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Volume 2, Issue 2 (February, 2012)

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CURRENT TRENDS IN PERFORMANCE APPRAISAL

Nimisha Sapra*

ABSTRACT
A study of current trends in performance appraisal indicates that most large organisations are placing increasing emphasis on the importance of performance appraisal and are making continuing efforts to improve their systems. Trends include Full time performance appraisal, 720 degree appraisal, Valuable line management tool etc. Trends in performance appraisal practices are emerging topics of significant interest in Human Resource Management. The study is based on secondary research which involves reviewing and critically analysing the scholarly literature that addresses issues similar to this research problem. The study will contribute to the body of knowledge on performance appraisal and thus will benefit the HRM practitioners and HRM scholars.

* Research Scholar, Department of Management, Singhania University, Jhunjhunu (Rajasthan). International Journal of Research in IT & Management http://www.mairec.org

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INTRODUCTION
Performance appraisal continues to be a subject of interest and importance to human resource specialists. For decades, performance appraisal has received considerable attention in the literature, for both researchers and practitioners alike. Many authors (Bernardin & Klatt, 1985; Hall, Posner, & Hardner, 1989; Maroney & Buckley, 1992; Thomas & Bretz, 1994) maintain that there is a considerable gap between theory and practice, and that human resource specialists are not making full use of the psychometric tools available. To support their claim, these authors cite surveys of practitioners concerning current performance appraisal methods and use. Nearly two decades ago, Taylor and Zawacki (1976) published the first two articles that documented trends in performance appraisal usage among U.S. organizations. When comparing the results of two surveys taken five years apart, the authors noted a remarkable shift away from what they called collaborative approaches (e.g., MBO, BARS) and toward the more traditional performance appraisal techniques (graphic rating scales). Taylor and Zawacki (1984) hypothesized that managers, responding to the legal constraints prevalent in the 1980s, preferred techniques that were defensible in court. Accordingly, managers tended to be more satisfied with the objective traditional approaches, whereas their subordinates seemed to prefer the developmental collaborative methods. Through the 1980s, researchers continued to document performance appraisal practice. Bernardin and Klatt (1985) noted that small firms tended to rely heavily on trait based approaches, while larger firms relied on a combination of trait, behavioural and results based techniques. They noted that one in five organizations did not give employees the opportunity to review the performance appraisal results. In another study, Locher and Teel (1988) identified graphic rating scales (57.1%), the opened essay (21.3%), and Management by-Objectives (18.1%) as the most popular performance appraisal techniques. Unlike Taylor and Zawacki 1984) before them, Locher and Teel identified a trend toward the use of MBO as a popular technique. Besides recording current trends in methods used, only a few researchers have clarified how performance appraisal data is used. Thomas and Bretz (1994) report that performance information is most likely to be used for employee development or to administer merit pay. They identified the main developmental uses as improving work performance, communicating expectations, determining employee potential and aiding employee International Journal of Research in IT & Management http://www.mairec.org

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counselling. Other common administrative uses included promotions, lay-offs, transfers, terminations, and validations of hiring decisions. In addition, Hall, Posner and Hardner (1998) identified common objectives of performance appraisal as reviewing past performance, rewarding past performance, goal setting for future performance, and employee development. Cleveland, Murphy, and Williams (1998) warned that organizations should exercise caution when using the same performance appraisal methods for multiple applications (e.g., counselling vs. Evaluation), since different performance appraisal methods may yield different types of data (e.g., qualitative vs. Quantitative).

EVOLUTION OF TRENDS IN PERFORMANCE APPRAISAL

Performance appraisal is a distinct and formal management procedure used in the evaluation of work performance. It can be defined as a structured formal interaction between a subordinate and his senior, at a defined periodicity. During a performance discussion the previous periods performance of the subordinate is examined and discussed. In addition the performance appraisal is also used to identify areas of training and improvement. It is a review of his work and goals that are set for him by the company in accordance with the goals of the company. In many organisations, appraisal results are used, to help determine reward outcomes. It helps in identifying the better performers, employee who will get majority of available merit pay increases, bonuses and promotions. It also helps in identifying the poor performers who may require some form of counselling or in extreme cases, demotion, dismissal or decrease in pay. Appraisals address a whole person development and not just job skills or skills required for promotion. The commonly used methods of Performance Appraisal are: Comparative Standards or Multi Person Comparison This relative method of performance is one in which one employees performance is compared to the performances of the other employees. Group Rank Ordering In this kind of performance appraisal, the supervisor places employees into a particular classification such as top one fifth and second one fifth. If a supervisor has ten employees only two could be in the top fifth and two must be assigned to the bottom fifth. Individual Ranking In this, the supervisor lists the employees from highest to lowest. The difference between the top two employees is assumed equivalent to the difference between the bottom two employees. International Journal of Research in IT & Management http://www.mairec.org

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Paired Comparison - In this the supervisor compares each employee in the group and rates each as either superior or weaker of the pair. After all comparisons are made, each employee is assigned a summary or ranking based on the number of superior scores received.

