Performance

Appraisal
INDU1106 Lecture 4

Dr Angie Ratcharak
[email protected]
Aims of the session
 Meaning of performance appraisal
 Objectives of performance appraisal
 Forms of appraisal
 Main approaches and appraisal tools
 Benefits and criticisms
 Appraisal examples from organisations
 Ways to improve performance appraisal
Meaning of Performance Appraisal
 Drawing on what we
Performance Management System: learnt from Week 1
lecture
Organisational mission, values,
objectives and competencies

PA is a formal component of Derived from team objectives

PMS and an agreed job description

Informal reviews
• Confirm the employee is ‘on the right
track’
• Employee reward: Recognition of (Torrington et al., 2017)
progress
 Performance Appraisal VS Performance Management
Performance Appraisal (PA)
– A formal process to review and measure employee performance: How well employees do their
jobs relative to a standard and communicating that information to them
– Normally one performance review meeting a year
– Centrally designed by the HR function, but the staff performance is appraised by line managers
– Objectives not explicitly linked to organisational objectives
Performance Management (PM)
– A continuous process to identify, measure & develop the performance of individuals and teams
– Ongoing throughout the year prior to annual review
– Driven and owned by line managers
– Top-down link between organisational and individual objectives: Align performance with strategic
goals of the organisation

Slide 5
Objectives of Performance Appraisal:
Why we need to conduct PA
Functional view of appraisal

“What is measured, gets done”

Managerial view that appraisal necessary for effective
management – a tool of motivation
Individual necessity for role clarity and purpose – manager &
employee
Absence of a formal appraisal system means informal appraisal
becomes more important
Appraisal Discussion
Manager should clearly communicate how an employee’s positive
contributions have helped the organization perform well
Discussing poor performance
Managers can use questions and discussion points that enable employees to
identify their own deficiencies and develop useful plans for progress
Feedback can inspire employees to improve their performance when
delivered effectively
Clarity, conflicts, confidence, and conviction can inspire employees
 Objectives of PA: • Communicate goals and feedback

• Review current performance • Motivate through feedback

• Set performance objectives • Place individual performance in perspective/context

• Identify skill gaps: training needs

• Identify reward

Links to different
functions in HRM practice

Training & Development Internal employee relation

• Review current performance VS goals • Promotion, demotion, termination, layoff, or transfer
• Capture skill gaps to identify training needs Human resource planning
Compensation programs • Ensure a sufficient number of workers
• Identify reward (Next week’s lecture) • Succession planning
Forms of Appraisal
Forms of Appraisal
• Appraisal by line managers or Downward appraisal
• Self-appraisal
• Appraisal by peers
• Appraisal by subordinates or Upward appraisal
• Appraisal by customers
• Multilevel or 360 degree appraisal.
Type of appraisal Strengths Weaknesses

Downward • LM should be familiar with • Relies on good management

appraisal (by LMs) work and constraints skills and mutual trust
• Strengthens relationship • Subject to bias
between LM and employee • Not suitable for all cultures.
• Facilitates communication.

Self appraisal • A person to reflect on own • Inaccurate assessment

performance • Prone to over rating or under
• Encourage employee’s voice rating
• Suitable for jobs with high • Problems if there is difference
levels of discretion, specialised between self and others’ ratings
skills or work in isolation from
managers
Type of appraisal Strengths Weaknesses

Upward appraisal • Employee involvement can improve • Employees may feel intimated and
(by subordinates) motivation and commitment may not give an accurate response
• Employees in close and regular contact • Can be undermining/threatening for
with their manager manager.
• Supports an open style culture
• If multiple raters then less prone to
bias.

Peer assessment • Suitable for team working • Colleague may not understand
environment individual’s job
• Reluctance to be honest
• May be influenced by jealousy or
rivalry (‘Screw your buddy’).

