The Purpose of Performance Appraisals, Edwards Deming Business Management Expert - Literature review Example

Performance appraisals (Institution) (Name) (Course) (Module) (Instructor) August 18th 2009 Abstract Performance appraisal is a management concept that has been heavily misunderstood and used in the wrong way. Ranking of employees using supervisors views on the subjects and is prone to bias. It sets employees against one another while employees tend to forget their core duty in employment and concentrate on impressing their seniors to obtain favorable ranking. However, when performance appraisal is approached in the right manner, the results are impressive both on individual employee productivity and overall performance of the organization. Introduction Edwards Deming is a renowned business management expert. In many forums, he has shocked his fellow management experts in denouncing employee performance appraisals terming them as detrimental. On the other hand, there are those adamant in the belief that employee performance appraisal are beneficial to organizations management. The mainstream literature seems to be in support of performance appraisals eager to record how effective the procedure is. However, the modern approaches to performance appraisal do not display the characteristics that Deming seems to be against. This paper will thus seek to show that the traditional approach in performance appraisal that heavily relies on numerical ranking of employees, has a negative impact and at the same time show that modern approaches to performance appraisals lead to better performance of employees and organizations through a review of existing relevant literature on the subject. Deming's view of performance appraisals may be said to be over rated. However, there exist a number of other business executives and management experts and authors who tend to be in congruence with his views. Falcone and Sachs (2007) write that performance appraisals have a common misconception in that their sole purpose in the workplace is to “inform employees how their performance has been rated.” Berger (2008) concurs with this misconception and says that a contemporary performance appraisal operate on the basis of absolute comparison by assessing how employees perform as compared to set goals and objectives. According to the same authors, (Falcone & Sachs, 2007), a performance appraisal is a work session between employer or senior staff with the junior staff aimed at making plans for the future. Berger (2008) also says that if managers could only impart performance appraisals on their employees in the right way then, the procedure would be sufficient enough to deliver feedback, manage organizational talent and play a significant role in making good compensation and rewards decisions. However, traditional managers, more so where there is a vertical organizational chart and making of decisions and flow of authority is from top downwards, are not ready to lose their “respect” by interacting with their subjects. Berger (2008) says that organizations with an organic structure have higher success rates in implementing performance appraisals. She (Berger, 2008) says that the backbone of performance appraisals is excellent communication between the senior management and other employees of the organization. She dismisses the traditional way of appraisal where managers “lecture” employees without hearing them out. Approaches to performance techniques This paper will limit the study to two main techniques as below a) Collaborative techniques – (management-by-objectives, work planning and review, 360° appraisals, peer review, etc). These methods are assumed to have a higher success factor than traditional methods and specifically the subjects crave for achievement and have higher ambition. Collaborative approaches are designed to help develop an organization’s human resources. They lay emphasis on smooth communication, on matching goals and objectives between managers and junior staff. These methods are habitually viewed to be more accurate and fair because of the involvement by junior staff with an obligation to the system and its goals. b) Numerical approach- (numerical ranking). This method relies on awarding of point to employees regarding their performance in certain areas. Due to the fact that some work out is immeasurable, supervisor’s perception so employees is used. The traditional methodology of performance appraisals gives a lot of weight to the past instead of the future (Berger, 2008). Deming's view of performance appraisals seems to have been from this traditional way of performance appraisals which tend to assess employees’ performance against a set standard through the achievements of set goals and targets. According to Berger (2008), this system tends to rank and yank employees leading to a lot of politicking in the office and resentment. As human beings, managers tend to be angry or rather harsh towards non performing employees setting the same mood and perception for other employees. In the long run, such performance appraisals lead to poor performance and lower productivity of employees and the organization as a whole. However, Berger, (2008) and Falcone and Sachs (2007) agree that performance appraisal carried out in the right way have lead to improved performance and higher productivity. Different experts (Falcone & Sachs, 2007; Murphy & Murguiles 2004) have highlighted a number