Traditionally, performance appraisal has been used as the guide for employee performance. Performance appraisal also known as ‘performance evaluation’, ‘merit rating’, and ‘performance assessment’ is a process of recording assessment of employees’ performance, potential and development needs. According to Wayne F Cascio (1995) performance appraisal is defined as “the systematic description of job related strengths and weaknesses of an individual or a group”. Performance appraisal is a system of review and evaluation of an individual’s (or team’s) performance. Lately it has been supplanted in more and more companies with performance management (PM), a more comprehensive human resource management process.
Within the recent past there has been a shift from traditional annual performance appraisal to continuous performance management. The obvious reasons behind this have been the inadequacy of Performance appraisal in serving as a performance enhancement tool. Performance appraisal is known to be a contentious and unpopular activity of Human Resource Management. It is contentious because employees do not readily accept their manager’s assessment about their performance, and managers feel uncomfortable when they have to defend their judgment. It is unpopular because managers do not want to play the role of a judge; besides they have feelings of guilt if their evaluation is critical of their employees’ performance.
There could be other reasons for performance appraisal being unpopular:
- Many a times appraisal is based on hunches, opinions and reflects what appraiser can readily recall since real performance measurement takes time and follow up.
- Employees are often less certain about where they stand after the appraisal than before it.
- Employees don’t know what constitutes performance or what precisely is expected out of them.
- Many a times employees don’t take appraisals seriously because they feel it is an annual or six monthly ritual undertaken by the organization.
With these problems with the conventional performance appraisal, there was a transition in the approach, organizations started moving towards developmental performance appraisal. This led to additions in the definition of performance appraisal also. Fletcher has defined performance appraisal more broadly as activities through which organizations seek to assess employees and develop their competence, enhance performance and distribute rewards. Fletcher holds that as a set of practices (and as a part of performance management), performance appraisal has now become part of a more strategic approach to integrating HR activities and business policies. Later on, a new field of study has emerged in the form of performance management, which is a holistic approach towards management of employee and organizational performance.
Performance management is a means of getting better results from the organization, teams and individuals by understanding and managing performance within an agreed framework of planned goals, standards and competence requirements. It is a process for establishing shared understanding about what is to be achieved and an approach to managing and developing people in a way that increases the probability that it will be achieved in the short and longer term (Armstrong, 1998).
Performance Management becomes essential because most of the contemporary organizations possess some or the other of the following features:
- A diversity of locations, units, programs, projects and specialized disciplines.
- Complex cultural interactions and varied tasks and problems.
- Interdependence and dynamism — what one segment of the organization does, affects the total organization.
- Decentralization and empowerment.
Some of the benefits of an effective performance management system are as follows:
- It creates a culture of excellence in the organization that inspires every employee;
- aligns organizational objectives to individual aspirations;
- equips people with the skills and the infrastructure necessary to perform their duties and imbibes teamwork;
- clears growth paths for specially talented individuals;
- provides new challenges to rejuvenate plateauing careers;
Performance management systems are widely recognized as a key business strategy for driving strong business results. Through goal setting, performance appraisal and feedback, continuous training and development efforts, and performance related pay, Performance Management can help companies incorporate strategy into individual employee efforts and turn their potential into desired results.
Performance management can assist in motivating employees for good performance and can strengthen their commitment to the organization. Furthermore, it can assist in organizational processes that are important to organization’s long term success such as organizational learning, knowledge management, change management and succession management.
Performance management is necessary to develop a ‘performance consciousness’ and it can be used as a powerful employee development tool. Effective performance management makes people aware of where they stand and also helps in retention of star performers. The thrust of an effective Performance Management System (PMS) has been identified as the ability to understand and reinforce the desired work behavior by all employees.
The performance management process links individual job performance to the attainment of organization’s vision, mission and goals. Performance management is a continuous process that involves supervisors and employees in the identification and evaluation of key job performance objectives and competencies that contribute to the achievement of organizational goals. Employees who understand what they are trying to accomplish and how their work fits into the work of the organization as a whole are more likely to perform at a higher level. With this in mind, the performance management process is designed to:
- Provide supervisors and employees with a method to identify individual job performance objectives and discuss their alignment with organization objectives;
- Provide supervisors and employees with a forum for ongoing communication and feedback on the attainment of individual objectives and performance in core competency areas;
- Facilitate the identification of areas for improvement needed by employees to perform more effectively on the job;
- Provide employees with the opportunity to collaborate with their supervisor to develop a personal job performance development plan.
The goal of performance management is to help employees improve their performance and their effectiveness. Performance is the results accomplished by an employee in meeting specific objectives or the development of competencies necessary for effectively doing a job. Performance management is a continuous process of supervisors and employees working together to:
- Set performance expectations linked to organizational objectives;
- Establish criteria against which individual and unit performance can be measured;
- Identify areas for competency improvement;
- Provide performance feedback;
- Continually enhance performance.