Customer appraisals • Helpful in customer facing • High surveillance and control

environment. • Cannot take account of all aspects
of performance.
 Multi-Source or 360-Degree Appraisal
Benefits
• A more balanced and accurate
view of performance: Reduce
common errors and biases
• Different raters can report on
different behaviours.
• Offers the opportunity for
improved self-awareness.
• Employees have a ‘voice’.
• It is useful if LM is not familiar
with job and in service sector:
Performance complexities
Problems with 360 Degree Appraisal
• Time consuming and costly as multiple evaluators involved
• Analysis of information is complex
• Does having multiple assessors create greater objectivity?
• If linked to reward may be prone to bias (e.g. people may fight over
the same resources)
• Too few raters in practice
• Different interpretations of measures
• Differences between self and others ratings
Original Source Ewenstein et al.
(2016, p. 70)
 See Amiridis and Costea (2019)
Article on Moodle
Main approaches and appraisal tools
Starting from the definition of PA

‘A dynamic process that requires a rater to observe and

record the performance of others, to pose evaluative judgements
as to the quality of that performance, to provide feedback to the
individuals evaluated, and finally to outline the development
opportunity to those same ratees.’

(Brutus, Fletcher and Baldry, 2009: 1999)

Performance appraisal approaches
Evaluative:
 Traditional, ‘harder’ approach. Backward looking (assessing past
performance against predetermined performance criteria). Often
associated with top down, more judgemental forms, and the
allocation of reward.
Developmental:
 ‘Softer’ approach – emphasis on communicating gaps in
performance expectations, clarifying job objectives, training and
development.
 Problematic ‘split roles’ in PA (e.g. Boswell & Boudreau, 2002)
 Approach 1: Result- or outcome-based appraisal
(also known as Management By Objectives)
Outcomes produced; Objectives/goals and measurable indicators, e.g. Sales figures,
Results, Production, Quality
• Considers employee accomplishments
• Works well for jobs in which measurement is easy and obvious
• More useful information than the other methods

Method: Management by Objectives (M B O)

Specific performance appraisal method that highlights the performance goals that an individual and
manager identify together
Stages
• Job review and agreement
• Development of performance standards
• Setting of objectives
• Frequent performance discussions
 Benefits & Problems of Result-based Approach
Benefits Problems
• A more systematic way to utilise the • ‘What gets measured gets done’
goal-setting theory • ‘What is measured is what’s easy to measure
• Reassurance in measurement not what is most important’
• Simple and easy to understand • Can result in unintended consequences
• Clarity in what is required • Not all jobs can be measured in this way
• Timely, Goal specificity • Fails to take account of contextual
constraints
• Motivational (e.g. provides a ‘line of
sight’) • The strong focus on the ‘what’ to be
achieved: The appropriateness of ways
• Uses a language familiar to all key employees use to achieve the goal is largely
stakeholders. overlooked
• Fails to explain the process or means by
 Approach 2: Competency-based appraisal
(also known as Behavioural Approach)
Focus on someone’s personal attributes or inputs.
• Can be defined as the behaviours (and technical attributes where appropriate) that individuals
must have, or must acquire, to perform effectively at work (CIPD, 2021)

'Competence' and ‘competences’ are broader concepts that cover demonstrable performance
outputs as well as behavioural inputs. They may relate to a system or set of minimum standards
needed to perform effectively at work.

Therefore, it is a process orientated approach emphasising how an

employee does the job – qualitative.
• Focuses on specific behaviours that lead to job success
• Examples: Leadership, Decision-making, Conceptualising,
Teamwork, Citizenship behaviour, Ethical behaviour and
Effective communication
 Benefits & Problems of Competency-based
Approach
Benefits Problems
• The subjectivity: Each person interpret the
• The focus on ‘how’ results are same behaviour differently
achieved allows employees to • E.g. what behaviour is defined as unethical?
• Thus, clear definition of each behaviour or
achieve the goals competency is needed**
• Especially when they have little • Ambiguous relationships between
influence over the results competencies/ behaviours and
performance
• E.g. does good behaviour really lead to
good performance?
• Thus, clear links between behaviour and
performance are needed. How can you
link the expectancy theory to solve this
issue?**
Example of competency-based appraisal (behavioural approach)
Other Appraisal Methods
Narrative Methods

• Critical incident: Manager keeps a written record of both

favourable and unfavourable employee actions during the entire
rating period
• Essay: Manager writes a short essay describing each employee’s
performance during the rating period
• Allows the rater more flexibility than other methods do, sometimes too
much
• Appraisers often combine the essay with other methods
 Rating Scale Method
Allows rater to mark employee’s performance on a continuum indicating low to
high levels of a particular characteristic
Concerns
• Evaluation criteria may not be representative of
job performance elements
• Traits or factors are often grouped, and the rater is
given only one box to check

