Essay (Theoretical Essay & Critical Analysis of the Literature)










Effectiveness of Appraisal Systems in Performance Management


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Effectiveness of Appraisal Systems in Performance Management


The competitive corporate world of today demands organizations to have effective appraisal systems which are important not only for the employees but also for the productivity of the organization. The basic aim of this paper is to critically analyze the effectiveness of different appraisal systems utilized by organizations for reviewing the performance of their employees. This paper will be arguing on the fact that existence of an appraisal system is very significant in an organization as it helps to make it more efficient and effective. The paper first gives an introduction of appraisal system and its definition by different authors, its evolution and then it focuses on the various types and aspects of having a right system in place, the need for a supportive organisational structure including the process of carrying out the performance appraisal has also been discussed. Limitations to the performance appraisal are also added and finally the paper concludes at the fact of how an effective appraisal system improves the organization’s productivity and performance.

Critical Analysis:

According to Dressler and Varkey ( 2010) ‘Human Resource Management’ defines the process of all the policies and practices that are involved in carrying out the issues and aspects of a management position which involves elements of acquiring, recruiting, training, appraising, compensating employees and addressing their health, labour relations, safety and fairness concerns as well. HR department and the HR managers are responsible for all such activities to be carried out effectively.

All the elements of HRM functions stated play an important role in adding to the productivity of the organization, if carried out efficiently and fairly. Performance appraisal is defined as the procedure which involves setting of work standards or benchmarking the requirements of the organization, assessment of employee’s performance in comparison with the set standards and providing feedback on those outcomes with either the aim of motivating them to continue with the present behaviour or eliminate certain activities in order to improve their performance with a larger focus towards contributing to the organizational performance (Dessler and Varkkey, 2010).

Performance appraisal could be described as the evaluation of an employee which is carried out after a fixed period of time in an organisation; the process is carried out in order to measure the performance against the presumed or stated requirements of the job design (Terry and Franklin, 2003).

Performance appraisal provide the necessary information required for making personnel decisions which cover determining the salary packages, promotion recommendations of the effective employees, designing the training and development programs as well the performance feedback for the employees and maintaining a record for the organization (Huber, 1983).

For over the last 40 years, it has been present in the argument of HR theory that the factors of job satisfaction and employee attitudes which are identified with the help of effective appraisal systems in place, have the likely relation of being associated with better organizational performance and on this basis satisfied workers will perform better than those who are dissatisfied at the workplace (Patterson et al., 2003).

Systematic techniques for evaluating performance became prominent during and immediately after the World War I and they were basically used for carrying out an evaluation of the US Military Officers. During 1920’s and 1930’s, industrialists concerns about installation of a reasonable and fair wage structures for workers who were employed for hourly jobs also came in the limelight. A policy was established by them that grade wage increases would be merit based. The initial employee appraisal plans were named as the merit rating programs (Khan, 2007).

Fletcher (2001) stated that performance appriasal used to be a term which was associated with the process of involving a line manager who used to complete an annual report about the performance of his subordinate, and sometimes but not always, discussing it with him as well in the appraisal interview. This tradition has changed over the period of time and has become more strategic and a number of organization wide processes come under the header of Performance Appraisal. As a result Wingrove (2003) said that performance management has the distinguishing factor of explicitly measuring the employee’s training, standard setting, appraisal, feedback options in relation to his required performance which contributes to the company’s goal and strategy achievement.

Performance appraisal is very important as it offers the organisation to form a practical point of view for setting the pay standards, promotion decsion and benchmarking (Morgan, 2006). It helps in translating the employer’s goals into employee’s startegic goals as well as allow the boss and subordinate in developing a plan for correction of defeciencies and last but not the least they also help in the process of carrer planning (Dessler and Varkkey, 2010).

Ayaz (2007) states that managers must realize the importance of apprisal systems as they help in the developement of employees which is beneficial for the organisation in the long term, organsations develope their employees to inculcate in them the ownership, philoshphy and values of the organisation. This developement procedure is a continuous cycle of setting some standardized performance goals, provision of training facilities for achieving the goals, assessment of their performance as for the accomplishment of goals and then setting new higher goals.

Types of Performance Appraisal:

There are a number of procedures which measure the performance of employees but most commonly employed include the graphics rating scale which measures between the traits and range of performance for each with the score, Alteration Ranking Method rates employees as highest to lowest, Paired Comparison Method ranks employees in pairs on basis of making a chart for the triats which indicate the better pair of employees. Forced grading is same as grading on a curve, ACR is also commonly employed, BARS is a quantitative measure which combines the benefits of narrative critical incidents and quantified ratings, MBO measures on the basis of setting goals and then a periodic review for the employee etc. (Dessler and Varkkey, 2010). 360 degree performance appraisals have also been adapted by various organisations which give a broader, purposeful and elaborative feedback of top down and same level employees to the employee who is undergoing the performance appraisal (Clawson and Yemen, 2008).

