Literature Review of Research related to Performance Appraisal

Literature Review of Research related to Performance Appraisal This chapter served as the foundation for the development of this study. An overview of the extensive historical research related to performance appraisal,as well as the theories of motivation related to performance appraisals is presented. 2.1 Performance Appraisal System 2.1.1 Meaning of performance: There are different views on what performance means. According to Brumbrach (1988, cited in Armstrong, 2000): Performance can be actions as well as their consequences. Behaviours originate from a performer and convert performance from a concept to an act. Not just the instruments for results, behaviours are also outcomes in their own right the product of mental and physical effort applied to tasks and can be judged apart from results. The above definition considers performance to be involving both the actions, in other word behaviours, taken during the process in attempting to achieve goals and outputs obtained as a result from the effort. Following this, Armstrong (2000) emphasizes the need for managers to deal with the potential of employees and accomplishments while managing performance. To determine if performance has been achieved, measures have to be developed to appraise the accomplishments and establish the rate at which it has been accomplished. Above all, performance should be about the decision and action taken with available information at any existing situation. 2.1.2 Performance Management System (PMS) Noe et al (2006) define performance management as the process through which managers ensure that employees activities and outputs are congruent with the organisations goals.The concept of performance management has contributed a lot in the development Human Resource Management in recent years. The concept was first coined by Beer and Ruh in 1976. However, it is barely in the mid 1980s that it had been accepted as a distinctive approach. Performance Management is widely being used in organizations so as to obtain the best results by trying to improve performance of the workforce. Goals and standards are being planned well beforehand in order to get satisfied outcomes. 2.1.3 Performance Appraisal System (PAS) Performance appraisal also known as performance review, formally documents the achievements of an individual with regards to set targets. It is a component of PMS. The system has become an essential management tool in todays organizations. Managing employees performance can be said to be as important as any other work that all managers execute during the year. Grote (2002) describes performance appraisal as a formal management tool that helps evaluate the performance quality of an employee. Schneier and Beatty as cited in Patterson (1987) define it as a process which apart from evaluating also identifies and develops human performance. According to Karol (1996) performance appraisal includes a communication event planned between a manager and an employee specifically for the purpose of assessing that employees past job performance and discussing areas for future improvement. 2.1.4 History of PAS The history of performance appraisal is fairly concise. Appraisal really began with the Second World War. It was used to assess results. Dulewicz (1989) says that there is an indispensable human inclination to judge the work of other people as well as ones own work.It can thus be said that appraisal is both unavoidable and universal. Even without the existence of a planned appraisal system, one can have a tendency and find it natural to evaluate the job performance of another easily and subjectively. Performance appraisal was seen in the industry in early 1800. Randell (1994) identified its use in Robert Owens use of silent monitors in the cotton mills of Scotland. The Silent monitors were in terms of blocks of wood with different colours painted on each visible side and it was hung above each employees work station. At the end of the day, the block was turned so that a particular colour, representing a grade of the employees performance, could be seen by everyone. (Weise and Buckley, 1998) Subjective evidence indicates that this practice had a facilitating influence on subsequent behavior. Spriegel(1962) and Weise and Buckley(1998) affirm that by the early 1950s, 61 per cent of organizations regularly used performance appraisals, compared with only 15 per cent immediately after World War II. DeVries et al. (1981) pointed out the primary tool to be the trait-rating system, which focused on past actions, using a standard, numerical scoring system to appraise people on the basis of a previously established set of dimensions. The main tool, used under here was trait rating system. The concept of Management by Objective (MBO) was first proposed by Peter Drucker in 1954. Mcgreror then used it in the appraisal process in the year 1957. He suggested that, employees should be appraised on the basis of short-term goals, rather than traits, which are jointly set by the employee and the manager. Weise and Buckley (1998) affirm that this method was very advantageous as it lead to a transformation of a managers role from being a judge to a helper. It also showed that employees productivity ultimately leads to performance. However, when employees performance was measured on the basis of units, then MBO was ineffective. This lead to new development in the appraisal process and the employees were evaluated on the basis of behaviour based rating. Smith and Kendall (1963) designed the first tool to focus on behaviors and it was the Behaviorally Anchored Rating Scales (BARS). 