Business and Technology

Performance Appraisal

Lecturer: Mr. Faron Joseph

Students Accountancy Centre
Limited (SAC)
Syllabus D6 and
0 | D7
Page
 Business and Technology – Performance Appraisal

PERFORMANCE MANAGEMENT

Performance management is a means of getting better results by managing

performance within an agreed framework of goals, standards and
competence requirements. It is a process to establish a shared
understanding about what is to be achieved, and an approach to managing
and developing people in order to achieve it. This definition highlights key
features of performance management:
 Agreed framework of goals, standards and competence
requirements – The manager and the employee agree about a
standard of performance, goals and the skills needed.
 Performance management is a process – Managing people's
performance is an on-going activity, involving continual monitoring
and assessment, discussion and adjustment.
 Shared understanding – The goals of the individual, unit and
organisation as a whole need to be integrated: everyone needs to be
'on the same page' of the business plan.
 Approach to managing and developing people – Managing
performance is not just about plans, systems or resources, it is an
interpersonal process of influencing, empowering, giving feedback
and problem-solving.
 Achievement – The aim is to enable people to realise their potential
and maximise their contribution to the organisation's success.

The process of performance management

A systematic approach to performance management might include the

following steps:
 Step 1 – From the business plan, identify the requirements and
competences required to carry it out.
 Step 2 Draw up a performance agreement, defining the expectations
of the individual or team, covering standards of performance,
performance indicators and the skills and competences people need.
 Step 3 Draw up a performance and development plan with the
individual. These record the actions needed to improve performance,
normally covering development in the current job.

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 Business and Technology – Performance Appraisal

 Step 4 Manage performance continually throughout the year, not

just at appraisal interviews done to satisfy the personnel
department. Managers can review actual performance, with more
informal interim reviews at various times of the year.
 Step 5 Performance review. At a defined period each year, success
against the plan is reviewed, but the whole point is to assess what is
going to happen in future.

COMPETENCE AND PERFORMANCE APPRAISAL

Competences are the critical skills, knowledge and attitude that a job
holder must have to perform effectively. Assessing competence is usually
done in a performance appraisal.
The general purpose of any performance appraisal system is to improve the
efficiency of the organisation by ensuring that the individuals within it are
performing to the best of their ability and developing their potential for
improvement. This has three main components:
1. Reward review – Measuring the extent to which an employee is
deserving of performance-related bonuses or pay increases
2. Performance review – for planning and following-up training and
development programmes: identifying training needs, validating
training methods and so on
3. Potential review – as an aid to planning career development and
succession, by attempting to predict the level and type of work the
individual will be capable of in the future.

Benefits to the Individual:

 Objectives are established in relation to the whole organisation so
that the employee knows that they and the organisation are aligned
 Helps to identify key results and timescales
 Compares past performance and future activities against standards
 Basis for performance related pay schemes

Benefits to the Organisation:

 Suitable promotion candidates are identified
 Areas of improvement in labour can be seen
 Communication with employees are improved
 Basis for medium to long term human resource planning
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Appraisal techniques

A variety of appraisal techniques can be used to measure different criteria

in a different ways:
 Overall assessment – The manager writes in narrative form his
judgements about the appraisee. There will be no guaranteed
consistency of the criteria and areas of assessment, however, and
managers may not be able to convey clear, effective judgements in
writing.
 Guided assessment – Assessors are required to comment on a
number of specified characteristics and performance elements, with
guidelines as to how terms such as 'application', 'integrity' and
'adaptability' are to be interpreted in the work context.
 Grading / rating scales – Grading adds a comparative frame of
reference to the general guidelines, whereby managers are asked to
select one of a number of levels or degrees to which the individual in
question displays the given characteristic.
 Behavioural incident methods – These concentrate on employee
behaviour in critical incidents of successful and unsuccessful job
behaviour reported by managers.
 Results-orientated schemes – This reviews performance against
specific targets and standards of performance agreed in advance by
manager and subordinate together.

