AN EVALUATION OF PERFORMANCE APPRAISAL TECHNIQUES ON EMPLOYEE MOTIVATION
ABSTRACT
The study provides an appraisal of performance appraisal techniques on employee motivation. It analyses the nature of performance appraisal, performance appraisal techniques and the nature of employee motivation. The research seeks to determine the effect of performance appraisal technique on employee motivation. It seeks to conduct a case study on the Akwa ibom state civil service to determine the effect of performance appraisal technique on employee motivation.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The long term success of an organization is related to its ability to measure how well its employees perform within a predetermined period, and how effectively, it uses that information to ensure that performance meets set standards, and also improves over time (Fisher, Schoenfeldt and Shaw, 2003). Grote (2000) refers to this process as performance management, and describes it as a handy umbrella term for all organizational activities involved in managing people on the job. Performance management helps to direct and motivate employees to maximize their efforts on behalf of the organisation; it is thus an essential instrument for an organization to meet its strategic objectives (Werner, Schuler, and Jackson, 2012). Performance appraisal (PA) is that part of the performance management process in which an employee’s contribution to the organization, during a specific period is assessed.
According to Mullins (2002), the underlying objective of PA, is to improve the performance of the individual employee, thereby leading to improvement in the performance of the organization as a whole. PA is one of the ranges of tools that can be used to manage performance effectively, in that it provides data which feeds into other elements of the performance management process. As noted by Mathis and Jackson (2008), a PA system is often the link between additional pay and rewards that employees receive, and their job performance. PA can improve motivation and performance, but if used inappropriately, it can have disastrous effects (Fisher et al, 2003). For PA to be effective, it must of necessity be anchored on the performance criteria that have been outlined for the job. Riggio (2003) describes performance criteria as the means for determining successful or unsuccessful job performance. They are one of the products of a detailed job analysis. Performance criteria spell out the specific elements of a job and make it easier to develop the means of assessing levels of successful or unsuccessful job performance. It can thus be inferred that an appraisal system not hinged on this all important criteria, can neither be appropriate nor fair, particularly to the employee, whose performance is being evaluated. In fact, some key points in the arguments of those opposed to performance appraisal is that, most of the time, wrong things are rated and the wrong methods used (Deming, 1986; Gilliland and Langdon, 1998). Situations arise whereby only some selected job elements are evaluated or given preference or higher points above other job elements in which the employee was equally engaged during the review period. This calls to question the fairness of the appraisal system and its ability to effectively produce the desired outcomes. Mickerney (1995) underscored the intricacy of PA by describing it as a difficult and complex activity which is often not performed well by many organizations. The end result of this is that it produces exactly the opposite effect to those intended (Coleman, 1995).
1.2 STATEMENT OF THE PROBLEM
In Nigeria today, the general state of poverty makes economic reward a very important reason why people go out to work, thereby making money to rank highly as a critical motivator (Muo, 2007).This situation has made it imperative for Nigerian workers to pay particular attention to human resource (HR) practices which have direct bearing on their financial rewards and social status. One of such HR activities is performance appraisal (PA), which is the focus of this study. A major outcome of PA is promotion and its attendant increase in financial benefits plus enhanced professional and social status (Tessema and Soeters, 2006; Shahzad, Bashir and Ramay, 2008). Performance appraisal outcomes tend to have high motivational impact and are a major determinant of employee performance. It must be emphasized that an effective performance appraisal system is one that takes cognizance of all the components of an employee’s job performance, and does not focus on selected ones. If used effectively, PA can improve motivation and performance, but if used inappropriately, it can have disastrous effects (Fisher et al, 2003). For PA to be effective, it must of necessity be anchored on the performance criteria that have been outlined for the job which in many case is overlooked. Riggio (2003) describes performance criteria as the means for determining successful or unsuccessful job performance. They are one of the products of a detailed job analysis. Performance criteria spell out the specific elements of a job and make it easier to develop the means of assessing levels of successful or unsuccessful job performance. It can thus be inferred that an appraisal system not hinged on this all important criteria, can neither be appropriate nor fair, particularly to the employee, whose performance is being evaluated. In fact, some key points in the arguments of those opposed to performance appraisal is that, most of the time, wrong things are rated and the wrong methods used (Deming, 1986; Gilliland and Langdon, 1998). Therefore the problem confronting this research is to appraise the effect of performance appraisal techniques on employee motivation.