Steps in Performance Appraisal:

The performance appraisal process contains three major steps which range from defining the job first, appraising the performer and then later providing with the feedback. Defining of the job means that the subordinate and the appraiser should agree on the same job standards and duties which are to be evaluated; appraising completes the task of developing a comparison between the set standards and achievement of the employee and the last one requires the feedback session only (Dessler and Varkkey, 2010).


Performance Appraisal and Organisation structure:

Cleveland and Morrison (1986) comment that there has been a very little research made which addresses the relation between organisational characteristics and the use of performance appraisal. However, there is some theoretical support present in the literature for such hypotheses that certain context of the organization and its environmental influence the way in which the performance appraisal is employed to make the decisions (Gooding and Wanger, 1985). For elaboration the examples include the structural characteristics, which focus on complexities and the formalization of the decisions of the organization (Birnbaum and Wong, 1985) and the financial aspects and condition of the organization (Nadler, 1981). Organisation structure, culture, contextual factors etc affect the way in which the information from the performance appraisal is employed by the appraisers in making decisions for the organisation (Cleveland, R.Murphy and E.Williams, 1989).


The analysis of literature has uncovered some major aspects which could be a cause of harm for the performance appraisal systems e-g if some high officials are exempted from evaluation, the appraisal is carried out in order to punish and not developing the low performers, presence of uncertainty in the minds of performers about the its after effects, such policies of the organisation which lead to disturb the performance of the employee who is being targeted etc (Deluca, 1993).

Ayaz (2007) reported that appraiser’s memories are quite fallible and in most of the cases for wrong performance appraisal he is susceptible to set his likings and disliking, his expectation about people and such kind of expectations might not be reasonable and rational at all. Such kinds of attitudes and events make the appraisal not reliable and the true ratings differ from the ones that are being given to the employee being rated.

Segal (2000) reported that a fundamentally flawed appraisal if employed which focuses on encouraging an individual, ultimately results in discouraging teamwork/ collaboration and issues of inconsistency in setting and application of appraisal criteria is found. A flawed system only focuses on extreme matters (performers who are exceptionally good or bad), or if appraisal’s goal is to achieve only the short term goals, supporting the autocrat supervisors thus subjective appraisal results may result in the development of agony and torture among the employees.

Utilizing vague qualities and measurement criteria which is not relevant, use of ineffective checklists for evaluation, employing monologues instead for using dialogues in the feedback sessions, appraisers being reluctant to provide the feedback, supervisor becoming a source of showing misguidance to the appraiser add to making the performance appraisal inefficient (Nurse, 2005). Horvath and Andrew (2007) also added to an inaccurate performance appraisal by commenting that supervisor and organization itself at times become the cause of an ineffective performance appraisal.


Many authors and researchers have commented upon the common outcomes of an effective appraisal process in place. According to Beer (1981) performance appraisals give a chance to employees to learn about themselves, their knowledge of what they are doing and how they are doing as well as their learning about the organization’s philosophy also gets enhanced. Stephen and Dorfman (1989) further contributed by saying that an effective appraisal system include the improvement in the accuracy of employee performance which helps in the establishment of a relationship between a performance task and the reward potential clarity.

Dobins, Cardy and PlatzVieno (1990) coined that there are five important outcomes of an effective appraisal system which include use of the evaluations as a form of feedback to performance development, reduction in employee turnover, increased motivation level, existence of feelings of equity among the employees and development of a linkage between the performance and rewards. Similarly Nurse (2005) viewed outcomes from her opinion as the provision of information from the appraisal for managerial strategies and for the functions of training and development as the significant outcome.

Teratanavat, Raitano and Kleiner (2006) discovered the major outcomes in his view as reduction in employee stress, a holistic review of overall progress, development of linkage between the current performance and employee’s goals and strategies as well the development of particular action plans for future progress of the organisation. A performance appraisal gives a picture of effectiveness of human capital.

The paper has analyzed the meaning, types, processes, benefits, supportive organizational structure and the limitations to the Appraisal system in Performance management. The arguments present that it is important for an organization to have the appraisal systems in place. There are many types of performance appraisals which are used by the organizations so it is imperative that the organization makes a reasonable and rational decision for selection of the type of performance appraisal which suits its environment, structure and demands. Having a right performance appraisal system is more significant as compared to having an appraisal system as this decision directly impacts the productivity of the organization.

