Performance Appraisal (PA) can be described as a formal process of assessment and evaluation of the employees on an individual as well as group level. The word “formal” is crucial, as it is important that the managers or supervisors review the worker or individual on a periodic basis. Even though, performance appraisal is only an element of performance management, it is very crucial for the success of performance management as it directly relates to the strategic plan set by the organisation. It is critical to evaluate team performance in many organisations where teams exist but performance appraisal in most companies concentrates on individuals. As emphasized, achievements, objectives and strategic plans set for development can be examined and evaluated by an effective performance appraisal system.
Although performance appraisal is somewhat considered as negative, unpopular and managers try to avoid the efficiency it provides. Not many Employers like conducting performance appraisal and workers dislike receiving them especially when it’s negative. Studies suggest that around 80% of workers are not satisfied with the performance appraisal system. Hence, if that is the case, why is it not yet eliminated? The sole reason why performance appraisal should not be eliminated is because it offers various opportunities to improve results and efficiency in an organisation which is important in today’s global marketplace which is highly competitive. Therefore, eliminating performance appraisal would be considered as a risky decision. Avoiding performance appraisal could also cause legal ramifications. Even after all the consideration, development of an effective performance appraisal system will always be an important function in management.
Uses of Performance Appraisal
In many organisations, an appraisal system assists in achieving numerous goals. However, in few firms performance appraisal is used in measuring and improving individual as well as organisational performance. The most common issue with performance appraisal is that a lot is expected from one form of performance appraisal system plan. For instance, a plan that is strategically designed to improve and develop employee skills may not be used in deciding wage increases. Although, if an appraisal plan is well designed it can be used in accomplishing the set objectives as well as performance.
- Human Resource Planning: It is important to record data/information of employees in a firm so that it is easy to identify the potentials of who deserves to be promoted or have any area to improve. Performance appraisal also helps in revealing if there is insufficient number of workers. An appraisal system should be designed and planned after considering the strengths and weaknesses of the HRM of the organisation.
- Recruitment and Selection: Through the process of performance analysis, organisations can determine the performance potential on an applicant. Studies show that successful employees display specific behavioral traits while performing tasks. The data processed through performance evaluation help in setting standards for behavioral interviews. In the process of selection, the employee rating can also be used as a variable against which test scores are compared.
- Training and Development: Training and development is crucial for any employee as it acts as way to communicating what is expected and how. Performance appraisal helps in drawing attention to these specific needs of training. For example, if an employee’s job involves the skill of creative writing and by the process of evaluation it reveals that he or she lacks in it or has poor knowledge about it, the employee will need appropriate training sessions. When managers of a firm lack the capability of administering disciplinary action, they need the necessary training to deal with this problem. Hence, identifying deficiencies and obstacles can be overcome by training and development sessions which develop and improve individual’s skills allowing them to perform better. An appraisal process does not train and develop individuals but determines the training needed by providing data.
- Career Planning and Development: Career planning can be described as a never-ending cycle in which an individual sets profession goals and means to achieve them throughout his or her lifetime. However, career development is a more formal approach used by organisations. It involves recruiting suitable qualified and experienced people when required. Performance appraisal can determine an employee’s potential through assessing its weaknesses and strengths. The data is also useful to counsel junior staff member and assisting in career plans.
- Compensation Programs: Performance appraisal evaluations help in making decisions dealing with wage or salary regulations. It is believed that organisations should reward employees with increase in pay when excellent performance is achieved. In order to increase performance, an organisation should implement well planned and designed performance appraisal systems and award the efficient workers. This not only increases performance but also keeps employees motivated to achieve better in future.
- Internal Employee Relations: Performance appraisal evaluation can provide crucial information used in making decision about the internal employee relations i.e promotion, demotion, transfers and dismisses etc. For example, performance appraisal data are also used for decisions in several areas of internal employee relations, including promotion, demotion, termination, layoff, and transfer. Also, an employee’s performance in one job may be useful in determining his or her ability to perform another job on the same level, as is required in the consideration of transfers. When the performance level is unacceptable, demotion or even termination may be appropriate.
- Assessment of Employee Potential: Some organizations attempt to assess an employee’s potential as they appraise his or her job performance. Although past behaviors may be a good predictor of future behaviors in some jobs, an employee’s past performance may not accurately indicate future performance in other jobs. The best salesperson in the company may not have what it takes to become a successful district sales manager, where the tasks are distinctly different. Similarly, the best systems analyst may, if promoted, be a disaster as an information technology manager. Overemphasizing technical skills and ignoring other equally important skills is a common error in promoting employees into management jobs. Recognition of this problem has led some firms to separate the appraisal of performance, which focuses on past behavior, from the assessment of potential, which is future-oriented.