of benefits gained by an organization after implementing successful performance appraisals on other employees as follows employees learn about their own strengths and their weaknesses new goals and objectives are agreed upon by the management and the employees participation of employees in goal and targets evaluation strengthening of the manager-employee relationship restructuring of work teams if necessary depending on past performance renewed interest in the organization in the present and in the future training needs are identified quality issues discussed without incurring expenses managers gain confidence in reviewing employee performance organizational issues such as work flow impediments are discussed in such meetings thereby saving valuable time it cultivates a sense of belonging for employees by appreciating the fact that they get listened to instead of following orders all the time. Murphy and Murguiles (2004) however, give conditions for the achievements of the above “Clear instructions and training for performance raters. Performance-rater familiarity with the nature and importance of job duties on which employee is being rated and with the employee’s actual performance Use of an appraisal system that is as job-related and understandable as possible. Precautions against improper bias by performance raters. Some additional level of review and signature beyond the performance rater. Some amount of monitoring to ensure uniform approach or application of the standards in the performance system. Employee right to review and comment. Employee signature to signify reading of review but not necessarily agreement with any rating. Employee right of appeal if the system is oriented toward that. Whether the system is numerical and traditional, or collaborative, some means to ensure specific and mutually agreed-upon goals. Some statistical evaluation for adverse impact.” Murphy & Migueles, 2004) The relationship between managers, supervisory employees and the rest of the employees is to a large extent based on monitoring. Simple management tasks such as assigning duties, setting pay and making hiring and firing decisions are carried out based ion the performance of workers. The nature of work determines how productivity and performance can be assessed allowing it to be informal or formal (Brown & Heywood, 2007). Brown and Heywood (2007) quote Jackson and Schuler (2003) who say that the most common method of monitoring is a formalized performance appraisal system. They (Jackson & Schuler 2003) define performance appraisal as “evaluating performance based on the judgments and opinions of subordinates, peers, supervisors, other managers and even workers themselves.” This approach had psychometric properties and prone to error (Brown & Heywood, 2007). Heslin, Latham and VandeWalle (2005) asses the effectiveness of performance appraisals through the Implicit Person Theory based on a psychological standpoint. The Implicit Person Theory is founded on the assumption that personal attributes can be altered through a number of measures in order to induce a change in behavior of a person, in this context employee. This implicit theory is further divided into two, incremental and prototypical. The archetypal IMT assumes that personal traits are unchanging entity while the incremental IMT assumes that personal traits are comparatively impressionable. Studies have bent on showing the impact of the incremental theory on an organizational context on aspects as self control, resilience o their self efficacy following setbacks and multitasking abilities. However, Heslin et al (2005) note that the results might be biased due to the fact that the same tests have not been carried out to assess the impact of the same theories on managers' judgment and perception of their employees. Heslin, et al (2005) quote Manzoni and Barsoux (1998) who argue that managers, who have experienced poor performance in their employees, might be hyper vigilant expecting subsequent cases of poor performance and therefore very high chances of bias. Abdullah, Rose, Salleh and Kumar (2007) recognize employee training and development as another form of employee performance appraisal which takes a different definition from the contemporary one as of reviewing and evaluating employee performance. In their paper, they take the study of Malaysia as a country and discuss the government’s involvement in employee training and development in the country’s manufacturing industry. Increased demand for both skilled and unskilled labor fueled by the country’s rapid economic growth spurred the government into preparing the country’s labor force for the industry through the Human Resources Development Act of 1992 (Abdullah et al 2007). The Malaysian government collaborates with organizations through sponsorship to run performance appraisal systems such as the Retrenched Workers Training Scheme. In fact in 2004, the Ministry of Human Resources allocated RM1.72 billion for of retraining and upgrading workers’ skills. This the government considers performance appraisal as an investment the same way that companies invest in their human resources through reward and compensation programs. Much attention has been given to equipping employees with ICT skills. Could this be the secret behind the country’s rampant economic growth in the last two decades? The answer to the question will be given later in the paper. Edwards Deming’s position in