Critical Incidents The supervisors attention is focused on specific or critical behaviour that separate effective from ineffective performance. Graphic Rating Scales In this kind of performance appraisal, a set of performance factors such as job knowledge, work quality, cooperation are listed, that the supervisor uses to rate employee performance using an incremental scale.

Behaviorally Anchored Rating Scale (BARS) BARS combines elements from critical incident and graphic rating scale approaches. The supervisor rates employees according to items on a numerical scale.

In the traditional performance appraisal methods as discussed above, the supervisor acts more as a judge of employee performance, than a coach. By doing so, unfortunately, the focus is on blame rather than on helping the employee assume responsibility for improvement. This made experts find out new trends in the performance appraisal. They are: A valuable line management tool Todays performance appraisal system is one of the principal tool, executives, line managers, and employees are able to use to achieve their collective goals. The change in application of performance appraisal has been enabled by software that provides management with a way to achieve its operational and strategic goals. These new applications provide a means of: Cascading strategic and operational objectives down to ensure every person knows their part of plan and executes their part of the plan, Developing the entire organisation by setting specific development objectives for each individual, Providing managers with visibility of their team members, Multiple assessment methods like business objectives, development objectives, competency review, behavioural objectives and activity review. Full Time Performance Appraisal Annual appraisal is rapidly being replaced with Full time Performance Management. This trend provides a mechanism where both managers and employees are able to make relevant notes on performance related issues throughout the year. This function is also referred to as performance diary. When the appraisal is conducted, International Journal of Research in IT & Management http://www.mairec.org

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both are better prepared and have a full record of achievements or areas for development and coaching throughout the year. This feature also promotes an ongoing dialogue between managers and employees and ensures that both are on track to achieve their goals for the year. Take an example of an IT manager to see how the performance diary used in practice. One of his primary objectives is to deliver all projects on time and on budget. With the performance diary, the IT manager makes notes on each project all the way through the year. His own manager also makes notes about these projects. When both parties meet, they have an adequate data to draw from and can perform a meaningful review in a short amount of time. They can objectively develop a relevant performance rating derived from factual data. Therefore, the IT manager receives an objective review based on documented information as opposed to a subjective review based on memory. Low administration Performance Management Early automated performance management systems were stand alone systems that offered several benefits but still suffered from high administrative input. These systems required HR to make duplicate data entries for all additions, changes and deletions to staff because entries had to be made in both the payroll system and the performance management system. Today, performance management applications can be fully integrated with the payroll system which means data entry is only required in payroll. All changes made to payroll are automatically made to the performance management application. This substantially reduces costs related to administration, enabling HR to assist line management with more strategic issues and matters of compliance. Management by Objectives It was Peter F. Drucker who first gave the concept of MBO to the world way back in 1954 when his The Practice of Management was first published. The MBO concept, as was conceived by Drucker, reflects a management philosophy which values and utilises employee contributions. Application of MBO in the field of performance appraisal is a recent thinking. MBO works can be described in four steps: The first step is to establish the goals each subordinate is to attain. In some organisations, superiors and subordinates work together to establish goals. In others, superiors establish goals for subordinates. The goals typically refer to the desired outcome to be achieved. These goals can then be used to evaluate employee performance.

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The second step involves setting the performance standard for the subordinates in a previously arranged time period. As subordinates perform, they know fairly well what there is to do, what has been done, and what remains to be done. In the third step, the actual level of goal attainment is compared with the goals agreed upon. The evaluator explores reasons or the goals that were not met and for the goals that were exceeded. This step helps determine possible training needs. It also alerts the superior to conditions in the organisation that may affect a subordinate but over which the subordinate has no control. The final step involves establishing new goals and, possibly, new strategies or goals not previously attained. At this point, subordinate and superior involvement in goal setting may change. Subordinates who successfully reach the established goals may be allowed to participate more in the goal setting process the next time. The process is repeated. Link to Strategy Performance appraisal systems are the vehicle for setting organisational objectives to organisational strategy. Combined with full time performance diary functionality, performance appraisal system is now one of the most powerful methods for effectively directing organisational effort. Psychological Appraisals Large organisations employ full time industrial psychologists. When psychologists are used for evaluations, they assess an individuals future potential and not past performance. The appraisal normally consists of in depth interview, psychological tests, discussions with supervisors and a review of other evaluations. The psychologist then writes an evaluation of the employees intellectual, emotional, motivational and other work related characteristics that suggests individual potential and may predict future performance. The evaluation by the psychologist may be for a specific job opening for which the person is being considered, or it may be a global assessment of his or her future potential. From these evaluations, placement and development decisions may be made to shape the persons career. Because this approach is slow and costly, it is usually required for bright young members who, others think, may have considerable potential within the organisation. Retention Organisations have now made the link between performance appraisal systems and retention. In the war for talent, employees want to be appreciated and developed. The answer to this is frequent reviews and developmental planning. Automated performance appraisal addresses both of these needs.