1.3 RESEARCH QUESTIONS
1 What is the nature of performance appraisal technique
2 What is the nature of employee motivation
3 What is the effect of performance appraisal technique on employee motivation
4 What is the nature of performance appraisal technique on employee motivation in the Akwa Ibom state civil service.
1.4 OBJECTIVE OF THE STUDY
1 To determine the nature of performance appraisal techniques
2 To determine the nature of employee motivation
3 To determine the effect of performance appraisal technique on employee motivation
4 To determine the effect of performance appraisal technique on employee motivation in the akwaibom state civil services
1.5 SIGNIFICANCE OF THE STUDY
The study shall provide a conceptual and analytical appraisal of performance appraisal technique and its effect on employee motivation. It shall serve a veritable source of information to managers and human resource professionals.
What Is a Performance Appraisal?
When employees have goals, they tend to be more motivated if they also receive feedback about their progress. Feedback may occur throughout the workday, but many organizations also have a formal, companywide process of providing feedback to employees, called the performance appraisal. A performance appraisal is a process in which a rater or raters evaluate the performance of an employee. More specifically, during a performance appraisal period, rater(s) observe, interact with, and evaluate a person’s performance. Then, when it is time for a performance appraisal, these observations are documented on a form. The rater usually conducts a meeting with the employee to communicate performance feedback. During the meeting, the employee is evaluated with respect to success in achieving last year’s goals, and new goals are set for the next performance appraisal period.
Even though performance appraisals can be quite effective in motivating employees and resolving performance problems, in reality, only a small number of organizations use the performance appraisal process to its full potential. In many companies, a performance appraisal takes the form of a bureaucratic activity that is mutually despised by employees and managers. The problems a poor appraisal process can create may be so severe that many experts, including the founder of the total quality movement, Edward Deming, have recommended abolishing appraisals altogether.Carson, P. P., & Carson, K. D. (1993). Deming versus traditional management theorists on goal setting: Can both be right? Business Horizons, 36(5), 79–84. On the other hand, creating and executing an effective appraisal system actually leads to higher levels of trust in management.Mayer, R. C., & Davis, J. H. (1999). The effect of the performance appraisal system on trust for management: A field quasi-experiment. Journal of Applied Psychology, 84, 123–136. Therefore, identifying ways of increasing appraisal effectiveness is important.
Giving employees feedback is not synonymous with conducting a performance appraisal, because employees may (and should) receive frequent feedback. The most effective feedback immediately follows high or low performance. Therefore, waiting for a formal process to give feedback would be misguided. A formal appraisal is often conducted once a year, even though there are some organizations that conduct them more frequently. For example, there are advantages to conducting quarterly appraisals, such as allowing managers to revise goals more quickly in the face of changing environmental demands.Odiorne, G. S. (1990, July–August). The trend toward the quarterly performance review. Business Horizons, 38–41. Conducting appraisals once a year has the advantage of being more convenient for managers and for effectively tying performance to annual pay raises or bonuses.
What Is the Purpose of a Performance Appraisal?
Performance appraisals can be important tools to give employees feedback and aid in their development. Yet feedback is only one reason why companies perform appraisals. In many companies, appraisals are used to distribute rewards such as bonuses, annual pay raises, and promotions. They may also be used to document termination of employees. Research shows that performance appraisals tend to be viewed as more effective when companies tie them to reward decisions and to terminate lower performers.Lawler, E. E., III. (2003). Reward practices and performance management system effectiveness. Organizational Dynamics, 32(4), 396–404. This is not surprising in light of motivation theories such as reinforcement theory, which indicates that behavior that is rewarded is repeated. Tying appraisal results to rewards may lead to the perception that performance is rewarded. However, if performance appraisal ratings are not accurate, it is possible for appraisals to be a major cause of reward unfairness.
Who Is the Rater?