employee performance appraisals returns in this study. A case in point is highlighted by Scholtes (2004) who gives a case study of Marshall Industries, a distributor of industrial electronic equipments, in his book pertaining to how the Deming’s view influenced the company’s performance appraisals. Robert Rodin, CEO of Marshal Industries was a firm belief in performance appraisals until he read about Deming’s view on the practice. Scholtes (2004) writes that prior to 1990, Marshall Industries had employee performance evaluation, rating and publicly displayed the ranks of employees, management objectives, sales promotions, quotas, incentives, contests and all other gimmicks that the company viewed would drive up sales. However, a seminar with Deming marked a change in this process in Marshall Industries. The company abolished all the performance evaluation systems and rankings, banned incentives and quotas and all employees were put on salary and profit sharing alone. The company also eliminated promotions and contests in light of Deming’s view that performance appraisals were short sighted. This dramatic change within a year saw the company increase sales from $530 million to $1billion though turnover went down by more than 50%. Consequently, one wonders do employee performance appraisal systems really hold back the potential of organizations? Only when implemented in the wrong manner (Scholtes, 2004) Kuvaas (2006) argue that, although the significance of employee performance evaluation is widely and generally acknowledged it is usually a setback for organizations and often materialize insuperable in view of the very large amount resources, both financial and human dedicated to the evaluation process. Scholtes (2004) quotes Al-Athari and Zairi (2002) who say that studies in the USA shows that companies spend an estimated $30 billion annually on employee training programs and only 10% of that amount is dedicated to evaluation. Many authors recognize evaluation as the most difficult HRD task through it not i impossible. Scholtes (2004) quotes Kirkpatrick (1994) who says that performance appraisals are aimed at assessing how employee training ad learning affects behavior at the workplace and how the organization benefits from such changes. Scholtes (2004) says that Kirkpatrick (1994) expresses doubt on how to measure the intrinsic and extrinsic value of employee training that more often than not accompanies performance appraisals. Guidelines to a successful performance appraisal system The goal of the performance appraisal system is a critical issue in employee and organization (Scholtes, 2004; Falcone & Sachs 2007) management though the manner in which it is conducted determines whether the results are negative or positive (Abdullah et al, 2007). Performance Appraisal should be established as a regular process to be introduced in the company’s management but not a random evaluation that seeks to achieve a spot-check analysis on employee productivity and performance. As aforementioned, such an approach may create rivalry and kill teamwork spirit more so if the numerical approach is used. Many companies are anxious to introduce employee performance appraisals but the process of drafting one is not carried out carefully enough and the end result is that they over estimate the benefits of their performance appraisal system (Murphy & Murguiles, 2004; Falcone & Sachs 2007). Employee performance appraisal systems should be directed at specific goals rather than having a multipurpose direction. In many modern organizations, performance appraisals are expected to fulfill are directed to achieved a few if not all of the following functions – employee feedback and response, training/coaching, goal setting, skill development, pay and compensation determination, legal documentation, employee comparison and ranking and layoff or promotion selection. According to Murphy and Murguiles, (2004), this is not achievable. Scholtes (2004) gives proposes three systems that will encompass a successful employee performance appraisal systems namely Career counseling Career ladders Education assistance Career counseling Scholtes (2004) defines this as counseling in career opportunities. He says that career-mindedness is one of the many goals individuals possess in different spheres of their lives. Various occurrences determine one’s urge for ambition and advancement in his/her career in the workplace. As such, assistance in career planning should be provided by managers who are interested in developing their human resources (Scholtes 2004; Patton & McMahon, 2006). Career counseling is founded on career theory and counseling theory. The Systems Theory Framework (STF) is the most efficient theory that is used to explain and develop career counseling (Patton & McMahon, 2006). This theory relies heavily on the individual system which tends to assume the Implicit Person Theory holds. The individual systems states that a person does not live in isolation and hence his environmental (geographic location, political decisions etc) and social perceptions impact on how he/she visualizes his career growth and development. The STF appreciates the diversity in career development as a vibrant progression through time as influenced by various factors. All these influences will impact on an employee’s decision in career matters with reference to in time i.e., past present and the future (Patton & McMahon, 2006). Changes