives.
In the 360-degree feedback method, feedback of the individual performance is gathered from outward, peers, subordinates and most importantly supervisors and sometimes even customers. This is a broad approach to looking at the employee’s work productivity and behaviour as well as other attributes that may benefit the organisation. Employees can know how people perceive them in an organisation, as well as introducing employees to the culture of receiving and issuing feedback.
It is the process of determining realistic measurable goals for employees, which are normally agreed upon by the manager and the employee. Targets of these objectives are then assessed through their performance. MBO concentrates fully on outcomes and workers are in charge of their objectives, making it a results-oriented appraisal procedure.
BARS, which is a structured appraisal method uses performance that tends to base their ratings on distinct behaviours. Each of the behaviours is labelled with an arbitrary number to eliminate variance in perception during the assessment. This method is most appropriate if the place of work has well understood tasks and observable action plans that define success on the job.
In this method, the employees go through several simulations, exercises and tests that are similar to the real-life working conditions. These assessment centres let managers see the capability of the employees to perform and decide on the staff’s problem-solving, decision-making, and leadership qualities. This method can be applied for searching for top performers to fill important positions like leadership roles in the organisation.
The advantages of performance appraisal go beyond individual growth. Here are some key benefits:
Enhancing Productivity: Most employees receive constructive feedback on their work, so they know what they need to do and can concentrate on attaining specific goals.
Improving Communication: The performance appraisals provide the opportunity for the employees and the managers to open a line of constructive conversation.
Identifying Training Needs: Appraisals used by HR can help in the identification of the areas of need for training and subsequent development of the respective training programmes.
Boosting Employee Morale: Rewarding subordinates encourages them to carry out their responsibilities thus increasing job satisfaction.
Supporting HR Decision-Making: The HR appraisal process thus helps in decision making on promotions, pay adjustments and even leadership development prospects.
While performance appraisal has many benefits, it also has certain difficulties and disadvantages. Following are some disadvantages:
Subjectivity and Bias: Appraisals can be impacted by bias of the personnel conducting the assessment hence resulting in biased appraisals.
Stress and Anxiety: The employees may feel intimidated, judged, feel stressed or nervous about the activity.
Time-Consuming Process: Preparation and conduction of an appraisal process require a lot of time, and it robs attention from other productive exercises.
Potential for Conflict: Disagreements over appraisal results can affect workplace relationships and enthusiasm.
Limited Scope for Creativity: Retaining concentration on several indicators may hinder identification of imaginative or distinctive endeavours.
Overemphasis on Recent Performance: “Recency bias” which gives an employee credit for the most recent efforts while ignoring all the other years of hard work.’’
Risk of Demotivation: Failure to receive reward or receive a negative response will demoralize the workers and lower their performance rates.
In HRM, performance management is not limited to appraisal only. It is a continuous process of improving the capability of the employees in the execution of their duties. Based on the performance appraisal definition in HRM, it can be stated as one of the instruments serving organisation development purposes, which allow focusing on achieved results by both subordinates and organisations.
There are several performance appraisal techniques used in organisations today. Here are some methods that HR managers commonly employ:
Management by Objectives (MBO): Employees and managers agree on objectives which are targeted by the employee within a given period.
360-Degree Feedback: Feedback is sought from supervisors, subordinates as well as customers, providing a comprehensive view of performance.
Rating Scales: Workers are particularly assessed in terms of certain parameters such as teamwork, timekeeping and problem solving, which affords quantifiable dimensions to the process.
They are some of the methods in an HR appraisal system that helps the HR individuals to do independent appraisals of their employees’ performance.
Performance appraisal in human resource management involves the identification, assessment and improvement of performance. Through the systematic HR appraisal process, organisations can ensure alignment between the performance of the employee and the targeted corporate objectives. The above explained seven steps or types of performance appraisal are a few of the methods to achieve this alignment. Finally, an effective HR appraisal system leads to better organisational culture by constantly improving employees and the organisation.
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When Should a Performance Appraisal Take Place?
Employees are usually evaluated at least once per year, semi-annually, or quarterly depending on the organisational requirements. They should also be conducted upon the completion of a major project or any other activity to have a recent check on how things are faring.
What Are Performance Appraisals Used for?
The most common uses of performance appraisals are to assess the contribution of an employee, to give feedback and to identify improvement areas. It helps in decisions concerning promotion, salary reviews, training gaps and potential future employee promotions. Appraisals also act as a key in improving individual performance to match organisational goals and plans, as well as support workforce growth.
How to Choose the Right Appraisal Method and When to Use It?
Selecting the right method of appraisal depends on the purpose set by the organisation, the characteristic of the job, and the level of feedback needed. For goal-oriented positions, MBO is efficient, while for positions requiring teamwork, 360-degree feedback is efficient. Self-appraisal should be adopted for feedback purposes that calls for self-evaluation and behavioural rating scales for identifiable behaviours for a particular job.
What is a suitable example of performance appraisal?
For instance, a manager may evaluate the performance of a worker by reviewing their performance over the past year and then setting goals forward based on assessment.