2.1.5 Modern Appraisal Todays performance appraisal process has evolved into a more planned and formal process. It is used as a means which helps identify and compare employees performances. The appraisals data are frequently being used to review several Human Resources decision. It can determine any need for career developments and trainings. For issues such as raise in salaries, rewards and promotions, employers are more and more making use of the appraisals results. Appraisals have now developed into a regular and intervallic system in organizations, normally carried out at least once a year. When talking about the modern approach to appraisal, the term feedback cannot be ignored. The one-to-one discussion between supervisors and subordinates gives rise to feedback and is referred to as the feedback process. This process can improve communication all through the organization but also it can reinforce employees relationships with their superiors. This is so as the workers have the feeling that they do matter to the organization and that their needs are being taken into consideration. The performance appraisal system has most likely become a future-oriented approach as it aims to improve future performances by considering present problems. 2.1.6 Purposes of PAS The most known purpose of performance appraisal is to improve performance of individuals. Cummings and Shwab (1973) held that performance appraisal has basically two important purposes, from an organizational point of view and these are: 1. The maintenance of organizational control 2. The measurement of the efficiency with which the organizations human resources are being utilized. Still, there are also a variety of other declared purposes for appraisal as per Bratton and Gold (2003) and Bowles and Coates (1993) and some are; improving motivation and morale of the employees, clarifying the expectations and reducing the uncertainty about performance, determining rewards, identifying training and development needs, improving communication, selecting people for promotion, discipline, planning corrective actions and setting targets. Furthermore, Bowles and Coates (1993) conducted a postal survey of 250 West Midland companies in June 1992, where organizations were asked questions pertaining to the use of Performance management in the organization. These questions included the apparent purpose of PA in the management of work, its strengths and weaknesses. Through their survey they found out that PA was beneficial in the following ways: PA was favorable in developing the communication between employer and employee It was useful in defining performance expectations It helped identified training needs. Performance appraisal can thus be used as an effective tool to improve employees job performance by identifying strengths and weaknesses, meeting of targeted goals and providing training if needed. 2.1.7 Techniques of PAS There are several commonly used techniques of performance appraisal as reviewed by Oberg (1972). They are as follows: Essay Appraisal, Paired Comparison, Graphic Review Scale, Weighted Checklist, Person to Person Rating, Forced Ranking, Critical Incidents. The above techniques were the traditional ones but the methods most widely used today are: Management by Objectives Employees are requested to put up their own performance objectives. They are then judged through these objectives by verifying whether they were satisfied or not. However, in many cases organizations themselves set their standards and goals even after consulting employees. 360 Degree Feedback 360 Degree Feedback is a process in which employees receive private and anonymous feedback from the people who work around them. Kettley (1997) says that when an individual receives feedback from different sources of the organization, including peers, subordinate staff, customers and themselves, the process is called 360 degree feedback or appraisal. The employee is then assessed using those received feedback 2.1.8 Feedback Feedback about the effectiveness of an individuals behavior has long been recognized as essential for learning and for motivation in performance-oriented organizations. Ilgen et al.(1979) stated that feedback is considered as an important tool in performance appraisalprocess. Feedback can be a useful tool for development, especially if it is specific and behaviorally oriented, as well as both problem-oriented and solution-oriented according to Murphy and Cleveland (1995). One of the basic purposes of formal appraisal process is the provision of clear and performance based feedback to employees. Carroll and Scheiner(1982) affirmed that some organisations use feedback as a development tool,while in some organizations it is used for merit evaluation and compensation adjustment. McEvoy and Buller(1987),Wohlers and Gallagher( 1990) contributed that feedback is very essential for the employees because it forms a baseline for the employees which help them to get a review of their past perfo rmance and chance to improve their skills for the future. Ashford (1986) says that when feedback is considered as a valuable resource, then only the individuals feel motivated to seek it, which helps in reducing uncertainty and provides information relevant to self-evaluations. There is also evidence that performance feedback (if given appropriately) can lead to substantial improvements in future performance (Guzzo et al., 1985; Kopelman, 1986; Landy et al., 1982) Fedor et al. (1989); Ilgen et al. (1979) identified that it is commonly accepted that negative feedback is perceived as less accurate and thus less accepted by recipients than positive feedback.Furthermore, Fedoret al. (1989) found that negative performance appraisal feedback was less accepted and perceived as less accurate than positive performance appraisal feedback. 