Designing a Performance Appraisal System - Essay Example

? Designing a Performance Appraisal System of the of the Designing a Performance Appraisal System Introduction The task of management, it is said, is getting work done through other people. The management in any organization is usually entrusted with the task of attaining the goals of the enterprise or its departments by a given deadline, usually a year. Just as an organization plans its costs, revenues and expenses through monthly or yearly budgeting, so also plans are made by the various departments such as sales and marketing, finance, human resources etc. to achieve certain goals over the course of any given year. While the exact nature of the goals may vary, some of the determined objectives would usually pertain to achieving a certain amount in sales, revenues and profits. There should also be measures in place to monitor and control the effectiveness and efficiency of every department. A performance appraisal system is one such management tool that would control the activities of managers, supervisors and subordinates throughout the entire organization. The task of creating and maintaining a performance appraisal system is usually one of the key tasks of the Human Resources Department and is also connected to the performance rewards and compensation system of the enterprise. Assumptions In the given scenario, I am working as an Occupational Psychologist and have been approached by a medium-sized organization called Select. The Managing Director has identified a need for a new performance appraisal system for senior and middle managers only, and he wants me to put together a proposal of how I would get this task done. The organization has 10 senior managers, 50 middle managers and 400 employees. The appraisal system will be conducted twice a year. Last appraisals using the current system were conducted one month ago. Competency frameworks are already available for the roles of senior and middle managers. Literature Review: The Need for Performance Appraisals Let’s face it. All organizations operate in order to achieve certain goals and objectives. There may be short term, medium term and long term goals. Planning the goals and how one would achieve them is one of the most important tasks of the enterprise. Every organization no matter how big or small usually has a recap at least once a year in which it takes account of how well each department, division and how it as a whole has performed in terms of revenues, profits, market share, shareholder value or whatever other measure management deems as necessary and important to gauge performance (Brown, 2001). The truth is that we never know how well or badly we are doing at a certain task until we develop a measurement for it. A performance appraisal system enables us to measure how each employee, supervisor or manager is doing in the attainment of his or her objectives. In such a system, individual goals contribute to departmental goals, which in turn contribute to the overall goals of the enterprise. A performance appraisal or management system is a diverse, well thought out process that seeks to elicit cooperation from the workers in the pursuit and attainment of organizational goals, by using rewards like bonuses, increments and stock options for good performance and punishments or warnings for bad performance. In this way the manager or supervisor evaluates and lets the worker know how he or she is doing on the job (Fletcher, 2004). It has been observed that there are both positive and negative feelings about the initiation of a performance appraisal system in an organization. Employees who are not performing up to the mark and who are warned about their lackluster performance are likely to view the performance appraisal system as a nuisance and react negatively to attempts to correct undesirable behavior and put them back on track. On the other hand, employees who are exhibiting all the positive traits and performance are rewarded for their good behavior and are likely to treat the performance appraisal system as a godsend. They seek to compete with one another as to how much better they can contribute to the goals of the organization. So now we see that some employees may view the performance appraisal system as an Exit Plan for bad performers while others see it as a Developmental Tool for good performance (Fletcher, 2004). But it is better for them to think of the system as fair and just and see it as nothing more than a tool to manage performance. At its best or worst, a performance management or appraisal system would seek to encourage good behavior and punish bad behavior. The simple criterion is whether or not it contributes to departmental and organizational goals (Miner, 2002). What is a Performance Appraisal System? A performance appraisal is a process of measuring an employee’s level of achievement against set goals. This of course means that the goals have been previously set by the supervisor in collaboration with the employee and have his or her assent. Modern appraisal management states that if there is no agreement between the employee and his supervisor, then there must be recourse to a senior manager or the human resources department who will decide whether the goals are realistic and achievable. While the goals must be achievable, they must also have the element of being challenging enough to make the employee exert some effort in achieving the said targets. Historically it has been seen that the first wage incentive schemes were attempts at differentiating between average and above average employees in terms of productivity. So while the average performing employee went home with his regular salary, the above average performers were rewarded with an extra amount based on their extra productivity or output. In time this measure was also used to determine average productivity, and to punish or warn employees who did not achieve this basic milestone (www.performance-appraisal.com). So now the system was complete- it covered above average, absolutely average, as well as below average performers and had a system of rewards and punishments attached to it. Components of a Good Performance Appraisal System Modern management practitioners always maintain, and rightly so, that a good performance appraisal system should be uniformly applicable, just and equitable, and most of all based on the objectives desired by the organization. This is also called Management by Objectives or MBO for short. It is seen that the vision of the higher management is translated into goals or objectives that are set at organizational, departmental and individual employee levels, depending on the tasks or work responsibilities they are entrusted with within an organization. These goals are then discussed with the employee by his supervisor, put on paper and agreed to by both parties. The outcomes desired and the level of performance achieved must also be measureable in no uncertain terms. Sometimes a target for below average, above average and average performance can also be set. A deadline for the achievement of these goals is also set across the whole organization. After this deadline has crossed the manager and the employee get together again to determine how well or badly the employee has done. The employee is marked against each task given, and also overall. This ranking is then shared with the Human Resources Department and tied to the performance and compensation rewards of the enterprise. Statement of Intent in Developing a Performance Appraisal System for Select In the given scenario, the organization called Select has a total of 10 senior managers, 50 middle managers and 400 employees. The Managing Director has identified a need for a new performance appraisal system for senior and middle managers only, and he wants me to put together a proposal of how I would get this task done. It is also desired