Module: 25
1. 1. Learning Outcome 2. 2. Introduction
3. 3. Why Performance Evaluation is so important?
4. 4. Significance of Performance Evaluation
5. 5. Key features of Performance Evaluation System 6. 6. Employee Evaluation
7. 7. Why Performance Evaluation Systems Fail?
8. 8. Summary 1. Learning Outcomes
To develop appreciation for relevance of performance evaluation system.
Design performance evaluation system.
To explain and illustrate the challenges in implementing robust system.
2. Introduction
The most important concern of an employer is to recruit employees who are not only having the desired skills and capabilities but also understand the importance of effective performance. An organization’s performance is the result of the collective efforts of its employees. Thus, in an organization, employer not only emphasizes on recruiting the right person but also providing training and tools necessary to do their jobs. To ensure they're performing to as per expectations, there is a requirement to conduct annual reviews of their work product, efficiency and attitude over the course of their employment. This benefits supervisors and employees by identifying how to bring out their respective best.
Items Descriptions of the Module
Subject Name Human Resource Management
Paper Name Strategic Human Resource Management Module Name/Title Relevance of Performance Evaluation
Module Id 24
Pre-requisites Nil
Objectives To understand relevance of performance evaluation, a critical parameter for the success of an organization
Keywords Performance, evaluation, appraisal, manager, employee, reward, expectation, effort
Performance evaluations are one of the most powerful weapons HR can use to demonstrate that the organization had legitimate, non-discriminatory reasons for termination or other adverse action against an employee or unsuccessful job applicant. HR Professionals have many tools in their arsenal to prevent, and, if necessary, defend legal charges, lawsuits, government investigations, adverse findings, etc. Supervisors need ongoing instruction in how to prepare and present a performance appraisal that is legally defensible as well as an effective management and coaching tool.
3. Why are Performance Evaluations so Important?
Formal performance evaluation plans are designed to meet many organizational and individual needs.
They provide systematic judgments to support salary increases, promotions, transfers, demotions and terminations. They are the means of assessing and communicating job performance status to a subordinate employee and suggesting needed changes in behavior, attitude, skills or job knowledge.
They are also used as a basis for a supervisor to coach and counsel the individual as well as to identify and deal with performance deficiencies. Thus, in short performance management has the following objectives:
Help organization in achieving sustainable improvements in organizational performance
Help in developing performance oriented culture
Help in increasing the motivation and commitment of employees
Help employees in developing their abilities in increasing their job satisfaction
Harnessing and developing full potential of employees
Enhancing team cohesion and performance
Developing a constructive and open relationship between individuals and their managers in a process of continuing dialogue
Providing them opportunities to express their aspirations and expectations about their work.
3.1. Need for a performance evaluation system
It is often argued that organizations exist to perform. It is so obvious then why there is a need for a separate performance evaluation system. Performance evaluation comes naturally with the organization. There are many points that are in favor of the argument. Managers understand it and it is the way of their life, but there is some managers who lack the desired skills and capabilities or they are not so motivated to perform in a way they should do for better results for an organization. These managers are not skilled enough to devise their own method of robust performance management. Thus, a framework makes them handy to plan, monitor, and review the performance of their organization. Generally, people like to have a structure that is appropriate and does not constrain them unduly. Moreover, system is required that brings out the innate need of performance management and is not a rigid monolithic system but a system which is reasonable flexible and responsive to the requirements of the people.
Expectations from the system
The performance management system is designed in such a manner that expectations of all the stakeholders are met in a systematic manner. As a CEO of a company, the expectation will be that the system should ensure organizational performance and the process should be robust and well accepted by all the employees. It should be fair as far as possible, simple, and useful. This means that the process should be able to help both manager and employee to work together to produce superior results.
The expectation of the manager will be that the system should aid in getting the best possible performance from their people. Thus, they expect a simple as well as an effective system. They also expect some amount of empowerment for themselves as managers can make performance related decisions such as confirmation, probation, extension, reward, and recognition in their own sphere of influence.