2.1.9Views Organisations Employees have on P.A.S Evans (1986) asserts that many employees believe that their promotion or salary increments depend mostly on their performance. Employees therefore are in a dilemma and consider this situation as survival of the fittest. They know for a fact that, their performance will only be taken into consideration at the end of the day. So, in order to grow in the company they need to be proactive towards their work. The feedback the employee receives from his superior, may simply describe the level of performance achieved. Hence, it becomes important for the managers to conduct the appraisal technique correctly. Employees can only accept criticism if it is useful and important to them. Managers should therefore know how to give information regarding progress made in performance and how to present criticism as well. Meyer et.al (1965) carried out a study in General Electric Company where certain points relating to performance feedback was highlighted. In this study, 92 employees were appraised by their managers on two occasions over two weeks. The study was carried out using questionnaires, interviews and observation. The first appraisal highlighted performance and salary while the second one underlined performance and improvement. It was observed that lots of criticisms were pointed out by the managers, which lead to defensive behaviour of the employees. The conclusion of the study was that criticism leads a negative impact on the motivation and performance of the employees. Also feedback sessions designed to improve performance should not at the same time consider salary and promotion issues. Ilgenet. al (1979) add that employees who believe that the appraisal system is under any kind of bias, are most likely to be dissatisfied by their work and can also leave their jobs. On the other hand Murphy and Cleveland highlighted one possible reason for the widespread dissatisfaction with performance appraisal in organization as the systems used by these help neither them nor their employees in meeting the desired goals. Landy et al. (1978), Klasson et al. (1980), and Tang and Sarsfield-Baldwin (1996) found evidence that the assignment of raters influences perceptions of fairness and accuracy in performance appraisals and hence about the whole process itself. Nevertheless, according to Jacobs, KafryZedeck (1980) employees perceive PA to give them a proper understanding of their duties and responsibilities towards the organization. Likewise, organization sees it as a tool to assess employees on a common ground and one which helps in salary and promotions decisions, training and development programs. In many circumstances appraisal plans are interpreted by managers as a system that helps an organization to change regular priorities and usual ways of working and in so doing to alter its strategic direction. Hence, in circumstances where change cannot be attained by managerial proclamation, appraisal takes on the character of an engine of change. When managers look at appraisal from this angle they hope that it will bring about a change in strategic direction and organizational behaviour. Researchers have suggested that reaction to performance appraisal is critical to the acceptance and use of a performance appraisal system (Bernardin Beatty, 1984; Cardy Dobbins, 1994; Murphy Cleveland, 1995). Reactions may even contribute to the validity of a system (Ostroff, 1993). Cardy and Dobbins (1994) suggest that with dissatisfaction and feelings of unfairness in process and inequity in evaluations, any performance appraisal system will be doomed to failure (p. 54). Murphy and Cleveland (1995) stated that reaction criteria are almost always relevant, and an unfavorable reaction may doom the carefully constructed appraisal system. 2.1.10Benefits of PAS Possibly the most important benefit of appraisal is that, in the rush and pressure of todays working life, it allows the supervisor and subordinate to have time out for a one-on-one discussion of indispensable work problems that might not otherwise be addressed. Likewise, the existence itself of an appraisal system indicates to employees that the organization is genuinely concerned with their individual performances and advancement. This only can have a positive impact on the employees sense of worth, commitment and belonging. Appraisal offers the rare chance to focus on employment activities and objectives, to spot and correct existing problems and to enhance favorable future performance. Thus the performance of the whole organization is improved. Performance appraisal usually provides employees with acknowledgment for their work efforts, if any and as a result it brings them satisfaction. Actually, there are facts supporting that human beings will even prefer negative recognition in rather than no recognition at all. During performance appraisals, feedbacks are obtained. These provide vital information on whether training and development needs should be considered. The presence or lack of working skills, for example, can become very obvious. The supervisor and subordinate can thus agree upon any demand for training. As far as the organization is concerned, the overall appraisal results can provide a regular and efficient training needs audit for the organization as a whole. The information obtained from appraisals can also give indication on an organizations recruitment and selection practices. This can be done by screening the performance of recently hired workers. The general quality of the workforce can also be monitored by assessing any improvement or decline performances. Changes if needed in the recruitment strategies can then be considered. 