Performance Appraisal and its Impact to the Employees and the Organization

Introduction

It is identified that the human resource is one of the most valuable asset of an organization (Kateřina et al, 2013). The overall performance of an organization is almost depending upon the performance by its members (Toppo & Prusty, 2012). Therefore, the performance of the individual employees plays a major role within the organization. The ‘Performance Evaluation’ or ‘Performance appraisal’ are used to determine the levels of the employee within employee’s scope. In addition to that it is identified that the reward decisions are depend on the performance evaluation results of the employees (Kamphorst & Swank,2012). The importance and the effectiveness of the performance appraisal will be discussed for the organization.

Performance appraisal

Performance appraisal is a tool which used by the organization to assess the performance of an employee against the standards and the objectives which defined by the organization. The process of performance appraisal will be helpful to improve the performance of the employees as well as the organization by increasing the productivity, quality and the attitudes of the employees towards the organization (Samuel, 2013). It is recommended to do a performance evaluation or a performance appraisal in every organization for the betterment of the employees as well as the organization (Mishra, 2013). The performance appraisal can be clearly identified as one of the tools that calculate the individual overall contribution to the organization through an assessment (Azeez, 2017).  The performance appraisal methods can be different from one organization to another. Some organizations will use manual methods such as marking the performance on papers and get it approved, and some organizations will use ERP (Enterprise Resource Planning) systems to do the performance appraisal in a digital manner.

The performance appraisal can be categorized as two forms, formal and informal (Kateřina et al). Informal procedure is where the superior monitors the employee during the work process and formal procedure is where the organization follows a systematic method. According to Rao (1985) the important components of a performance appraisal are identified as key performance areas, self-appraisal, performance analysis, performance ratings and counseling (Kolawole et al, 2013). In addition for these components according to Ali and Opatha (2008) states that in an organization there are few dimensions considered in performance appraisal. Those are objectives, policies, criteria and standards, appraisal form and procedure, training of appraisers, feedback discussion interview, and procedure for ensure accurate implementation. The formal performance appraisal will be usually done in few different steps. The first step will be the self-appraisal where the employee himself is giving the ratings. Then the higher management will do a specific interview to measure the ratings of the employees, and the performance appraisal ratings will be reviewed.

As Hornqren (2002) express there should be a better relationship between the organizational goals and the employees’ goals. The performance appraisal process needs to be aligning with this relationship.

Figure 1 – Relationship between organizational goals and employees’ goals

(Source: Ali et al, 2012)

As the above diagram displays the efforts by the individual employee, organizational outputs, organizational goals and the rewards are linked with the performance appraisal. As an example the performance appraisal process of a leading telecommunication organization can be taken. Most of the modern organizations are using ERP systems to do their performance appraisal process. Therefore, with just few clicks an employee can see the overall performance appraisal process and the results with the comments via the ERP system. According to the organization circular No 06/2018 by the acting CEO the major steps which this organization has mentioned for a performance appraisal can be listed as the following image.

Figure 2 – Acting CEO circular No 06/2018

The above plan is for a mid-year performance appraisal. According to the plan the first step is for the self-evaluation. Then there will be an interview where superior checks the performance levels of the subordinate in various categories. Finally, the performance ratings will be updated on the ERP and the employee can see all the comments and the results through the ERP system where the performance appraisal process makes more transparent.

Benefits of the Performance appraisal

The performance appraisal creates a motivation within the employee to develop themselves and to improve their performance (Akinbowale et al, 2013). In addition to that point according to Akinbowale, Lourens and Jinabhai (2013), they state that the performance appraisal can improve the quality of the working life of the employees. According to Hudson (1992) the performance appraisal can be a great tool to gain greater knowledge and to develop better skills with positive attitudes.

According to Paul, Abeguki, Hezekiah and JoyIfiavor (2014) the performance appraisal will be helpful to identify the areas where the employees need to be trained. The competency levels can be decided of each and every employee. Therefore the management of the organization can arrange the training sessions, knowledge sharing sessions for those employees with the data collected from the performance appraisal results.  As the outcome of these well planned training sessions, the performance level of the organization will be increased naturally.

Figure 3 – Outcomes and benefits of performance appraisals

 (Source: Jabeen, 2011)

The performance appraisal will be a strong factor to measure the personal decisions of the employees. The outcome of the performance appraisal will represent important strategic personal decisions which will help the management to get a clear image about the employee (Venclová, 2013)

When it comes for the performance appraisal of the newly promoted employees, the process of performance appraisal will benefits both the employee as well as the organization to capture the performance level and the areas where the employee needs to develop in the new position (Kolawole et al, 2013). This positive factor will be helpful for the management to take better decisions on employer promotions in future aswell.

 Weaknesses found in Performance appraisal

Basically the performance appraisal is used for the betterment of the organization, but there can be drawbacks aswell. According to Samuel (2013) following problems are identified in the process of performance appraisal.

·         Using ineffective forms-

This happens when the performance appraisal is mainly targeted on the popularity or the personality traits rather than focusing the job related activities (Daschler and Ninemeier, cited in Samuel 2013).

·         Compare the employees-

This is something that should not be done. The performance appraisal is based on individual performances with respect to the organization and individual scope as it explained. Therefore comparing one employee’s performance with another employee could be lead to an unsuccessful performance appraisal (Samuel, 2013).

·         Performance appraisal can be affected by the demographic effects. According to De Nisi and Murphy (2017) the performance rating can be affected by the factors such as race, gender, or age.  Further Bass and Turner (1973) have examined the Black-White difference in performance ratings (DeNisi and Murphy, 2017). This is another major weakness that can be found in non-systematic performance appraisals. The outcome of such a performance appraisal will lead the organization in to a wrong path.

·         Negative effect for the employee motivation factor.

In most organizations the reward scheme is based with the result of the performance appraisal process. Therefore according to Toppo and Prusty (2012) the mangers should not give negative judgments on employees as it could be a reason to de-motivate the employees. In that point it is clearly identify that this performance appraisal is somewhat a sensitive factor for the employee and the process should be carried out in a systematic way with minimizing the weaknesses.

Conclusion and Recommendations

The performance appraisal is identified as one of the best tools for the organization to increase the performance of the each employee as well as the whole organization. Most importantly the performance appraisal process needs to be transparent, unless there can be more internal problems within the organization.

As it described above, the performance appraisal is one of the keys which defines reward method or the reward criteria of the employee. Therefore it is clear that the result of a single performance appraisal process might be heavily affecting an employee for the employee’s motivation. An employee needs to have the feeling that he/she is valuable for the organization. Hence, frequent performance appraisals are preferred to measure outcomes.

The performance improvements of the organization and the individual employees are very critical in gaining a competitive advantage in the market (Samuel, 2013). Further, for the statement made by Samuel (2013), in the modern world market, the knowledge and the performance level plays a huge role. Therefore a proper performance appraisal will be a key factor for the success of an organization.

Performance appraisal is a key for the employee motivation as well. Therefore the performance appraisal needs to be more transparent and it should be systematic. The employee should have the capability to trace back his/her performance evaluation process and to get an idea about the way the employee got the performance level. If the employee is not happy about the performance appraisal process and the awarded performance level, it will be a key factor to reduce the motivation of the employee. Therefore if most of the employees were de-motivated with the performance appraisal process, the final negative result will be for the performance of the organization. Therefore it is highly recommended to have a performance appraisal process which is transparent for every employee.

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