The expectations of the Employees will be that there should be a clear communication in terms of what is expected from them. They also expect a collaborative support from the system so that they are able to perform at their best. They also expect that they should get fair opportunities for their continuous development on their job under the guidance of their manager. This means that they should not only get clear expectations from the manger but also should get constructive feedback time to time on their strengths and weaknesses. Coaching and counseling is also a part
of it. Also they work and they put their efforts with the expectation that they will be rewarded and recognized in a fair manner.
Before Setting Goals
It is very important in an organization that supervisors should review their employee’s personnel file to understand the employee better. Along with that the employer must review the job description of the employee as a starting point. The job description states what the organization wants an employee in a particular job to accomplish and how it wants the employee to perform.
The supervisor does not have to read each and every document in full, but he or she should review the file to note any patterns of behavior, continuing incidents of misconduct or poor performance. Careful drafting of performance evaluations – as well as all employee performance related documentation – is essential, in today’s litigious workplace.
3.2. Benefits of Evaluation
The importance of understanding employee is very important before allocating a task to the person. If the manager is aware about strengths and weaknesses of the employee, it gives a clear
picture to the manger as what the employee can do in a better manner. Moreover, he is also having a clearer picture as to what are the areas where the employee can be developed further.
These areas can be marked as developmental goals for that employee.
One of the other significant benefits of performance evaluation is that, in the rush of daily working life, it offers a rare chance for a supervisor and subordinate to have "time out" for a one- on-one discussion of important work issues that might not otherwise be addressed.
Almost universally, where performance evaluation is conducted properly, both supervisors and subordinates have reported the experience as beneficial and positive.
Appraisal offers a valuable opportunity to focus on work activities and goals, to identify and correct existing problems, and to encourage better future performance. Thus the performance of the whole organization is enhanced.
For many employees, an "official" appraisal interview may be the only time they get to have exclusive, uninterrupted access to their supervisor. Said one employee of a large organization after his first formal performance evaluation, "In twenty years of work, that's the first time anyone has ever bothered to sit down and tell me how I'm doing."
The value of this intense and purposeful interaction between a supervisor and subordinate should not be underestimated.
4. Significance of Performance Evaluation
Performance Evaluation provides important and useful information for the assessment of employee's skill, knowledge, ability, and overall job performance. The following are the points which indicate the significance of performance evaluation in an organization:
Performance Evaluation helps supervisors to assess the work performance of their subordinates.
Performance Evaluation helps to assess the training and development needs of employees.
Performance Evaluation provides grounds for employees to correct their mistakes, and it also provides proper guidance and criticism for employee's development.
Performance Evaluation provides reward for better performance.
Performance Evaluation helps to improve the communication system of the organization
Performance Evaluation evaluates whether human resource programs being implemented in the organization have been effective.
Performance Evaluation helps to prepare pay structure for each employee working in the organization.
Performance Evaluationhelps to review the potential of employees so that their future capability is anticipated.
5. Key Features of Performance Evaluation 5.1. It is a continuous process
Performance Evaluation system is a continuous, on-going, and never ending process. It starts with setting goals, observing performance, giving coaching and counseling, identifying development needs, and giving feedback for continuous improvement.
5.2. It is a strategic process
It is also considered a strategic process as individual goals are linked with the strategic goals of the organization.
5.3. It is an integrated process
Vertical Integration: It aligns business objectives with individual and team objectives.
Functional Integration: It links functional strategies in different parts of the business.
HR Integration: It links different parts of human resource management with the organization development and rewards.
5.4. It isconcerned with outputs and processes
Performance Evaluation System is concerned with outputs i.e. achievements and results. But it is equally concerned with processes that are required to achieve these results.
5.5. It is functions through proper planning ahead to achieve future success. This means defining expectations expressed as objectives and business plans.
5.6. It is concerned with measurement and review
It is tightly said, if one can measure then one can manage it.
Performance management is concerned with the measurement of results with reviewing progress towards achieving objectives as a basis for action.
5.7. It creates culture of development and improvement
Performance Evaluation system is concerned with creating a culture in which organizational and individual learning and development are related with each other. It provides means for an integrated learning and work. It also encourages facing day-to-day challenges in a more efficient manner.