2.1.11Criticisms related to P.A.S There are several problems in the actual performance appraisal primarily due to rater bias. Some supervisors are too lenient and thus have a tendency to rate all employees positively rather than really measuring their performance. Another problem is the central tendency where supervisors position the majority of the employees in the center of the performance scale, even though they deserve a better or worse grade. The halo effect is another error usually made during appraisals. This arises when a supervisors general feeling about an employee influences the overall judgment. Performance appraisal systems are at times criticized for weaknesses in the system design itself. Sometimes they assess the wrong behaviours or consequences, or focus on employees personality instead of on their work performances. Very often standards for appraising employees are not related to the work itself. As a consequence employees may not likely be interested in such a system where performance standards are unsuccessful in highlighting important aspects of the jobs. Some organizations founds that PAS is a constant cause of tension, since evaluative and developmental concerns come often into disagreement. It is said that the appraisal can serve only one of them at a time. Also they find it dehumanize and demoralize to pass on judgments which then become source of apprehension and stress to employees. Many researchers such as Derven (1990) expressed doubts about the effectiveness and dependability of the appraisal process. Some found the process to be imperfect in nature. Moreover, Gabris Mitchell found a disturbing bias in the appraisal process called the Matthew Effect. It is said to take place in cases where employees keep on receiving the same evaluation each year. This denotes that there is the belief that if an employee has work well, he or she will continue on that pace. The Matthew Effect advocates that even if employees struggle to do well, their past appraisal reports will discriminate their future progress. Accuracy is important in appraisals. However for raters to appraise employees accurately, they should give unbiased results. Unfortunately accurate ratings are quite impossible as researchers affirm that personal liking, look, former impressions, gender and race will certainly manipulate appraisals, that is, there will always be some kind of biasness. 2.1.12Conclusion about PAS There are various schools of beliefs as to the validity and reliability of performance appraisals. While Derven (1990) doubts about its dependability, Lawrie (1990) finds it to be the most important aspect of organizations. A recent survey concluded that more than fifty per cent of the workforce wishes that their supervisors list the performance objectives much more specifically and clearly. The same survey revealed that 42 per cent of the employees were rather disappointed their organisations performance appraisal system. Many supervisors make the wrong use of appraisal. They use it as a punitive tool rather than helping their subordinates to improve their performance and overcome work problems. According to Shelley Riebel, as in the Detroit News (April 11, 1998) often managers are unsuccessful to explain what they really expect from their employees and fail to well describe the criteria used for assessing their performance. The data obtained during the appraisal process should be wisely used and considered. Still, for performance appraisal to be successful, it is important to carry it out on a regular and consistent basis. This will allow supervisors to follow and review employees work. Raters often make the mistake of emphasizing too much on mistakes committed by the employees. Rather, if ever some problem is spotted by the supervisor, the issue should be discussed with the employee concerned and both should try work on a solution. 2.2 Motivation Performance Appraisal System 2.2.1 Introduction to Motivation Motivation can be defined as the driving force that moves us to pursue a certain goal, or trigger a particular action. It can be considered as the desire within a person causing him or her to act. People generally act for a motive and that is to achieve a specific objective. Two main types of motivation have been noted, namely intrinsic and extrinsic. Intrinsic motivation comes from the inner self while extrinsic motivation arises when external factors require one to perform something. According to Passer and Smith (2004) the concept motivation refers to a course of action that influences the determination, direction and dynamism of goal-directed behaviour. Similarly, Kreitner and Kinicki (2007) assert that motivation represents psychological practices that stimulate voluntary actions. In the work context, as confirmed by Coetsee (2003), motivation entails the readiness of individuals and groups to put much effort so as to achieve organizational goals. From the above, it can be construed that there exists no single and general definition for motivation. Yet, Boje and Rosile (2004) regard motivation as an authoritarian ideology, a way to manipulate performance and where visions of self-actualisation need gratification. This view might be too negative to consider, but the rise in capitalism has been driven by high concentration motivation programmes which sometimes turn employees into production machines. 