Literature Review on "Employee Attitudes to Performance Appraisal in Company Xy Limited"

Literature Review 7 pages (2139 words) Sources: 15

[EXCERPT] . . . .

Employee Attitudes to Performance Appraisal in Company XY Limited

The Literature Review section is constructed in a means in which it introduces the reader to the topic of performance appraisal systems and to various dimensions of the issue, such as their definition and history, their applicability within the modern day business climate, but also their flaws. The information onto which the chapter is constructed is collected from a wide array of sources, including mostly books and journal articles, but also internet articles. The first two categories of sources are characterized by the fact that they are peer reviewed and they as such integrate reliable information. A limitation which is however observed is constituted by the fact that the specialized journals and the books could deal with issues which are not up-to-date. This limitation is however acceptable within the current context in which not major developments have occurred to impact the field within the past recent years. Additionally, the limitation is addressed through the integration of more recent data from internet articles.

1. Defining performance appraisal system

In the definition of performance appraisal systems, it is first necessary to make the distinction between performance management and performance appraisal. Quite ironically, the two are often used as synonymous, but they in fact stand for two different phenomena. In this order of ideas, performance management represents the wider area of organizational behavior in which emphasis is placed on communication. On the other hand, performance appraisal represents a system by which managers assess the performances of their subalterns. Michael Armstrong and Angela Baron (2005) explain:

"Performance management is a comprehensive, continuous and flexible approach to the management of organizations, teams and individuals which involves the maximum amount of dialogue between those concerned. Performance appraisal is a more limited approach which involves managers making top-down assessments and rating the performance of their subordinates at an annual performance appraisal meeting" (Armstrong and Baron, 2005).

In light of this information, performance appraisal systems can de defined as mechanisms by which economic agents assess the performances of their staff members. The scope of the appraisals is that of integrating the collected information and supporting a higher quality process of decision making within the organizational climate. At a more specific level, the process of appraisal is defined as follows:

"Performance appraisal may be defined as a formal and systematic process by means of which the job-relevant strengths and weaknesses of employees are identified, observed, measured, recorded and developed" (Erasmus, Swanepoel, Van Wyk and Schenk, 2003).

2. History of performance appraisal systems

Michael Armstrong points out that performance management represents one of the most impressive developments of the past recent years. He reveals that the term was first coined in 1976 by Beer and Ruh, but it was not until a decade later that it would be recognized within the managerial community. But Goyal argues that the first applications of performance appraisal were obvious during World War I, with the application of the manto-man rating system to evaluate the personnel. The system was applied by Walter D. Scott of the United States Army, but it gradually lost popularity (Goyal, 2005). Goel then argues that "the history of performance appraisal is as old as human civilization" and that the first signs of appraisal were obvious in the Wei dynasty in China, between 221 and 265 Anno Domini. But the author does agree that the basis of modern day appraisal were set during the World Wars. At that stage, emphasis was placed on the evaluation of the hourly work of the employees and no emphasis was placed on the evaluation of the managers. An important role in appraisals was played by the trait and personality of the subalterns and the appraisals were as such highly subjective (Goel, 2008).

And during the 1980s decade, the performance management systems were underdeveloped and performing at low standards. In time however, they gained more applicability and turned into omnipresent systems within the business community.

"For crudely developed and hastily implemented performance-related pay and appraisal systems were all too often failing to deliver the results that, somehow naively, people were expecting from them. Performance management rose like a phoenix from the old-established but somewhat discredited systems of merit rating and management by objectives" (Armstrong, 2000).

Today, the appraisal of performance is the result of gradual processes of improvement, through which the evaluation of the staff members has been expanded to wider categories of employees and is based on more elements, aside from personality traits. In spite of the developments nevertheless, the system is far from being perfect and developments are still on the way (Goel, 2008).

3. Applicability of performance appraisal systems

A traditional performance appraisal system is beneficial due to the three specific purposes it serves, as follows:

The provision of adequate feedback to each individual on their performance

The constitution of a basis for the modification of behavior in the creation of more effective working habits, and finally

The ability to present managers with the necessary information on how to judge jobs and propose rewards and distribute assignments (Vroom, 1990).

Overall, the performance appraisal system is not useful and applicable within the modern day society because it assesses the working features, but namely because it allows the firm to use the assessed working features to create positive impacts within the organization.

Traditionally, the performance appraisal systems were applied in order to support administrative decisions. In time however, their applicability increased to also include several other uses, one of the most common of them being the usage of performance appraisal to support organizational efficiency. Also, performance appraisal is useful for organizational planning, for the development of the employees or for the replacement of the staff members.

At the level of administrative decisions, performance appraisal systems play the role of supporting managers in the promotion of the staff members, in the making of the wage decisions and so on. Nevertheless, it is important that performance appraisal be coupled with other decision making tools in order to ensure the accuracy of the decision. Kevin R. Murphy and Jeanette Cleveland (1995) explain:

"The most obvious purpose of a performance appraisal system is as a decision aid. Performance appraisals provide one basis for deciding who should be promoted, terminated, given a raise, and so forth. They are probably not the only basis for such decisions. Promotion decisions may depend as much on a prediction of future performance as on assessments of past performance. Salary decisions may depend as much on market forces as on assessments of job performance. Nevertheless, high-quality performance appraisal systems are an important consideration in making a wide range of personnel decisions in most organizations" (Murphy and Cleveland, 1995)

A review of the online works on the applicability of performance appraisal systems indicates that the assessment of the performances of the staff members is useful due to a wide array of reasons. The lines below introduce the main applications of the performance appraisal systems:

Performance appraisal systems impact the levels of employee satisfaction and they can stimulate an increase in employee morale, which in turn creates higher opportunities to attain organizational goals

Performance appraisal systems create a context in which supervisors can assess the skills and capabilities of the staff members and implement the necessary training programs, to as such support the professional formation of the individual as well as improve the quality of the human capital within the firm (Performance Appraisal, 2010)

Performance appraisal systems create a context in which the expectations and the targets are clearly set and agreed upon by both manager as well as employee (Human Resources HRVINET, 2011)

Performance appraisal systems support the managerial act within the firm by helping identify those individuals with a flair for management

Performance appraisal systems support effective documentation within the firm (Richardson, 2011).

4. Limitations of performance appraisal systems

In spite of the numerous advantages they reveal, performance appraisal systems are complex systems which still integrate several limitations. One such limitation is represented by the fact that they rely on various sources of performance appraisal, and this generates additional complexities (Baruch and Harel, 1993). Goyal (2005) argues that the number one limitation nevertheless remains the existence of bias in the completion of appraisal efforts.

The author as such mentions that in all firms, but even more so, in small size organizations, a relationship exists between the interviewed employee and the interviewer and that the nature of the relationship would impact the evaluation. Additionally, the outcome of the appraisal could also be impacted by the quantity of the work and the levels of productivity, not only the quality of the work. In some instances however, the exact appreciation of the quality or quantity of the work completed cannot be entirely and truly measured, meaning as such that the results of the appraisal could not entirely reflect the reality of the situation (Goyal, 2005).

Other limitations of performance appraisal systems include:

Performance appraisal systems, if inadequately implemented, can be a negative experience for the firm. For instance, instead… READ MORE

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