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Succession Planning Performance appraisal systems can leverage the data collected to implement succession planning system to allow HR to realise successors for critical and non critical and also the high potential staff. A significant benefit of this is that the employees see the organisation as a developing career path and this binds them closer to their organisation and work. Assessment Centres Mainly used for executive hiring, assessment centres are now being used for evaluating executive or supervisory potential. An assessment centre is a central location where managers may come together to have their participation in job related exercises evaluated by trained observers. The principal idea is to evaluate managers over a period of time, say one to three days, by observing their behaviour across a series of selected exercises or work samples. Assessees are requested to participate in in basket exercises, work groups (without leaders), computer simulations, role playing and other similar activities which require the same attributes for successful performance, as in the actual job. After recording their observations of rate behaviours, the raters meet to discuss these observations. The decision regarding the performance of each assessee is based upon this discussion of observations. Self appraisal and peer evaluation are also thrown in for final rating. Remuneration Management and Salary Packaging By implementing an effective Performance Appraisal System, organisations can now rank employees according to how well they achieved their business and development objectives. So remuneration now gains objectivity and is directed mainly towards those employees who are the top achievers. Some other commonly used methods of performance appraisal today as observed during the study are: 90 degree Appraisal: The employee evaluates himself and shows his strengths and achievements or his boss evaluates him. (Self or Boss) 180 - degree Appraisal: The employee and the boss evaluates his performance on a monthly basis. (Self or Boss) 270 degree Appraisal: The method wherein the employee is evaluated by 3 persons, himself, boss and co workers. 360 degree Appraisal: Also known as multi rater feedback, where feedback about employees performance comes from a supervisor/ superior, co worker, client/ customer, subordinates and the self assessment of the employee himself.

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720 degree Appraisal: As the name itself suggests, in this method, the 360 degree appraisal method is practiced twice. First the 360 degree appraisal is done, where the performance of the employee is analysed and having a good feedback mechanism, the boss sits down with the employee again a second time and gives him feedback and tips on achieving the set targets.

CONCLUSION
Performance Appraisal system in its present form is a trend itself. Performance Appraisal system has progressed from appraisals and reviews to a valuable tool to link performance to strategy and to do this in an environment that is less onerous on HR than it has ever been in the past. In a nutshell performance appraisals are an important part of any corporate or organizational plan because it drives the manpower in various ways to work their best towards the success of the goals and targets.

REFERENCES
1) Bernardin, J. H., & Klatt, L. A. (1985). Managerial Appraisal systems: Has practice caught up to the state of the art? Personnel Administrator, November, 79-82, 84-86. 2) Bretz, R. D., Milkovich, G. T. & Read, W. (1992). The current state of performance appraisal research and practice: Concerns, directions, and implications. Journal of Management, 18(2), 321-352. 3) Cleveland, J. N., Murphy, K. R., & Williams, R. E. (1989). Multiple uses of performance appraisal: Prevalence and correlates. Journal of Applied Psychology, 74(1), 130-135 4) Dorfman, P. W., Stephan, W. G., Loveland, J. (1986). Performance appraisal behaviors: Supervisor perceptions and subordinate reactions. Personnel Psychology, 39, 579-597. 5) Hall, J. L., Posner, B. Z., Hardner, J. W. (1989). Performance appraisal systems: Matching practice with theory. Group and Organization Studies, 14(1), 51-69. 6) Locher, A. H., & Teel, K. S. (1988). Appraisal trends. Personnel Journal, September, 139-140, 142, 145. 7) Maroney, B. P., Buckley, M. R. (1992). Does research in performance appraisal influence the practice of performance appraisal? Regretfully not? Public Personnel Management, 21(2), 185-196.

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8) McAfee, B. and Green, B. (1977). Selecting a performance appraisal method. Personnel Administrator, May, 61-65. 9) Taylor, R. L., & Zawacki, R. A. (1976). A view of performance appraisal from organizations using it. Personnel Administrator, June, 290 292, 299. 10) Taylor, R. L., & Zawacki, R. A. (1984). Trends in performance appraisal: Guidelines for managers. Personnel Administrator, March, 71-72, 74 76, 78-80. 11) Thomas, S. L., & Bretz, R. D. (1994). Research and practice in performance appraisal: Evaluating employee performance in America's largest companies. SAM Advanced Management Journal, 59(2), 28-34.

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