2.2.2 Motivation and P.A.S in Organisation Today Motivation can be the key to a successful organization. It is often claimed that the best businesses have the best motivated workers. Well motivated employees are said to be more productive and perform quality work. It remains however one of the most challenged tasks for managers to motivate their staffs as everyone is unique. A supervisor should strive to tie in the companys goals together with the employees individual goals through performance management. Moreover, the whole performance appraisal process and its result can affect an employees motivation. As highlighted by Cummings and Swabs (1973), employees performance is the outcome of the employees motivation to perform. In an organisational context, the performance is appraised by assessing the employees aptitudes and potentials to achieve the set goals. 2.2.3 Theories of Motivation related to P.A.S 2.2.3.1 Edwin Lockes Goal Setting Theory A main element for efficiently coaching employees is by using goal setting. Edwin Locke (1968) introduced the Goal Setting Theory whereby employees get motivated to work for the organisation when they are given specific and pronounced goals to achieve. This theory emphasizes that hard goals produce a higher level of performance than easy goals. Secondly, particular hard goals produce higher level of output and lastly, behavioural intentions lead to choice behaviour. Many, who study the relationship between performance and motivation in organizations, will agree that goal-setting and explanation creates confidence in the workers. By clearly explaining the meaning of the goals, employees will have a clear view on what the organization wants to achieve. Coetsee (2003) affirms that the most performing workers are goal-directed. Set goals allow employees to accomplish organisational vision, aims and strategic objectives. The assumption made here is that when people recognise and understand what is expected from them and how they are to be met, they will be motivated to achieve them within the time-limit. With regard to coaching, goal-setting theory has been used more than any other as a framework to motivate employees to improve their performance. The early work of Maier (1958) and Meyer et al. (1965) emphasized goal setting in the appraisal process. In a study, Latham et al. (1978) found that consistent with the theorys predictions, employee participation in setting the goals resulted in higher performance than assigning them, not because of greater goal commitment, but rather due to high goals being set. According to Dossett et al. (1979), a similar result was observed with Weyerhaeusers word processing employees. Goals and objectives set by the employers and employees should be discussed regularly. Erez (1977) asserted that for difficult goals to result in high performance, sufficient feedback is very important. 2.2.3.2 Behaviour Maintenance Model (BMM) Cummings and Swabs presented the Behaviour Maintenance Model (BMM) to illustrate how people are motivated to perform efficiently in an organisation. This model emphasises on the significance of outcomes in the motivational process. Fig.1: Behavior Maintenance Model This framework shows that goal aspirations results in goal attainment and motivation. When goal attainment is achieved by the employee, it leads to job satisfaction which in turn leads the employee to become motivated. 2.2.3.3 Victor Vrooms Expectancy theory Expectancy theory is an idea that was introduced by Victor Vroom. The theory as explained by KreitnerKinicki (2007) is based on the assumption that people are motivated to act in ways that will be followed by valued and desired outcomes. The theory says that an employee might be motivated when there is a belief that a better performance will result in a good performance appraisal which will help in the realization of personal goals. The theory focuses on motivation as the combination of valence, instrumentality and expectancy. Valence is the value of the alleged result. Instrumentality is the point of view of an individual whether he or she will really obtain what they want. It shows that successful act will eventually lead to the desired result. Expectancy refers to the different level of expectations as well as confidence regarding ones capability. Employees believe that these create a motivational force and this force can be represented by the formula: Motivation = Valence x Expec tancy The theory focuses on three things: à ¢Ã¢â€š ¬Ã‚ ¢ Efforts and performance relationship à ¢Ã¢â€š ¬Ã‚ ¢ Performance and reward relationship à ¢Ã¢â€š ¬Ã‚ ¢ Rewards and personal goal relationship 2.2.4 Conclusion: Performance Appraisal as Motivator? From the above reviews, it can be seen that no such research has been done to show if performance appraisal really acts as a motivator to employees. Bratton and Gold (2003) and Bowles and Coates (1993) claimed motivation to be one of the purposes of appraisals. It remains unconditional to know whether performance appraisal has a role to play in employees motivation. The research will therefore try to answer the following research questions: Does the Performance Appraisal System affect employees motivation? Does the system affect more a specific category of employees? How do employees perceive the PAS at the MRA? How do employees perceive feedback? Does the level of importance given to the system directly affect the employees motivation? Does the trust put on the appraiser influences the employees motivation?