5.8. It is concerned with effective communication
It is done by creating climate in which a continuous dialogue between managers and the members of their teams take place to define expectations and share information on the organization’s mission, values, and objectives. This also establishes mutual understanding of what is to be achieved and also helps in achieving and developing a framework for managing and developing people to ensure that it will be achieved (Armstrong and Murlis, 1994).
6. Employee Evaluation
Though often understated or even denied, evaluation is a legitimate and major objective of performance appraisal.
But the need to evaluate (i.e., to judge) is also an ongoing source of tension, since evaluative and developmental priorities appear to frequently clash. Yet at its most basic level, performance appraisal is the process of examining and evaluating the performance of an individual.
Though organizations have a clear right - some would say a duty - to conduct such evaluations of performance, many still recoil from the idea. To them, the explicit process of judgment can be dehumanizing and demoralizing and a source of anxiety and distress to employees.
It is said by some that performance appraisal cannot serve the needs of evaluation and development at the same time; it must be one or the other.
But there may be an acceptable middle ground, where the need to evaluate employees objectively, and the need to encourage and develop them, can be balanced.
Employee evaluation data can be used in variety of spheres- 6.1. Recruitment and Induction
Evaluation data can be used to monitor the success of the organization's recruitment and induction practices. For example, how well are the employees performing who were hired in the past two years?
It can also be used to monitor the effectiveness of changes in recruitment strategies. By following the yearly data related to new hires (and given sufficient numbers on which to base the analysis) it is possible to assess whether the general quality of the workforce is improving, staying steady, or declining.
6.2. Promotion
Performance evaluations provide a look at how and what a worker is doing compared with earlier reviews of her skill sets, knowledge, initiative and participation in the company vision.
This record reflects whether an employee is prepared to assume greater responsibility. If, for example, multiple candidates are vying for promotion, but there's only one slot to fill, a supervisor must justify his choice by pointing to specific examples of outstanding achievement and professional readiness.
6.3. Compensation
Employers want to feel they're getting their money's worth just as much as workers want to see fatter paychecks with each year of loyal service. While government jobs often have step increases for designated classifications, as well as across-the-board raises predicated on state budgets and aggressive union negotiations, private employers base compensation decisions on individual merit and the company's financial performance. Evaluations are used to assess whether an employee deserves a salary increase based on achievement and accrued seniority as well as whether a lump sum bonus is appropriate for solving problems and attracting new business.
6.4. Training Needs
If an employee is struggling with tasks or lagging behind quotas, the problem could be the quality of training he received. Ignoring skill deficiencies can jeopardize a company's attainment of its goals. An evaluation that reveals the need for remedial instruction also defines a time line to revisit the worker's progress.
It's likewise a means for employees to request classes to groom them for additional responsibilities. When management demonstrates a commitment to help employees do their best, it doesn't just contribute to company morale--it also elevates individual self-esteem. According to leading HR expert Donald Kirkpatrick in "Improving Employee Performance Through Appraisal and Coaching," a supervisor's role in evaluations is akin to a sports coach in recognizing her team can't win unless every player can perform in peak condition.
6.5. Disciplinary Action
In a perfect world, every employee would be hard-working, reliable, honest and enthusiastic to excel. Not everyone, however, may be as wedded to an organization’s expectations of commitment and success. Performance evaluations constitute a legitimate paper trail in administrative and legal proceedings to prove employee negligence, willful disobedience, harassment or criminal behavior. According to Barry Silverstein's "Best Practices: Evaluating Performance: How to Appraise, Promote, and Fire," written documentation is generally more effective than verbal reprimands in addressing underperformance issues and poor attitudes.
6.6. Career Goals
Although an evaluators primary goal is to gauge whether a worker is a good fit for that company, it serves a larger purpose of helping individuals determine if they've chosen the right career paths.
The feedback a worker receives regarding strengths and weaknesses is invaluable in charting a future course in which the company and worker can put her interests and talents to the best use.