Traditionally, the rater has been the supervisor. Supervisors have more at stake when an employee is not performing well and they have access to greater resources that can be used to improve performance. However, relying solely on supervisors may lead to a biased appraisal system. Many aspects of a person’s performance may remain hidden from managers, particularly in team-based settings or organizations where supervisors do not work in the same physical setting as the employees. Therefore, organizations are introducing additional raters into the system, such as peers, customers, and subordinates. As organizations become more flat, introducing more perspectives may provide richer feedback to employees in question. Organizations using supervisors, peers, subordinates, and sometimes even customers are using 360-degree feedback. In this system, feedback is gathered from all these sources, and shared with the employee for developmental purposes. It is important to note that 360-degree appraisals are not often used in determining pay or promotion decisions and instead are treated as feedback tools. Using 360-degree feedback in reward decisions may be problematic, because individuals may avoid giving objective feedback if it means causing a peer to lose a bonus. Since not all feedback will necessarily be positive, if competition or jealousy exists among peers, some feedback may be retaliatory and too negative. Keeping these problems in mind, organizations may benefit from using only supervisor ratings in reward decisions and using feedback from other sources for developmental purposes.Toegel, G., & Conger, J. A. (2003). 360-Degree assessment: Time for reinvention. Academy of Management Learning and Education, 2, 297–311.
What Makes an Effective Appraisal System?
What are the characteristics of an effective appraisal system? Research identified at least three characteristics of appraisals that increase the perception that they are fair. These characteristics include adequate notice, fair hearing, and judgment based on evidence. Adequate notice involves letting employees know what criteria will be used during the appraisal. Unfortunately, in many companies the first time employees see the appraisal form may be when they are being evaluated. Therefore, they may be rated low on something they didn’t understand was part of their performance. Fair hearing means ensuring that there is two-way communication during the appraisal process and the employee’s side of the story is heard. Judgment based on evidence involves documenting performance problems and using factual evidence as opposed to personal opinions when rating performance.Taylor, M. S., Tracy, K. B., Renard, M. K., Harrison, J. K., & Carroll, S. J. (1995). Due process in performance appraisal: A quasi-experiment in procedural justice. Administrative Science Quarterly, 40, 495–523.
Absolute Rating versus Relative Ranking Appraisals
As a student, would you rather be evaluated with respect to some objective criteria? For example, you could get an A if you correctly answer 90% of the questions in the exam, but would get a B if you answered only 80%. We are calling this type of appraisal an absolute rating because the grade you get depends only on your performance with respect to the objective criteria. The alternative to this approach is relative ranking. In this system, you would get an A if you are one of the top 10% of the students in class, but you would get a B if you are between 10% and 20%. In a relative ranking system, your rating depends on how your objective performance (test grade) compares with the rest of the students’ grades in your class.
If you say you would prefer an absolute rating, you are not alone. Research shows that ranking systems are often viewed more negatively by employees. However, many major corporations such as General Electric Company (GE), Intel, and Yahoo! Inc. are using relative rankings and truly believe in its advantages. For example, Jack Welch, the former CEO of General Electric, instituted a forced ranking system at GE in which 20% of employees would be in the top category, 70% would be in the middle, and 10% would be at the bottom rank. Employees who are repeatedly ranked at the lowest rank would be terminated. Relative rankings may create a culture of performance by making it clear that low performance is not tolerated; however, there are several downsides to rankings. First, these systems carry the danger of a potential lawsuit. Organizations such as Ford Motor Company and Microsoft faced lawsuits involving relative rankings, because employees who were older, female, or minority members were systematically being ranked in the lowest category with little justification. Second, relative rankings are also not consistent with creating a team spirit and may create a competitive, cutthroat environment. Enron Corporation was an organization that used relative rankings to its detriment. Third, relative systems have limited value in giving employees concrete feedback about what to do next year to get a better ranking. Despite their limitations, using them for a few years may help the organization become more performance-oriented and eliminate stagnation by weeding out some employees with persistent performance problems. As long as these systems fit with the company culture, are not used in a rigid manner, and are used for a short period of time, they may be beneficial to the organization.Boyle, M. (2001). Performance reviews: Perilous curves ahead. Fortune, 143(11), 187–188; Lawler, E. E., III. (2003). Reward practices and performance management system effectiveness. Organizational Dynamics, 32 (4), 396–404; McGregor, J. (2006, January 9). The struggle to measure performance. Business Week, 26–28.
Conducting the Appraisal Meeting
A performance appraisal meeting is the most important component of a performance appraisal. After the rater uses the company’s appraisal form to evaluate the performance of the ratee, both sides meet to discuss positive and negative instances of performance. Thus, the meeting serves as the key medium through which the rater gives feedback to the ratee.