 Popular due to its simplicity

 Quick evaluations, Facilitate comparison
X Described as ‘above’ or ‘below’ expectations
without further elaboration
 What do employees really learn??
 Comparative Method: Forced distribution or ranking
Forced distribution: Ratings of employees’ performance levels are
distributed along a bell-shaped curve
Forces managers to identify high, average, and low performers, with a limited
percentage permitted to earn each ranking level
 Benefits of Forced Distribution
• forces managers to differentiate
• continually raises the bar
• can identity top performers who need to be developed
• can ‘weed out the dead wood’
• greater consistency in marking
• if linked to pay can help budgetary control.
 Problems with Forced Distribution
• is performance normally distributed?
• employees not evaluated on the basis of what they actually do
• demotivating
• undermines team working
• fosters unhealthy competition
• increases stress and workload
• promotes a culture of fear.
Appraisal Examples from Organisations
 https://www.youtube.com/watch?v=8_n-9DTke
BQ&t=175s&ab_channel=WeAreNetflix

Example: Netflix
• culture with few rules and no tolerance for average or poor performers, designed to
initiate and maintain creativity.
• If someone does something wrong, they are told. After that they either “get it” or
they are gone. “If someone is not extraordinary we let them go.”
• Annual 360-degree reviews provide “direct and honest feedback.” The company
does not “coddle” employees and does not ask how someone “feels.”
(Valentine et al. 2020)
 https://www.youtube.com/watch?v=umMZYN5jOA0&ab_chan
nel=Valuetainment

Example: Amazon (HQ Seattle)

2015 New York Times article:
Interviews with ex-Amazon employees describe “bruising”
feedback culture that encourages employees to criticise
colleagues’ ideas and send secret feedback to their managers,
using Amazon’s internal feedback tool called “Anytime
Feedback Tool” .
Team members are ranked, and those scoring lowest are
reportedly eliminated each year.
(Source: Marr, 2018)
Example: Microsoft
In 2013, removed its system which involved an annual performance
review and used process known as ‘stack ranking’ to divide employees
into five performance categories along a targeted distribution of
ratings.
Replaced by approach which focuses on collaboration, feedback and
rewards.
Replaced by less formal but regular ‘performance development’
conversations called ‘Connects’. Ratings were abolished. (See
Armstrong textbook page 217)
See youtube video: https://www.youtube.com/watch?v=RZZJca-X__k
Ways to improve performance appraisal
as line managers in organisations
 Give feedback and set goals

• Performance evaluation:
 Absolute standard - Comparison with the best possible performance in a particular role
 Comparative standard - Comparison with another employee in similar role within the same
organization
 Individual standard - Comparison with the same person’s performance in the past

• Goal setting and development plan: SMART

• Potential or readiness for promotion:

• Performance in one job not an indicator for suitability for another

• ‘Halo’ effect can result in promotion to level of incompetence

• ‘Horns’ effect mean good people overlooked

Current trends and developments
https://www.cipd.co.uk/knowledge/fundamentals/people/performance/strengths-based-conversations

• CIPD argues that strengths-based performance conversations are

the way forward for effective quality feedback
• Focus = ‘understanding and building on their strengths, rather
than fixing their weaknesses’
• Managers adopt a coaching style and the approach is based on
‘appreciative inquiry’
• Focus = reflect on what works well and how that can be
replicated
Ethical Approach to Performance Management

To avoid problems of perceived control and lack of fairness:

•build in respect for individual
•procedural fairness
•transparency in decision making
•ongoing dialogue
•training for raters
•limit the amount of measurement.

(Winstanley and Stuart-Smith, 1996

and Hendry et al, 2000)
Key Takeaways
 Meaning and forms of performance appraisal

 Approaches to performance appraisal and tools (their benefits and criticisms)

 How to improve performance appraisal as line managers in organisations

Essential reading list
From our core textbooks – e-books available on Moodle

 Armstrong (2020) - Chapter 8, 9 and 10

 Hutchinson (2013) – Chapter 5 and 6

 See more materials on Moodle Week 4

This lecture is important to Question 2 in your
case study assignment – Due on 31st March 2023

Question 2 : Describe the way in which you would adapt the

following elements of Wells Fargo’s performance management system
to eliminate fraudulent practices, making use of at least 3 academic
references. (~1,000 words)
 Performance appraisal/ review process
 Reward system
 Disciplinary process
THANK YOU!