The problems with performance appraisal
Formal performance appraisals form an integral part of overall performance management programs in many organisations. Indeed, for many decades performance appraisals have been a key method for monitoring employee performance and they often play a major role in promotion or salary increments. However, though appraisals continue to be widely used, there is significant and ongoing debate about the validity of results obtained, as well as their effectiveness in positively influencing employee productivity and performance.
This paper examines performance appraisals in the modern organisation. It discusses the development of performance appraisal theory, the perceived problems with performance appraisal systems as well as the potential performance and productivity improvements that may be achieved with their use. OK!
It is widely contended that many (if not most) organisations conduct regular employee performance appraisals (Gliddon 2004; Varma & Pichler 2007). Thus, it is understandable that there is a very large body of literature around the subject (Schraeder & Simpson 2006). Indeed DeNisi and Pritchard (2006, p. 253) state that ‘performance appraisal has been the focus of considerable research for almost a century’. Yet there is surprisingly little consensus on any aspect of performance appraisals, not merely in terms of how they should be constructed or conducted, but even whether or not they offer any value at all (Connell & Nolan 2004; Waite & Stites-Doe 2000).
When studying the literature and the seeming lack of progress or consensus, it is clear that even on a terminology level, there is significant divergence. DeNisi and Pritchard (2006) define performance appraisal as being a formal evaluation process that assigns quantitative scores to employee performance. The broader term performance management is defined by Dessler (2005) as combining three main activities into one process, these being: goal-setting, performance appraisal and ongoing employee development. However, in the literature the distinction between performance appraisal and performance management is blurred, some authors use the terms indistinguishably (DeCenzo & Robbins 2007) and many authors refer extensively to pre and post appraisal activities such as training and ongoing feedback when discussing appraisal (e.g. Latham & Wexley 1981; Schraeder, Becton & Portis 2007). This complicates study of the area and widens the scope for debate. For the purposes of this paper it is important to refer to the development of both performance appraisal and performance management (specifically where centred on performance appraisal). Good – you set the boundaries…
Several literature reviews have traced the development of the performance appraisal field (Levy & Williams 2004; Schraeder & Simpson 2006). They argue that the field initially focused on measurement issues (including rating methods and scales), developed to include cognitive aspects (including accidental rating errors) and is now developing to include social and organisational contextual factors. However, a review of the literature would seem to indicate that there is ongoing debate on all of these levels, especially the cognitive (e.g. Schraeder & Simpson 2006; Varma & Pichler 2007) and social levels (e.g. Lilley & Hinduja 2007; Shore & Strauss 2008).
On the cognitive level, many sources of rating inaccuracy have been identified and documented. Bernardin and Beatty (1984, pp. 237-253, referring extensively to works by Landy & Farr, Thorndike, Werry, Cooper and others) identify many of the most well known issues including the halo effect (where one trait overrides the perception of others), attribution errors (whether results are due to the employee effort, ability or the situation), memory errors (where the most recent results are recalled) and affect (whether the appraiser...