Thursday 18 November 2010

Performance appraisal - contribution to organization's performance


Many experts argue that performance appraisals lead to dysfunctional behaviours which may affect organization performance. Examine the claim that HRM practices or policies contribute to an organization’s performance.


Success or failure of any organisation is dependent on the performance of the people working in the organisation. Therefore regular evaluation of the performance of the people working in the organisation is very much important for the survival of the organisation. Such evaluation of the performance of the employees is known as the performance appraisal. In simple words, ‘performance appraisal means evaluating an employee’s current and/or past performance relative to his or her performance standards’ (Dessler 2005; p.310 ). Performance Appraisal is one of important functions of the Human Resource Department.

Though the main purpose of performance appraisal is to improve current performance, it can be used for a variety of purposes such as ‘provide feedback, increase motivation, identify training needs, identify potential, let individuals know what is expected of them, focus on career development, award salary increases, and solve job problems’ (Torrington, Hall & Taylor 2002; p.300). It is one of the Human Resource functions which motivates staff, helps an organization achieve its goals and establish good relationship between managers and staff.


Performance appraisal is significant for every organisation and can provide several valuable benefits to both employees and the organisation. It helps in strategic development of the organisation and helps it gain competitive advantage. Let us now discuss the benefits of performance appraisal that helps in the strategic development of an organization:-

a) Performance appraisal improves the performance of the organisation. It lets the boss and the subordinate develop a plan for correcting any deficiency that the appraisals have uncovered. It also helps in reinforcing the things the subordinate does correctly. The performance appraisal is an opportunity to focus on work activities and goals, to identify and correct existing problems, and to encourage better future performance. Thus the performance of the whole organization is enhanced.

b) Performance appraisal system helps to evolve strategic training programs to equip the employees with necessary skills for job fulfilment. The evaluation may provide ideas for refining established practices or instituting new ones. For example, an appraisal shows that an employee has had a some interpersonal conflicts with other employees, therefore the HR department can pay more attention to interpersonal skills while selecting employees or may encourage employees to attend conflict or communication classes or provide counselling . (

c) Appraisal of performance improves the performance of the employees, by means of the feedback. Although not all employees have the same amount of desire to improve, generally all of them want to know how well they are performing. Therefore employees need feedback. If the feedback is presented in positive and constructive fashion, it can have positive effects on the performance of the employees.

d) Performance appraisal helps in establishing and upholding the principle of accountability. Most organisations wants a alignment of responsibility and accountability in their organisation. Performance appraisal when carried out properly helps in alignment of responsibility and accountability at every organisational level.

e) It helps to appoint who deserves increases, by designing proper policies of compensation. In most organisations, performance appraisal results are used, either directly or indirectly, to determine reward outcomes. In simple words, the appraisal results are used to identify the employees who are performing better and who should get the majority of available merit pay increases, bonuses, and promotions. Similarly , appraisal results are used to identify the performers who are not performing well and who may require some form of counselling, or in extreme cases, demotion, dismissal or decreases in pay.

f) Performance appraisal can have a massive effect on the level of employee motivation and satisfaction. . Motivation and the human basic needs go hand-in-hand. It is thus very important for the organization’s perspective to motivate their employees. The strength and prevalence of this natural human desire for individual recognition should not be overlooked by the employers. The appraisal system give recognition to the employee for their good performance. This social recognition acts as an incentive to the employees and motivates them to work harder. (

g) It assists decisions of employee’s location, in terms of promotions, transferences and separations. These are based on predicted performance or previous ones. The quality of the employees is measured and then they are matched to the jobs for which they are best suited. This is significant for the success of any organization.

h) It aids planning and development of the career of the employees. The performance appraisal actually provides an opportunity to the employees to develop their career in the organisation on the basis of their performance.

i) Assessments can determine that performance is affected by external factors, such as the family, health, finances, and so on. Therefore the organisation can consider those factors and provide relevant assistance.

j) The existence of performance appraisal system sends a signal to the employees that the organisation is genuinely interested in the employee and is closely monitoring its performance. This in turn can have a positive influence on the employees sense of worth, commitment and belonging.

(Mathis & Jackson,2006; pp 335-336)

Performance appraisal helps the organisation gain competitive advantages in the following ways.

· Planning by setting objectives and targets.

· Establishing performance standards.

· Rectifying mistakes and taking action.

· Comparing performance against targets.


Planning by setting objectives and targets

A performance appraisal helps the organisations to adopt a strategy by setting objectives and targets. Performance appraisal process helps the employees to understand the company’s objective. It helps them to set their goals and precisely know what role they play in their work to serve the organization. It also lays down the targets that the employees of the organisation must try to achieve.

Establishing performance standards.

Performance appraisal process establishes the standards of performance to which the employees must conform. This helps the organization to maintain the quality of the work performed by its employees.

Rectifying mistakes and taking action.

When the performance appraisal process evaluates that the performances of the employees has been poor, it indicates the errors in the job design, job analysis information, human resources plans, or other parts of personal management information system which leads to inappropriate training hiring and counselling decisions. Therefore action can be taken to rectify the mistakes by taking necessary actions.

Comparing performance against targets.

Performance appraisal actually compares the actual performance of the employees with the targets assigned to them. Therefore the organisation can actually know the shortfalls and can takes steps accordingly. Its also helps to set future targets accordingly.


We have seen above that performance appraisal plays a significant role in the strategic development of a organization and helps it in gaining competitive advantage. However, in practice the performance process may go against the organization, if not carried out properly. Many experts have argued that performance appraisals lead to dysfunctional behaviours. Not surprisingly, most managers and employees dislike performance appraisals! The major reasons for this dislike include ‘the lack of ongoing review, lack of employee involvement, and lack of recognition for good performance. It is also argued that all performance appraisal systems are so flawed that they are manipulative, abusive, autocratic, and counterproductive’ (Torrington, Hall & Taylor 2002; p.300). However it is important to realize that the deficiencies are not the result of evaluating employee performance rather they result because of the shortcomings of the performance appraisal methods or systems adopted. Therefore it is important for the HR managers that they bridge the gap between the theory and practice. That is, they should make sure that the performance appraisals method adopted must be fair, free of biases, and acceptable to both employees and organisation.