6.7. Motivation and Satisfaction
Performance Evaluation can have a profound effect on levels of employee motivation and satisfaction - for better as well as for worse.
It provides employees with recognition for their work efforts. The power of social recognition as an incentive has been long noted. In fact, there is evidence that human beings will even prefer negative recognition in preference to no recognition at all.
7. Why Performance Evaluation Systems Fail
The importance of performance management system is understood in an organization from the very beginning. Still, performance management systems fail as many managers and executives are not committed enough to providing performance feedback to their employees on a timely manner. The reason behind this is the process itself is a very time consuming and cumbersome and it makes managers uncomfortable. There are various factors that are highlighted by the managers as to why they find the process difficult.
Process is too complicated
No impact of job performance
Possible legal challenges
Lack of control over process
No connection with rewards
Complexity and length of forms Common Rating Errors
There are different common errors that are observed while rating employees in the organizations.
These are the errors that mis-represent the data or give a mis-leading figures. Armstrong warned that
"appraisers must be on guard against anything that distorts reality, either favorably or unfavorably."
These are different errors as observed during the performance appraisal process and highlighted below:
Central Tendency Error: In this type of error, performance ratings of most of the employees are clustered in the middle, thus, extreme categories are either good or poor are avoided. This is not an acceptable practice, or this is not fair to employees, who are making efforts, rather it is quiet demoralizing.
Favoritism: In this type of error employees are given better ratings who are close to their superiors. Actual performance of the employee is not the only criteria here for getting better ratings.
The Halo Effect: In this type of error if an employee is having a positive work image then there are chances that perception is reflecting in his/her overall rating.
Personal Biases: Allowing your bias to influence the rating. Bias can come from attitudes and opinions about race, national origin, sex, religion, age, veterans’ status, disability, hair color, weight, height, intelligence, etc.
Recency: This is the most common bias that managers have. This is the tendency that the recent performance is always remembered and the final rating sometimes is reflected based on that perception.
Varying Standards: Different managers appraise performance in a different manner by using different standards and expectations. This often results when the criteria of performance are ambiguous and standards are not clearly specified.
Primacy Effect: This is kind of error happens when the information about individual performance obtained first gets the highest weightage in appraisal. This is just opposite of recency effect.
Leniency Error: In this approach, the appraiser rates employees at the higher end of the scale as good performers. In this process, low performers also receive ratings and rates all employees as falling in a narrow range, that is, everyone is average. Even, the poor performers receive an average rating.
Strictness Error: In this case, the rater is very strict or critical about the performance and most of the employees get low ratings.
Similar to or different to me: In this aspect, most of the managers compare employees against their own characteristics. Those employees who are seen as similar to themselves by managers are rated higher.
Sampling Error: In this process, sometimes, only a small number of employees’ work is observed after taking a sample. If the sample is collected wrongly, then there are chances that best performance is not awarded because of the selection of wrong sample.
Contrast Error: Rating only recent performance, good or bad. Data should be representative of the entire review period. If you’re not keeping good notes, you may not remember the whole period. Armstrong noted that "you want to make sure, again, that you’re keeping records so that you can adequately describe performance over an entire performance period."
Common Pitfalls
7.1. Managers are not well trained
Most of the time, it was realized that managers are not trained enough or they are not aware as how to conduct performance appraisal and review in the routine manner, thus they often find difficulty in planning and delivering the effective review process. There is a need to conduct a structured training in such a manner that different practices should be taken care of while conducting an effective performance review, as how to document the whole process, what is to be said, how to say, when and what, all these are important parameters while planning a performance review process. Moreover, the important parameter is how to conduct and prepare a plan for performance review discussions with employees. Moreover, it is observed that managers do not document performance, recognize accomplishments, or deal with poor performance throughout the year, thus this remains an issue. An accurate performance review is important that will make them prepare and will lead towards a better process.
7.2. Performance is not measured accurately
As most of the times, there is variation in terms of measuring performance among the role holders, thus there are chances that the review process gets delayed and managers as not following a standard format commit certain mistakes knowingly or unknowingly. Thus, to have a performance review process, one must follow a practice that is accurate along with must follow a process that is known and acceptable by all.