that the appraisal system will be conducted twice a year. In fact the last appraisals using the current system were conducted just one month ago. The advantage is that competency frameworks are already available for the roles of senior and middle managers, so that will save time instead of developing these anew. As a first step I would try to introduce myself to the entire organization as an Occupational Psychologist and outline my responsibilities through an internal memorandum that will be circulated or emailed throughout the organization. It will be countersigned by the CEO and the Managing Director. In this way I shall have established the required authority and support of top management, which will make people at lower levels cooperate with me in a better way. This will also overcome initial resistance by employees who feel they have been sidestepped for promotions or have been victimized by the last appraisal system. Obviously there is something wrong with the past appraisal system or the Managing Director would not have asked me to design a new system. One good way to get feedback on the good and bad points of the last appraisal system and its implementation is through an Employee Feedback/ Satisfaction Survey. This is a group of questions posed generally to every manager in the enterprise about how they felt about the last appraisal system. This can be formalized and sent to each manager in the enterprise via email. They should be required to fill in their names and designations and reply to the email also electronically within a stated deadline. Sometimes the respondents are encouraged not to divulge or write their names in the survey forms, so that confidentiality is assured. However it is clear that since this is my first communication with the organization, I need to know who feels what so that I can address the issues more directly. At any rate, confidentiality of the respondents must be ensured as I will be working either independently or through the Human Resources Department. Methodology: Tasks, Timelines and Participants Once the deadline has passed, I shall collect and group together all the responses related to the Employee Feedback/ Satisfaction Survey. Then I will look for common issues regarding elements of satisfaction and dissatisfaction within the organization. One of these could be lack of proper goal setting by senior managers, or insufficient discussion with the middle managers. It could be that the problem was highlighted to Human Resources, but never discussed further as a result of which there is employee resentment and lackluster performance. It could be that some senior managers are pressurizing middle managers by setting them unrealistic goals, and then taking all the credit if the goals are achieved but laying the blame squarely on the middle managers for any shortfall. If some of the middle managers are brave enough to highlight these deficiencies, they could be discussed with the CEO and the Head of Human Resources discreetly so that an action plan could be implemented to address these deficiencies. Care must be taken never to involve the errant managers directly; they might resent it and make life more difficult for their middle managers. But the most important part is the positive role that HR can play in the whole process. There may be a need to revamp the whole performance appraisal system because either the lower level managers are not being promoted in time, which can lead to staff turnover, employee dissatisfaction and bitter feelings against the organization, leading to a loss of name and reputation as a preferred employer in the marketplace. Judging the Effectiveness and Efficacy of a Performance Appraisal System Obviously it is now clear that the whole performance appraisal system has to be re-developed from scratch. The first step would be for me to have meetings with the CEO and the Managing Director in which I would outline my plans for a thorough review of the manager level performance appraisal system. As evidence of this I would be able to show the feedback received from some middle managers in the Employee Feedback/ Satisfaction Survey. Once the need has been established, I can arrange meetings with each senior manager separately, determine the goals of each department and then have each senior manager sit down and discuss how he or she has goals set for each middle manager. Where I encounter difficulties or resistance, I can be diplomatic or even have these issues discussed with the Human Resources Department. They can put pressure on the managers to elicit a better response or level of cooperation. I will also be looking at each middle manager’s job description to see that he or she is not being over-burdened or alternatively, favored with respect to the load of work responsibilities being allotted to different middle managers in the same department. Sometimes middle and senior managers can work together to make life difficult for lower level employees while doing little work or giving little support themselves to their subordinates. But as stated the best measure for any performance appraisal system is whether or not it contributes to the departmental and organizational goals of the enterprise (Fletcher, 2004). Another way to achieve manager promotions and feedback for middle level managers would be to subject each middle manager to a 360 degree review. In this instance, the manager gets evaluated from his immediate supervisor as well as his subordinates and peers. In some cases at higher levels there may be evaluation from a regional manager to whom the middle manager has matrix reporting as well. A 360 degree evaluation is comprehensive but often difficult to achieve and evaluate. Personal opinions could dominate over professional evaluations and it is seldom done expect at higher levels or when developing talent inventories for the manager at hand (London & Beatty,1993). Conclusion The timeline for the overall performance appraisal shall be one year, from 01 January to 31 December. However, the final appraisals shall be evaluated and sent in by the end of February in the next year. This will give some time to discuss with top management who they see worthy of being promoted. In some cases it may also result in non-performing employees being put back on probation, where they will be evaluated on how they are doing for three months. In case their performance does not improve, it could result in ouster or forced resignation. The employees could also choose to quit themselves. The annual meeting and the performance rewards would be announced on March 31 each year, for the previous year’s performance. I have developed a five point rating scale for my performance appraisal system, ranging from (1) Outstanding Performer to (2) Above Average Performer to (3) Average Performer to (4) Below Average- Needs Improvement to (5) Way Below Average Performer. Employees in the fourth and fifth category need to be counseled by their managers and the Human Resources Department. If those in the fifth category do not show improvement in 3-6 months, they are sadly on their way out as they are not contributing to departmental and organizational goals. An interim appraisal would also be possible every six months, which would serve as a wake-up call to the employees who are not doing so well, as well as a pat on the back for the employees who are meeting the needs of the enterprise. References Brown, D. (2001). Reward Strategies- From Intent to Impact. CIPD, London Fletcher, C. (2004). Appraisal and Feedback: Making Performance Appraisal Work. CIPD London. Introduction to Performance Appraisal. Online. . Accessed on 11 March 2011. London, M. & Beatty, R.W. (1993). 360 degree feedback as a competitive advantage. Human Resource Management, Vol. 32, pp 353-372. Miner, J.B. (2002): Organizational Behavior-Foundations, Theories and Analyses. Oxford University Press. Read More