The appraisal interview

The appraisal interview is an important stage in the process, as it can be

used to encourage collaborative problem solving and improvement
planning. The process of an appraisal interview may be as follows:
 Step 1 – Prepare by analysing any supporting documents
 Step 2 – Interview by selecting an appropriate style (see below)
 Step 3 – Agree plan of action
 Step 4 – Report Complete appraisal report, if not already prepared
 Step 5 – Follow up

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Three approaches: Maier

Maier identifies three types of approach to appraisal interviews. Most

appraisees prefer the third of the alternatives suggested:
1. The tell and sell style – The manager tells the subordinate how (s)he
has been assessed, and then tries to 'sell' (gain acceptance of) the
evaluation and the improvement plan.
2. The tell and listen style – The manager tells the subordinate how
(s)he has been assessed, and then invites the appraisee to respond.
The manager therefore no longer dominates the interview
throughout, and there is greater opportunity for coaching or
counselling as opposed to pure direction.
3. The problem-solving style – The manager becomes a coach and
helper. The discussion is centred not on the assessment, but on the
employee's work problems. The employee is encouraged to think
solutions through, and to commit to the recognised need for
personal improvement.

Problems in practice

Lockett (Effective Performance Management) suggests that barriers to

effective appraisal can be identified as follows:
 Appraisal as confrontation – Many people dread appraisals, or use
them 'as a sort of show down, a good sorting out or a clearing of the
air.'
 Appraisal as judgement – The appraisal 'is seen as a one-sided
process in which the manager acts as judge, jury and counsel for the
prosecution'. This puts the subordinate on the defensive. Instead, the
process of performance management 'needs to be jointly operated in
order to retain the commitment and develop the self-awareness of
the individual.'
 Appraisal as chat – The appraisal is conducted as if it were a friendly
chat 'without … purpose or outcome … Many managers, embarrassed
by the need to give feedback and set stretching targets, reduce the
appraisal to a few mumbled "well dones!" and leave the interview
with a briefcase of unresolved issues.'

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 Appraisal as bureaucracy – Appraisal is a form-filling exercise, to

satisfy the personnel department. Its underlying purpose, improving
individual and organisational performance, is forgotten.
 Appraisal as unfinished business – Appraisal should be part of a
continuing future-focused process of performance management, not
a way of 'wrapping up' the past year's performance issues.
 Appraisal as annual event – Many targets set at annual appraisal
meetings become irrelevant or out-of-date. Feedback, goal
adjustment and improvement planning should be a continuous
process.

360 degree appraisal

New techniques of appraisal aim to monitor the appraisee's effectiveness

from a number of perspectives. Taking downwards, upwards and customer
appraisals together, some firms have instituted 360 degree appraisal (or
multi-source appraisal) by collecting feedback on an individual's
performance from the following sources.
 The manager personally / self appraisal: all forms of 360 degree
appraisal require people to rate themselves. Those 'who see
themselves as others see them will get fewer surprises'.
 The person's immediate manager who would usually do the appraisal
interview
 The subordinates who report to the appraisee, perhaps divided into
groups (upward appraisals).
 Peers and co-workers: most people interact with others within an
organisation, either as members of a team or as the receivers or
providers of services. They can offer useful feedback.
 Customers is someone who uses the output of an employee and
therefore can be internal or external for example if sales people
know what customers thought of them, they might be able to
improve their technique.

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Self-appraisals

Self-appraisals occur when individuals carry out their own self-evaluation as

a major input into the appraisal process.

Advantages include the following:

 It saves the manager time, as the employee identifies the areas of
competence which are relevant to the job and his/her relative
strengths.
 It offers increased responsibility to the individual, which may
improve motivation.
 This reconciles the goals of the individual and the organisation.
 In giving the responsibility to an individual, the scheme may offer
more flexibility in terms of the timing and relevance of the appraisal.

Disadvantages the following:

 People are often not the best judges of their own performance.
 People may deliberately over- (or under-) estimate their
performance, in order to gain approval or reward – or to conform to
group norms.

Upward appraisal

This technique allows the subordinate to rate their supervisor. An

Advantages of upward appraisal include the following:
 Subordinates tend to know their superior better than superiors know
their subordinates.
 As all subordinates rate their managers statistically, these ratings
tend to be more reliable – the more subordinates the better.
 Subordinates' ratings have more impact because it is more unusual
to receive ratings from subordinates.

Problems with the method include fear of reprisals or victimisation. Some

bosses in strong positions might refuse to act, even if a consensus of staff
suggested that they should change their ways.

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