Unknowingly, managers may be making these biases or rating errors, especially if they are unaware of them. Biased evaluations can lead to perceptions of unfairness, subjectivity, and favoritism which can hurt a performance review's effectiveness and cause employees to distrust the performance management process.
7.3. Casual Attitude
In the absence of objective performance measures, there are managers who are sometimes use vague language such as: "You're doing a great job" or "You could do better," instead of citing specifics in terms of what the employee did well or not well in terms of their performance.
Without knowing the specifics of what their boss liked or didn't like, employees aren't provided with useful feedback that they can use to improve their performance nor do they understand why they didn't receive the pay increase or promotion they wanted, if the review is tied to compensation or advancement.
7.4. Surprise Element to Employees
In today’s time, continuous monitoring and feedback system is followed in most of the organizations. Managers keep an eye on the performance of their employees on day to day basis and provide them valuable feedbacks as what is more important for them.
Many managers hardly bother to know as what their employees are doing and they do not guide them as what is the right way of performing a process.
Some managers never bother to let their employees know when their performance is slipping, and during the performance review, when their employees’ performance is not up to the mark, they become highly critical. And provide them negative feedback mentioning that the employee is a low performer and sometimes, even warn them that they might miss the promotion opportunity, and possibly even a threat of termination.
7.5. Managers themselves do not have a support of solid processes and systems
A systematic performance management systems itself is sufficient enough for delivering a good performance. An organization, which is not having processes or clarity of standards often get trapped with uncertainty and unclear performance. Thus, the system constrain may also sometimes create a problem that is not sufficient to explain the system.
System constraints that can make it difficult for managers to deliver an effective performance review can include:
Conflicting goals
Not having IT based systems and processes
No clear guidelines or timeframes for completion of work
Lack of performance management/developmental activities beyond the review
No training or accountability for managers
In general, managers find the process disheartening as it involves multiple levels of reviews and also they need to collect data from various sources and multiple levels. Thereafter, they have to
analyze the data and identify the inconsistent feedback that can be reconciled. This process requires planning before setting employee goals and communication at each level. An ideal system thus is able to connect the required data from various sources whenever is needed. Here, the pre-condition is that the data should be gathered from different sources along with on a uniform and timely manner. If the information is not clear and complete, there may be little or adverse impact on subsequent job performance. An ideal performance management system collects data about the recent past performance and connects to future plans. In order to achieve the goal, employee’s career aspirations and strategic goals of the organization are also kept in mind. The manager is also responsible to make salary, promotion, and retention decisions also.
It is also important to note that salary, promotion, and retention decisions are made based on performance data, thus, claims of unlawful discrimination may be made by employees who did not feel appropriately awarded. Moreover, one more aspect in this direction is that many managers find that they have very little control over the processes by which they manage their subordinates’ performance. When standards related to expectations of the end results are set by senior management, managers may feel that the process is less than legitimate.
Many of the managers comment on the system that there is no linkage between performance and rewards. In this case employees do not take the performance system or the given goals seriously.
Moreover, it is the tendency that we have a very complex and lengthy system in implementing day to day responsibilities. Thus, managers often find shortcuts that compromise the efficacy and integrity of the overall process.
8. Summary
Performance reviews play a crucial role in managing performance of employees that ultimately reflects in the performance of the organization. If the system is not full proof or having issues related to systems and processes than there are chances that the system does not function as per the requirements of the organization. There is a need to have a system that is known to each employee and should also be transparent. There is a need that the system should work efficiently and the support of employees is needed at each and every level. Employees should be active and should monitor the performance of their manages constantly. Involvement of top managers is also important.
There should be specific guidelines to the mangers as how to rate and evaluate the performance of employees. This will help managers in terms of giving their employees a kind of feedback and rating that will not be having much difference from one person to another.
So we can summarize that the existence of an evaluation program indicates to an employee that the organization is genuinely interested in their individual performance and development. This alone can have a positive influence on the individual's sense of worth, commitment and belonging.
