Of all the activities in Human Resources Management (HRM), performance appraisal is arguably the most contentious and least popular among those who are involved though it can provide valuable performance information to a number of critical human resource activities such as the allocation of rewards. Managers do not seem to like doing it, employees see no point in it, and personnel and human resource managers, as guardians of an organization’s appraisal policy and procedures have to stand by and watch their work fall into disrepute. (Bratton J. $ Gold J., 1999).

Employee performance appraisal is carried out within a practical context, which is essentially the day-to-day business of the enterprise. Performance appraisal is commonly perceived to be a key feature of management control and direction wherein the review of employee work performance results in the identification of areas of performance which deserve praise and/or which may need improvement. Without reference to any particular organizational context, appraisal of human performance at work confronts the appraiser with four realities.

First, this activity is inevitable in all organizations-large and small, public and private, local and multinational. This is so for three reasons: (1)Individuals are hired by organizations to perform work needed for the success of the organization; performance appraisal is thus the organization’s way of assessing whether it is getting its rightful due from the individual: (2) individuals differ concerning how well and how conscientiously they do their work: therefore, appraisal is necessary to account for the differences in contributions of individuals: and (3) in today’s legal climate, formal performance appraisal is essential to defend the organization’s negative actions against individuals, particularly those that adversely affect members of minority groups protected by law.(Patten T.H., 1982)

Second, performance appraisal is a serious activity whose conduct is fraught with consequences for both the individual and the organization. From the organization’s perspective, a faulty assessment can result in false positive (rewarding bad performance) as well as false negative (failing to reward good performance) errors. From the individual’s perspective, results of performance appraisal have implications for the future relationship with the employing organizations. In practice, there is a good measure of rational thought and emotional intelligence involved in setting the appraisal system into motion. The key targets to be achieved need to be discussed between employee and manager, so that the former is genuinely able to commit to the challenge. The criteria to be used are frequently a source of discontent, sometimes for both parties. The criteria need to be achievable as well as measurable, and contingency considerations taken into account in case of totally unexpected events affecting the employee’s performance. The criteria employed should be such as to encourage the employee to rise to the challenge, and be neither irrelevant nor over-enthusiastic, both of which can be de-motivating. The criteria are almost certain to contain some element of timing, and here again the need for results has to be balanced against what is reasonably possible in a given time frame. Positive appraisals can result in the renewal of membership as well as promotions, pay raises and other rewards. Negative appraisals, on the other hand, can result in demotions, and even termination of membership. (Murphy K. R. & Cleveland J. N., 1991)

Third, performance appraisal is a complex activity that confronts even the most well-meaning appraiser with a maze of interrelations that frustrate assignment of clean, accurate, and merit-based ratings. Moreover appraisal gets progressively more complicated with the introduction of additional variables and quality demands. Even modest increments in complexity add disproportionately to the challenge. In theory, the evaluation of employee performance might seem to be a straightforward process, but in practice several problems often produce adverse reactions to performance appraisal. McGregor, in his now classic article “An Uneasy Look at Performance Appraisal,” argues that managers are uncomfortable when they are put in the position of “playing God.” This unwanted judgmental role is thought to be one important reason for managerial resistance to performance appraisal processes. McGregor argues that judging the personal worth of another individual conflict with “the respect we hold for the inherent value of the individual “. (McGregor, Douglas, 1957)This argument is advanced by others who, like McGregor, see performance appraisal as creating a situation in which the superior must behave in a “threatening, rejecting, and ego-deflating” manner with those employees judged to deserve criticism. (Likert R., 1959) Yet others, such as Maier, point out that the appraisee can be expected to act defensively when criticized by supervisors. (Maier, Norman R.F., 1958)Take the relatively simple case of the waiter serving food in a restaurant. Customer satisfaction is the result of a large number of variables (e.g. , menu, quality of ingredients used, skills of cooks, coordination among different personnel, physical atmosphere) brought into alignment by a chain of decisions and behaviors involving  the entire restaurant staff as well as the suppliers who furnish the ingredients. To reward or to punish any one person for satisfaction of restaurant customers would be both inaccurate and unfair. As complexity increases, it becomes progressively more difficult to meet the criteria that good appraisal systems need to meet: i.e., observability, measurability, job relatedness, importance to job success, controllability, and practicality. (Cascio W. F., 1991)

The fourth reality is that performance appraisal tends to get entangled in politics of organizations. This is partly due to the complexities of the process, and also to the nature of human organizations. While joining hands to produce a valued output, individuals also compete with each other for a share of the returns of organizational success. (Burns T., 1966) When sitting in judgment on co-workers, therefore, there is an ever-present danger of the parties being influenced by the political consequences of their actions in appraising performance-rewarding allies and punishing enemies or competitors. (Longenecker C.O. et al, 1987)

A critical element influencing the potential success of an appraisal system is the reaction to the system of those persons being evaluated (Carroll & Schneier, 1982; Murphy & Cleveland, 1991). One particular type of employee reaction that has been found to be related to acceptance or rejection of appraisal is the perceived fairness of an appraisal system (Murphy & Cleveland, 1991). Bretz, Milkovich,and Read (1992), in their summary of three large scale surveys of U.S. private sector organizations, identified fairness as the most important performance appraisal issue that organizations face.



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