in the labor market have been instrumental in creating the necessity for career counseling. Traditionally, employees offered a job for life to employees with only minimum training in career perspectives, then called vocational guidance being offered (Scholtes, 2007). Intermediate approaches in career counseling tended to strive at matching wishes and knowledge about self with knowledge about the world of work. In the modern workplace, the elements of career counseling have been maintained although a number of theories have been incorporated in order to add relevance (Milkovich, & Newman, 2002). Scholtes (2004) also notes the influence Deming has made on General Motors in regards to career development. He says that the Power train Division of General Motors in Detroit adopted an appraisal program proposed by Deming that was devoid of the traditional appraisal methods as described earlier. The new development program was based on non conventional ideas; employees always want to be at their best and in control their development. The earlier career counseling plan was based on one on one conversation with employees and their supervisors on career matters. The new program had three main values a) allowing employee to asses themselves b) assumed that the supervisor is not a reliable source of feedback and c) employees had control of their careers. Scholtes (2004) says, although overshadowed by time, the model adopted by GM remains a good a example for organization that are keen of career counseling and employee performance appraisals. On the other hand Berger (2008) says that employers fear the results of career counseling as it might “open” their employee’s eyes into seeking better wages or even move to greener pastures. Career ladders This a defined promotion schedule showing steps of possible progression from entry level to the highest with possible stipulated requirements for each upgrade. How employee’s wishes should be respected as some of them fear upgrade due to increased challenges and responsibilities at their designated positions. Education assistance In the modern workplace environment, employees encourage their employees to attain better skills in order to enhance the performance of the organization as whole. On the other hand, employees are motivated into seeking better skills and furthering their education in search of self satisfaction, better remuneration and promotion among a number of several motivating factors. As such, organizations as beneficiaries of employee skills have a moral obligation to support their staff in furthering their education and gaining additional skills out of the workplace (Gilley, W., Eggland, & Gilley, M. 2002). Scholtes (2004) writes that organizations such as GM have been active in sponsoring their employees on courses and even paying employees on educational leaves. It is on this note that organizations partner with institutions of higher learning in sponsoring high performing students. On a larger, scale governments like earlier mentioned in the case of Malaysia have contributed towards equipping their employees with knowledge by supporting their education. As a performance appraisal program then, it can be deduced that the education the labor force in Malaysia has played a significant growth in ensuring the country’s economic growth. Conclusion Deming’s view of performance appraisal is correct to some degree. It has been shown that some approaches in performance appraisal do actually lead to what Deming says as “nourishes short-term performance, destroys long-term planning, builds fear, demolishes teamwork and fosters rivalry and politics in the workplace.” On the other hand, performance appraisal can be employed in developing an organization’s human resources whose performance can be turned into a competitive strategy. This is more applicable to organization in the service industry that re more reliant of the people factor in their operations. References Abdullah, H., Rose, R., Salleh, A., and Kumar, N. (2007) Measuring and Managing Performance Improvement in the Manufacturing Sector European Journal of Social Sciences, Vol. 5, No. 1, pp 157-166 Berger, D. (2008) The Compensation Handbook, edition 5, (New York: McGraw Hill) Brown, M. and Heywood, J. (2007) “Performance Appraisal Systems: Determinants and Change,” British Journal of Industrial Relations, Vol 43, No 4 pp. 659–679 Falcone, P and Sachs, R. (2007) Productive performance appraisals edition 2, (New York: AMACOM) Gilley, W., Eggland, A. and Gilley, M. (2002). Principles of Human Resource Development, 2nd edition (Cambridge, Perseus Publishing) Heslin, P., Latham, G. and VandeWalle, D. “The Effect of Implicit Person Theory on Performance Appraisals,” Journal of applied psychology 2005, Vol. 90, No. 5, 842– 856 Kuvaas, B. (2006) “Performance appraisal satisfaction and employee outcomes: mediating and moderating roles of work motivation,” The International Journal of Human Resource Management, 1466-4399, Volume 17, Issue 3, 2006, Pages 504 – 522 Milkovich, T. and Newman, M. (2002). Compensation 7th edition. (Boston: McGraw-Hill Irwin). Patton, Wendy and McMahon, Mary (2006) The Systems Theory Framework Of Career Development And Counseling: Connecting Theory And Practice. International Journal for the Advancement of Counseling Vol. 28, No. 2 :pp. 153-166 Scholtes, P. (2004). The leader's handbook: making things happen, getting things done (New York: McGraw-Hill) Read More