Importance of Performance Measurement and Performance Appraisal in Human Resource Development

How Performance Appraisal Contributed to the Development of Human Resources is a burning issue in the field of HR management. Performance measurement or appraisal is a core function of human resource management and has remained an imperative area of research among organizational researchers (Dulebohn and Ferris, 1999). Elmuti et al. (1992) argue that performance appraisals are used typically in organizations for two broad purposes: as an evaluative function for making decisions regarding merit pay, promotions, demotions, transfers, and retention and/or as developmental function to identify areas for employee growth and improvement and recommending ways of improving performance or the potential for performance. An effective performance appraisal enhances employees’ perceptions and understanding of job tasks and results in job satisfaction (Shen, 2004). It leads managerial career development, career progression and compensation adjustments (Schuler et al., 2002). First objective of the appraisal mechanism is to develop and build the capacity of employees by providing them formal feedback on job performance (Shen, 2004). Furthermore, performance appraisal is an instrumental tool to influence both the extrinsic and intrinsic motivations of employees and their attitudes towards organizations (Shen, 2004).

Although there is no single “best” way to structure an evaluation system and the appraisal system should be adapted to fit the unique culture of the organization, ?Good practices do share some common elements. Research indicates that for an appraisal system to be effective, appraisees must have an opportunity to give input into the appraisal process (Gilliland and Langdon, 1998). One of the important objectives of performance appraisal is to provide feedback to the employees for their growth and development (Stroul, 1987). The scheduled formal review is important but even more valuable is the informal communications between evaluation periods. Ideally, there should be constant and ongoing communication regarding employee performance. Research indicates that the value of feedback is lost if it is not given in a timely manner (Smith, 2008). Frequent and timely feedback is an important aspect in terms of setting, meeting and revising goals, as well as motivating the work effort (Dowling et al., 1999). Lindholm (1999) argues that the use of performance feedback can potentially reduce job errors and minimize the risks of learning through examination and analysis. Unbiased assessment of performance and constant feedback on performance establish an essential basis of job satisfaction and contribute significantly to the incumbents’ personal growth (ibid).

Moreover, many empirical studies show (Schweiger and Sumners, 1994) that eventual success or failure of a performance appraisal process depends upon effective supervisory training. Norton (1982 cited in Shaikh, 1995) considers appraising employees as one of the most difficult tasks for a newly appointed supervisor. Schweiger and Sumners (1994) recommend that appraisers should be given training about giving adequate and timely feedback, setting adequate SMART performance goals, avoiding psychometric errors (such as Halo effect, Recency effect, contrast and restriction of range etc.) and dealing with emotional barriers to express constructive criticism. Performance appraisal should incorporate multi-rater feedback to reduce biases and present a more detailed picture of the assessment. It has long been established that assessment from multiple sources is more reliable and more ‘predicatively valid’ than single source (Latham and Wexley, 1994). Incumbent participation in the process of identifying standards and setting performance goals is argued to increase the motivation and performance levels. Research has concluded that, employees who set their own goals in a participative way with their supervisor actually set higher goals and actually perform better than employees who do not participate in the goal-setting process (Latham and Saari, 1979 cited by Gomez-Mejia, 1990). An effective performance appraisal should have the ability to give objective input to highlight workable areas in the employees’ performance (Oldroyd, 1995).

The utility of performance appraisal as a managerial tool partly depends on its ability to provide accurate data on employee performance, so rating accuracy becomes a critical aspect of the appraisal process (Poon, 2004). Politics is an inevitable factor embedded in the very contextual nature of organizations (Ferris et al., 1996). Research has identified that political behaviors influence performance appraisal processes and its outcomes (Murphy and Cleveland, 1991). There is some evidence that managers intentionally give negative performance ratings for political reasons (Longenecker et al., 1987). Longenecker et al. (1987) has noted that appraisers were more concerned about the consequences of the evaluation (for themselves, the appraisee, and the work group) than whether or not their ratings accurately reflected employee performance. Subjectivity of standards and measures may enable the appraiser to forward his/her own socio-politically inspired personal agenda (Poon, 2004).

The issue of appraisal of the expatriates is widely evident in the social development sector organizations in general and International NGOs and donor agencies in particular, the basis of which is the works on domestic US performance appraisals (Gregersen et al., 1996,). Despite the consensus in literature about the importance of international performance appraisal, there is, however, a lack of a shared understanding about what constitutes the best practice of international performance appraisal due to the complex interaction of variables in host country environment (Shen, 2004), which comprises a variety in its cultural, economic, social, legal, technological and other variables associated with task and the personality of the individual (Dowling et al., 1994). An extensive range of performance dimensions need to be taken into account such as cross-cultural interpersonal qualities, understanding of international and local standards, rules, laws and customs, ability to adapt to uncertain and unpredictable conditions as well (Peterson et al., 1996). Hossain and Davis (1989) have identified technical ability, management skill, cultural empathy, adaptability and flexibility, strategic skill and linguistic ability as the criteria of expats’. One way to address the dilemma of cultural adaptation is to involve the host-country nationals in designing a suitable appraisal system and to advise on the conduct of the appraisal (Dowling et al., 1999).

The process of designing a ?Good? measurement and evaluation system starts with job analysis which breaks down a job into its basic components and determines skills, abilities and behaviors which mark the distinction between good and bad performers (Schweiger and Sumners, 1994). In order to measure performance realistically, objectively and productively, review must be specifically based on the job content (McCourt and Eldridge, 2003; Rankin and Kleiner, 1988). A meticulous job analysis is crucial as it establishes a link between the content of the job and the performance appraisal. Based on this job analysis, performance standards related to a particular job can be developed and communicated to the employees as part of their job description (Schweiger and Sumners, 1994).

A potential weakness of performance appraisal is that often appraisers and appraisees collude that appraisal is once a year activity to discuss performance (McCourt and Eldridge, 2003). Another drawback of appraisal as a system is that it functions in an organizational vacuum with no integration with overall organization‘s strategy (ibid). The recent development of performance management aims to rectify these weaknesses (ibid). Radnor and Barnes (2007) note that the notion of what is performance appraisal and what is performance management, at times, becomes intermingled. These jargons are often used even interchangeably, even though, it is argued to be helpful to consider them as different concepts (ibid). Performance appraisal is one of the several key components of performance management system (Shen, 2004).

 

References:

• Dowling, P.J., Schuler, R.S., Welch, D. (1994), International Dimensions of Human Resources Management, 2nd ed., Wadsworth, New York, NY.
• Dowling, P.J., Welch, D.E., Schuler, R.S. (1999), International Human Resource Management: Managing People in a Multinational Context, South-Western College Publishing, Cincinnati, OH.
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• Shen, J., (2004), ?International performance Appraisals: Policies, practices and determinants in the case of Chinese multinational companies?, International Journal of Manpower, Vol. 25 No. 6, pp. 547-563.
• Smith, S. (2008), ?Employee Performance Appraisal Process: Honesty is the Best Policy, http://www.sideroad.com/Human_Resources/employee_performance_appraisal .html, 26 DEC 2008.
• Stroul, N.A. (1987), “Whither performance appraisal”, Training and Development Journal, Vol. 41 pp.70-4.


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