Chapter 16 Performance Appraisal and Management Notes

Performance Management and Assessment

Performance management is a definitive means of achieving superior results by managing performance within an agreed framework comprised of goals, standards, and competence requirements. It is a systematic process designed to establish:

A shared understanding regarding the specific objectives that are to be achieved.
A structured approach to managing and developing individuals to ensure those objectives are met.

The Process of Performance Management

The performance management process follows five distinct steps typically derived from the broader business strategy:

Step 1: Identify Requirements and Competences. Based on the business plan, determine the specific requirements and competences necessary for successful execution.
Step 2: Performance Agreement. Draw up an agreement that defines the expectations for the individual or team. This document covers standards of performance, performance indicators, and the necessary skills and competences.
Step 3: Performance and Development Plan. Create a plan with the individual to record actions needed to improve performance, typically focused on development within the current role. Discussions with job holders usually cover:
- Areas of performance identified by the individual as needing development.
- Agreed-upon needs determined by both the individual and manager to enhance performance.
- Specific development and training initiatives.
Step 4: Continuous Management. Performance must be managed throughout the entire year, rather than being restricted to annual interviews. This involves informal interim reviews and the following actions:
- (a) Reinforcing high performance through praise, recognition, and the assignment of increasing responsibility. Addressing low performance via coaching or counselling.
- (b) Updating work plans as circumstances change.
- (c) Addressing performance problems by identifying the specific issue, establishing the reasons for the shortfall, taking control action with adequate resources, and providing feedback.
Step 5: Performance Review. At a defined period annually, success is reviewed against the plan. The primary purpose is to assess future requirements and actions.

Components and Objectives of Appraisal Systems

An appraisal system is composed of three primary review types:

Reward Review: Measuring the degree to which an employee deserves a bonus or a pay increase.
Performance Review: Aiding the planning and follow-up of training and development programmes.
Potential Review: Identifying prospects for career progression and succession planning.

The specific objectives of performance appraisal include:

Defining the individual's role and tasks to ensure departmental objectives are realised.
Establishing the key results the individual is expected to achieve during their work.
Comparing performance levels against a standard to provide a foundation for remuneration.
Identifying training and development needs based on actual performance data.
Pinpointing potential candidates for promotion.
Identifying specific areas for improvement.
Creating an inventory of both actual and potential performance levels across the organisation.
Monitoring the effectiveness of selection procedures by comparing them against the subsequent performance of recruits.
Improving communication regarding work tasks across different hierarchical levels.

Requirements for Formal Appraisal Systems

A formal system requires three fundamental elements to function effectively:

The formulation of desired traits and standards for consistent and objective assessment.
A system for recording assessments where managers use a standard framework but retain the freedom to express important observations without excessive administrative burden.
The facilitation of joint meetings between the appraiser and appraisee to ensure both contribute to the assessment and future development plans.

The Performance Appraisal Hierarchy and Flow

The appraisal process involves a circular flow of information and action:

Foundational Elements: The Corporate Plan leads to the Purpose of Appraisal, Job Requirements, and Job Analysis.
Criteria Identification: Job analysis leads to the identification of criteria for assessment.
Performance Input: The employee's performance is the focus of the assessment.
Assessment Phase: Conducted through both a formal Report by the manager and a formal Interview.
Outcome Phase: Results in a jointly agreed concrete conclusion and necessary follow-up action.
Looping: Feedback is provided back to the performance cycle.

Appraisal Techniques and Methods

Various methods are employed to assess employee performance:

Overall Assessment: A narrative format based on the manager's personal judgement.
Guided Assessment: Managers and appraisees provide comments under specific, pre-defined performance elements.
Grading: The manager assigns a numerical grade to various performance elements.
Behavioural Incident Method: Assessing success or failure based on critical job-related behaviours.
Results-Orientated Schemes: Assessment is conducted against specific, measurable objectives.

Self-Appraisal: Advantages and Disadvantages

Self-appraisal occurs when an employee evaluates their own performance against set criteria and discusses the results and solutions with their manager, with a primary emphasis on development.

Advantages:

Reduces the time burden on the manager.
Increases the individual's sense of responsibility.
Aligns the goals of the individual with those of the organisation.
Increases flexibility regarding the timing and relevance of the appraisal.

Disadvantages:

Individuals are not always the most objective judges of their own performance.
Individuals may deliberately overestimate performance for rewards or underestimate it to conform to group norms.

Approaches to the Appraisal Interview

Maier identified three distinct styles for conducting appraisal interviews:

Tell and Sell Style: The manager delivers the assessment and attempts to gain the employee's acceptance of the improvement plan. This requires high-level human relations skills to motivate and criticise constructively.
Tell and Listen Style: The manager delivers the assessment and invites a response from the employee, providing more opportunities for counselling.
Problem-Solving Style: The employee is invited to identify and discuss work problems and areas for improvement. This style replaces judgement with collaborative thinking and proactive development, making it the preferred method for most appraisees.

Modern Appraisal Techniques

Upward Appraisal: Employees rate their subordinates. This is beneficial because subordinates often have better knowledge of the appraisee than superiors do, and statistical rating from multiple subordinates provides a more balanced view with higher impact.
Customer Appraisal: Customer feedback becomes a key element of remuneration, reflecting the idea that customers are the best judges of service quality.
360-Degree Appraisal: A system that collates feedback from a diverse range of sources, including immediate superiors, subordinates, peers or co-workers, customers, and self-appraisal.

Follow-Up Procedures and Implementation

Effective follow-up is critical and should include:

Formally informing appraisees of their results.
Executing all agreed-upon actions.
Monitoring the progress of the appraisee consistently.
Assisting the appraisee in reaching their improvement objectives.

Barriers to Effective Performance Appraisal

Lockett's research in "Effective Performance Management" identifies several reasons why appraisals may fail:

If the process results in confrontation.
If it is perceived as a judgemental exercise.
If it lacks structure and is treated as just a chat.
If it is viewed as mere bureaucracy or form-filling.
If there is unresolved "unfinished business."
If it is treated as a isolated annual event rather than a continuous process.
Appraisals are frequently perceived as a "nuisance" by those involved.

The Link Between Appraisal and Pay

Linking appraisals to reward systems creates several challenges:

Funding Constraints: Pay increases depend on the financial performance of the company, not just the individual.
Expectation of Improvement: Continuous improvement is often expected as a standard part of development rather than an extra achievement.
Future vs. Past: Appraisals focus on future planning, whereas reward systems often focus strictly on past performance.

Questions & Discussion

Questions regarding the application of appraisal styles in specific scenarios:

Question: Giles is conducting an appraisal interview with his assistant, Jill. He initially feeds back to Jill areas of strength and weakness of performance, but then invites Jill to talk about the job, her aspirations, expectations and problems. He adopts a non-judgemental approach and offers suggestions and guidance. This is an example of which approach to performance appraisal?
- A. Tell and sell approach
- B. Tell and listen approach
- C. Problem solving approach
- D. 360 degree approach
Answer: B. Tell and listen approach ( $2$ marks). The 'tell and listen' approach encourages input from the individual, promoting participation in the process by the appraisee.