Performance Appraisal

In some organizations performance appraisal (PA) and performance management systems are treated as unnecesary or routine job. But the evaluation of of employees' job performance is vital human resources function and of critical importance to the organization. In work organizations performance measurement typically takes place in the form of formal performance appraisals, which measure worker performance in comparison to certain predetermined standards. Performance appraisals serve many purposes for the individual worker, for the worker's supervisor and for whole organization. (Cleveland, Murphy, and Williams, 1989).

For the Worker:

* means of reinforcement

* career advancement

* information about work goal attainment

* source of feedback to improve performance

For the Supervisor:

* basis for making personnel decisions

* assessment of workers' goal attainment

* opportunity to provide constructive feedback to workers

* opportunity to interact with subordinates

For the Organization:

* assessment of productivity of individuals and work units

* validation of personnel selection and placement methods

* means for recognizing and motivating workers

* source of information for training needs

* evaluation of the effectiveness of organizational interventions

Research has been done on numerous facets of performance appraisals (PA), including psychometric issues, rater-ratee characteristics, cognitive processes, rater training, and appraisal fairness (Bretz, Milkovich, and Read, 1992). How PAs are used has been shown to influence rating behavior and outcomes (for example, Jawahar and Williams, 1997) and to be an important predictor of employee attitudes toward their supervisor, the job, and the appraisal process (Jordan and Nasis, 1992). In the Meyer, Kay, and French (1965) study, for example, researchers proposed that conducting salary discussions during the annual performance review interfered with the constructive discussion of plans for future performance improvement and could lead to negative reactions. However, in the first empirical test of the Meyer, Kay, and French study, salary discussion was found to have either no impact or a slightly positive impact on employee attitudes (Prince and Lawler, 1986). Thus, how PAs are used has developed as an area of interest, yielding mixed results and conclusions.

Previous research has relied on PA administrators (human resource managers, for example) to provide information on how the appraisal is used (Cleveland, Murphy, and Williams, 1989). As suggested by Bretz, Milkovich, and Read (1992), these respondents may be describing the PA system as intended instead of actual practice. An alternative approach is to investigate the appraised individuals' perceived PA use. If people perceive PA purposes differently, as has been suggested , then attitudes may vary depending on that perception. For example, how a PA is used may signal to employees their value to and future in the organization.

Firms engage in the performance-evaluation process for numerous reasons. Managers may conduct appraisals to affect employee behavior through the feedback process, or to justify some sort of human resource management action (termination, transfer, promotion, etc.). However, many other benefits may also accrue from the information yielded by the appraisal. These benefits include increases in knowledge regarding the effectiveness of selection and placement programs, training and development needs, budgeting; human resource planning, and reward decisions.

One current problem which performance appraisal faces is that the term is often used synonymously with that of "performance management". Yet performance management is clearly more than a new name for performance appraisal - ( Fletcher, 1992 ) defines performance management as:

"an approach to creating a shared vision of the purpose and aims of the organisation, helping each individual employee understand and recognise their part in contributing to them, and in so doing manage and enhance the performance of both individuals and the organization."

He suggests that the main building blocks of such an approach include:

* development of the organization's mission statement and objectives;

* enhancing communications within the organization so that employees are not only aware of the objectives and the business plan, but can contribute to their formulation;

* clarifying individual responsibilities and accountabilities;

* defining and measuring individual performance;

* implementing appropriate reward strategies.

In the literature, two typical PA uses were examined--evaluative and developmental. The evaluative function includes the use of PA for salary administration, promotion decisions, retention-termination decisions, recognition of individual performance, layoffs, and the identification of poor performance. This is similar to Ostroff's (1993) conceptualization of the administrative PA purpose. Cleveland, Murphy, and Williams (1989) contend that evaluative functions all involve between-person decisions. Developmental functions include the identification of individual training needs, providing performance feedback, determining transfers and assignments, and the identification of individual strengths and weaknesses. These are all proposed to encompass within-person decisions. Evaluative PA use is going beyond salary discussion and instead defined to include determination of poor performers, layoff and termination decisions, and promotion decisions. This is consistent with Cleveland, Murphy, and Williams's (1989) representation of between-person uses and Ostroff's (1993) administrative PA use category.

Many researchers believe that criticizing employees, as is often done in evaluations, fosters defensiveness and rationalization, which usually results in nonconstructive responses (Meyer, Kay, and French, 1965). Evaluation is a sensitive matter, often eliciting negative psychological responses such