Performance appraisal is basically a step wise process which starts from the individual level considering the employees and then move towards the larger and bigger aspect of how it affects the performance of the organization as a whole. An organization which has a fair, efficient and reliable appraisal system in place does perform better. The paper has argued that existence of an appraisal system is very essential for the organization to perform better. Organizations having an effective and productive appraisal system installed do make their mark in the competitive industry of the 21st century.

Reference List:


Beer, M. (1981) ‘Performance appraisal: Dilemmas and possibilities’, Organisational Dynamics, vol. 9, no. 3, December, pp. 24-36.

Birnbaum, P.H. and Wong, G.Y.Y. (1985) ‘Organizational Structure of Multinational Banks in Hong Kong from a culture free perspective’, Administrative Science Quaterly, vol. 30, no. 2, June, pp. 262-277.

Clawson, J.G. and Yemen, G. (2008) 360 feedback, 1st edition, Virginia: Darden Business Publishing.

Cleveland, N.J. and Morrison, R. (1986) ‘Rater Intentions in Appriasal ratings: Malevolent manipulation or functional fudging?’, Unpublished manuscript, Colorado State University.

Cleveland, J.N., R.Murphy, K. and E.Williams, R. (1989) ‘Multiple Uses of Performance Appraisal:Prevalence and Correlates’, Journal of Applied Psychology, vol. 74, no. 1, pp. 130-135.

Deluca, M.J. (1993) Handbook of compensation management, 1st edition, Englewood Cliffs: Prentice Hall.

Dessler, G. and Varkkey, B. (2010) Human Resource Management, 11th edition, UP: Dorling Kindersley.

Dobbins, G.H., Cardy, R.L. and PlatzVieno, S.J. (1990) ‘A contingency approach to appraisal satisfaction: an initial investigation of the joint effects of organizational variables and appraisal characteristics’, Journal of Management, vol. 16, no. 3, September, pp. 619-623.

Fletcher, C. (2001) ‘Performance Apprraisal and Management:The developing research agenda’, Journal of Occupational and Organizational Psychology, vol. 78, pp. 473-487.

Gooding, R.Z. and Wanger, J.A. (1985) ‘A metanalysis review review of the relationship between size and performance: The productivity and efficiency of organisations and their subunits’, Administrative Science Quaterly, vol. 30, no. 4, December, pp. 462-481.

Horvath, M. and Andrews, S.B. (2007) ‘The Role of Fairness Perceptions and Accountability Attributions in Predicting Reactions to Organizational Events’, Journal of Psychology, vol. 141, no. 2, March, pp. 203-222.

Huber, L.V. (1983) ‘An analysis of performance management practices in the public sector: A review and recommendation’, Public Personnel Management, vol. 12, pp. 258-267.

Khan, A. (2007) ‘Performance Appraisal’s Relation with Productivity and Job Satisfaction’, Journal of Managerial Science, vol. 1, no. 2, December, pp. 102-114.

Morgan, R. (2006) ‘Making the most of performance Mnaagement Systems’, Compensation and Benefits Review, September/October, pp. 22-27.

Nadler, D.A. (1981) ‘Managing Organizational Change: An integrative Perspective’, Journal of Applied Behavioral Science, vol. 17, no. 2, April, pp. 191-211.

Nurse, L. (2005) ‘Performance appraisal, employee development and organizational justice: exploring the linkages.’, The International Journal of Human Resource Management, vol. 16, no. 7, July, pp. 1176-1194.

Patterson, M.G., West, M.A., Lawthom, R. and Nickell, S. (2003) Impact of People Management Practices on Business Performance, Wiltshire: CIPD.

Ratachai, T., Raitano, R.E. and Kleiner, B.H. (2006) ‘How to Reduce Employee Stress’, Nonprofit World, vol. 24, no. 3, May, pp. 22-24.

Segal, J.A. (2000) Your Appraisal Process?, 4510th edition, Philadelphia: HR Magzine.

Stephen, W.G. and Dorfman, P.W. (2007) ‘Administrative and Developmental Functions in Performance Appriasals: Conflict or Synergy?’, Basic & Applied Social Psychology, vol. 10, no. 1, July, pp. 27-41.

Terry, G. and Franklin, S.G. (2003) Principles of Management, 8th edition, Dehli: AITBS Publishers.

Wingrove, C. (2003) ‘Developing an effective blend of process and technology in the new era of performance management’, Compensation and Benefits Review, vol. 35, no. 1, January/February, pp. 25-31.




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