Performance Appraisal and Performance Management

2008-10-08T05:18:00.000-07:00

Author: Shyam Bhatawdekar (eminent management guru, successful business leader, highly sought after management consultant and well-known author)

For everything you wanted to know on building leadership and management, refer Shyam Bhatawdekar’s website: http://shyam.bhatawdekar.com

(Refer our High Quality Management Encyclopedia “Management Universe” at: http://management-universe.blogspot.com/)

Performance Management

Integrated process for improving employee performance directed towards achieving organizational goals.
Integration of processes of setting goals, appraising the employees, training/developing them and rewarding.
It is a unified HRM approach.

Why Performance Management?

Enhanced employee performance in the organizational context requires more organizational support in terms of goal setting systems, learning/training systems, appraisal systems and rewards systems in addition to mere self motivation of the employees. A well designed and well implemented performance management system fulfils these requirements.
In globally competitive environment there is a need for continuous improvement of the performance of the organization which in turn depends on the continuous improvement of the performance of the employees year after year. Performance management aims at that.
Performance management system makes performance appraisal more objective and useful otherwise, many a time, the traditional performance appraisal carried out in isolation may prove to be counterproductive.
Performance management focuses the efforts of the entire organization and particularly those of it's human resources to the ultimate goals of the organization.

Also refer: http://strategic-managing.blogspot.com/ (Strategic Management), http://goal-target-setting.blogspot.com/ (Goal/Target Setting) and http://training-function.blogspot.com/ (Training and Development)

Generic Performance Management Model

For achieving a complete integration, a generic performance management model is given below. However, every organization can customize it to its specific objectives and requirements.
The process steps are given in logical sequence:

Mission
Objectives
Core competencies (of the organization)
Critical success factors
Key performance indicators
Strategies
Organizational structure
Skills and competencies (required of individuals working for the organization)
Position and job descriptions
Objectives of each individual working for the organization
Plans of action
Achievement measurement
Performance review
Assessments of skill and competency gaps and gap analysis
Individual development plans
Training and other developmental initiatives like job rotation, job enrichment, transfers, task force assignments, foreign assignments etc
Recognition and rewards
Succession plans

Performance Appraisal or Performance Evaluation

Appraising the employees on how well they did in the past period, say for past six months to an year.
Appraising the employees for their potentials

Why Performance Appraisal?

Finding out the levels of performance of the employees and deciding and awarding appropriate motivational packages to the employees in terms of recognition, salary raise, promotion, special rewards, bonus, profit sharing, stock options etc
Finding out the competency gaps of the employees as compared to what competencies they should have. This helps in training and development needs identification.
Identifying the areas of weaknesses and strengths and working out appropriate interventions for the employees for their training and development.
Thus, helping in improvement of employees' effectiveness and efficiency.
Working out additional development interventions for employees like job rotation, job enrichment, transfers between various sites/offices, foreign assignments etc.
Chalking out the career progression of the employees based on the analysis of their past performance and future potentials.

Uses of Performance Appraisal/Evaluation in Other HRM and Organizational Functions

Human resource planning. Also refer: http://human-resource-planning.blogspot.com/ (Human Resource Planning) and http://human-capital-architecture.blogspot.com/ (Human Capital Architecture).
Recruitment and selection. Also refer: http://recruitment-selection.blogspot.com/ (Recruitment and Selection).
Training and development. Also refer: http://competency-matrix.blogspot.com/ (Competency Matrix), http://training-function.blogspot.com/ (Training and Development), http://coaching-skill.blogspot.com/ (Coaching), http://mentor-mentorship.blogspot.com/ (Mentoring) and http://counseling-skill.blogspot.com/ (Counseling at Workplace).
Rewards and compensation. Also refer: http://motivation-people.blogspot.com/ (Motivation).
Employee and organizational effectiveness improvements.

Many Appraisal Systems

Confidential reports by boss(es) or superior(s).
Appraisal by boss(es) or superior(s): not strictly confidential.
Appraisal by superior(s) and self: but appraiser and appraisee do not consult or discuss.
Appraisal by superior(s) and self (appraisee) followed by a discussion between superior and appraisee to arrive at a consensus on performance rating: open appraisal.
Appraisal by boss(es), self and one or two internal customers.
Appraisal as guided by MBO (Management by Objectives: result focus) by bosses, self and may be, by one or two internal customers.
Appraisal considering results and attributes, both by superiors, self and may be, by one or two internal customers.
Appraisal considering results, attributes and competencies/skill sets (result focus as well as process focus) by superiors, self and may be by, one or two internal customers. Also refer: http://competency-matrix.blogspot.com/ (Competency Matrix). You may also like to read at URLs: (Competencies- Life Management) http://shyam-bhatawdekar.blogspot.com/, (Life Management: Competencies) http://knol.google.com/k/shyam-bhatawdekar/competency-matrix/6txz9nck6g3/4#
Three sixty degrees performance appraisal (by superiors, self, peers, direct reports, internal customers and external customers).
Three sixty degrees performance appraisal and leadership development (by superiors, self, peers, direct reports internal customers and external customers).
720 degrees performance appraisal: evaluation of a manager/employee is done through detailed personal interviews with performance evaluators. It concentrates on what matters most to the organization. For example, the customers' or clients' views on employee's performance may be most important to the organization.

Pitfalls in Performance Appraisals in Practice

Lack or absence of objectivity or increased subjectivity
Unclear standards
Central tendency
Lenient attitude of the evaluator(s)
Strict attitude of the evaluator(s)
Bias
Halo effects
Horn effects
Disproportionate impact of recent events on evaluation
Employee resistance
Lack of employee's trust in the appraisal system

Superior Most Systems

Appraisal considering results (against KPAs, KRAs or objectives), attributes and competencies/skill sets (result as well as process focus). Also refer: http://competency-matrix.blogspot.com/ (Competency Matrix).
Three sixty degrees performance appraisal and leadership system (Refer URL: http://three-sixty-degrees-feedback.blogspot.com/).
A combination of the above-mentioned two systems.

Anti Views on Performance Appraisal (Mainly Based on Opinions of Peter Scholtes and Edward Deming)

Data and research are not available to show that performance appraisal does any good. There is no evidence to indicate that a company which uses performance appraisal does any better than it would if it did not use performance appraisal.
It is reported that, when quality guru Edwards Deming was asked what to do about performance appraisals, he replied ‘whatever Peter Scholtes says.’
Performance appraisal and a number of other management interventions are based on a
fairly cynical premise about people by those who manage. The view that gets reflected is: we would be okay if it weren't for the inadequacies of our individual employees.
As per Deming, systems are the cause of problems and the cause of solutions. If you want to improve what you are doing, you have to improve your systems. You should not think organisations as hierarchies (the conventional view). As per Scholtes, if you want to improve, what you do is to improve the system; you don't pester the people to work harder or work smarter. You don't threaten them with punishment or promise them rewards: that's looking in the wrong place.
Performance appraisal tends to undermine the system (process) by encouraging individuals to organise their performance often at the expense of the system.
Performance appraisal can undermine teams because many times, individuals want to look good at the expense of the team.
At times, performance appraisal make an employee totally boss oriented irrespective of the system (process) or team.
Performance appraisal is supposed to provide channels of communication and feedback to the employees but in real practice, that hardly happens.
So, what to do? If an organisation has a performance appraisal system, should it just throw it out the window start working on the transition to systems thinking? “That's a pretty good start,” says Scholtes. “Most people hate performance appraisal, but they
assume that's because they are not doing it the right way. There is no right way to do it: it's inherently the wrong thing to do.”