American Business


Performance appraisal (performance evaluation)

A performance appraisal or evaluation is a structured, formal interaction between a supervisor and a subordinate in which the subordinate’s work performance is evaluated and discussed. Performance appraisals are primarily used to determine pay raises, as tools to identify weaknesses and develop corrective actions, and as a means of motivating employees to improve their work performance. The performance appraisal evolved out of management specialist Frederick Taylor’s early 20th-century time and motion studies, the goal of which was to improve workers’ productivity. Taylor’s classic study analyzed the output of workers shoveling coal using different-sized shovels. He calculated how much output workers should be able to achieve with the equipment and materials available and then encouraged employers to pay more productive workers at a higher rate than other workers. In the 1940s, performance appraisal began to be recognized as a distinct MANAGEMENT function. It is now used primarily to justify paying some workers more than others and attempts to define and utilize objective standards for evaluation. The alternative is informal evaluation, which can lead to a variety of problems, including arbitrariness, and bias. This discourages motivation among workers who perceive the process to be unfair, and it can lead to legal disputes. With the performance appraisal’s early focus on justifying pay differentials, developers ignored the potential for it to be used as a basis for employee motivation and development. Research showed that although pay for performance often worked, it did not always totally explain employee performance. Self-esteem and morale also contributes to workers’ productivity, but early performance-appraisal systems did not include these considerations. Beginning in the 1950s, managers attempted to move beyond pay-for-performance appraisal systems. Some management scholars suggest performance appraisal must be linked to pay, or workers will not take it seriously. Others argue performance appraisal should be used for development of workers’ potential but not linked to pay. Some organizations use it to identify TRAINING AND DEVELOPMENT opportunities and define supervisor-employee agreements on work expectations, but it is still most often used to determine monetary rewards. The appraisal is also used for promotions, transfers, and LAYOFFs. In the 1990s, Ford Motor Company established a controversial appraisal system, mandating that employees who were consistently ranked the lowest in their part of the organization be terminated. Only after considerable disgruntlement among managerial workers was the system scrapped. Performance appraisal involves two parts: evaluation and feedback. From a supervisor’s perspective, evaluation attempts to identify any performance gaps—that is, divergences between what a worker is responsible for and what they accomplish. From an employee’s perspective, performance appraisal addresses four questions.
• What am I expected to do?
• How well am I doing?
• What are my weaknesses and strengths?
• How can I do better and get rewarded for doing so?
Employers use a wide variety of performance-appraisal methods, including rating scales, essays, management by objective pre- and post-evaluations, and ranking systems. Each method has its advantages and disadvantages and may or may not be appropriate, depending on situation and the appraiser’s skill and integrity. Usually workers’ direct supervisors conduct performance appraisals, which can lead to a variety of issues and situations. One problem is known as the game of feedback- seeking. Some employees frequently seek out informal confirmation from their supervisors that what they are doing meets or exceeds expectations. The supervisor is caught off guard, being asked for an appraisal without the time or often the full information needed to evaluate the individual objectively. When the supervisor does conduct a formal performance appraisal, if the worker receives a less-positive evaluation, he may claim he was “ambushed” by the supervisor after receiving consistently positive signals. Another issue in performance appraisal is a tendency for supervisors not to make critical evaluations or to “fudge” the evaluations, because they fear such appraisals will make them look bad then fear legal action from the employee, or employees will respond poorly. Especially in the United States, where work environments tend to be less formal and where teamwork is valued and promoted, supervisors are frequently hesitant to make harsh judgments about coworkers’ performance standards, since this can be seen as interference with their staff-coaching function. In addition, some supervisors see performance appraisal as wasted paperwork if the upper administration does nothing with the information provided.