Performance appraisal and performance management are business strategies that have evolved due to their relevance and applicability in modern business environment. In order to understand how the two approaches are related, it is in order to consider the various organizational factors and how they influence business operation. Performance appraisal in the leeway towards implementing performance management since appraisal identifies the needs of managerial interventions to solve organization difficulties. The views expressed by other scholars provide basis upon which relevance of a toolkit for implementation of performance can be achieved. Review of other scholarly studies and how scholars perceive the relevance of such tools as TQM, process focus approach, and organizational behavior of both employees and employers are critical towards the definition of effective organizational performance. This research concludes that performance appraisal in the foundation of formulating management toolkits that would bring organizational change. TQM is an appropriate toolkit in resolving issues affecting performance appraisal.
Any organization or institution has the role of establishing a working process that manipulates resources and workmanship in a way to realize its fundamental goals and aims. All organizations: governmental, non-governmental, and private sector among other organizations undergo continuous changes. An effective organizational management needs managers with relevant skills and experience in a specific practice given the current competitive environment in the service sector. A number of organizations take measures to initiate change in response to innovation needs, market competition, and pressure to perform. However, all the organizations that take initiatives to change, only 30%-40% succeed in achieving their goals (Miller, 2002). This paper explores the relevance of performance management and performance appraisal as best measures to take when performance of a firm dwindles.
Performance Appraisal Theory and Effective Toolkits of Management
Performance appraisal and performance management are important tools that help to influence workforce in a desired and specified manner. They are management practices that if embraced, result into enhanced productivity among workforces leading to the realization of competitive advantage in an organization. According to Chiang & Birtch (2010) appraisal is an integral tool that assists an organization to achieve specific priorities. Indeed appraisal has highly been credited for improving productivity and quality of employees. The authors also add that performance appraisal leads to job satisfaction, commitment and trust (Chiang & Birtch, 2010). Despite importance and concepts being similar in most countries, appraisal suffers from societal norms, values, and beliefs. It is for this reason that it is hard to transfer appraisal practices envisioned and regarded as appropriate in one region to another. Indeed research has confirmed that attributes that are influenced by culture often lead to direct conflict when managerial practices based on one value structure interact with each another (Chiang & Birtch, 2010). This is because every society has its own approach and procedures of conducting appraisal.
Appraisal is normally an indicator of attitudes aimed at individual motivation, performance, and relationship that in most cases are dissimilar from one country to the other. For instance, in the USA it is believed that participation of employee and their feedback provision contain both motivational and cognitive advantage. In China, free and open discussion about performance is rare. This is done under the pretext of protecting the image of Asian countries. In the West, the levels of trust rating by employees contribute significantly to the acceptability of appraisal. Generally, degree of trust placed on appraisal practices also differ from form one country to another. Therefore, for appraisal to be operational and effective it has to align itself with cultural norms, values and beliefs of that particular society (Chiang & Birtch, 2010, p. 1366.)
As noted above, even though a number of intercultural experimental research focus on management practices, performance appraisal has not been widely researched. Scholars have, therefore, appealed for further research that would give thorough elucidation on the earlier findings that would go beyond cross-national settings. The research should be opposed to the current approach on the study that is in most cases non-experimental and focuses on a contracted aspect of appraisal in isolation. According to Chiang & Birtch (2010) further investigation should avoid being predominantly confined to narrow comparison of just a country or between two countries or skewed toward the USA in approach. This will enable performance appraisal to be effective and widely acceptable. As a result, the application, representativeness and even the general contributions of these findings on the international performance appraisal are largely restricted.
All the aforementioned limitations deter the ease of understanding of relevance that appraisal brings forth from theory outside the initial context. Being that the principles upon which performance appraisal are very much dominated by the USA centric, their theoretical importance and relevance in terms of culture that are obvious are really questionable. Up scaling and extending the understanding of the nature in which cultural dynamics influence appraisal, the threshold on equity, expectancy perception on procedural justice are boosted. All these aspects are of essence to the advancement of cross-cultural performance on appraisal theory. As aptly put forward by Chiang & Birtch (2010) extension and replications are important to the building of knowledge and testing of theory. Indeed, lack of a good empirically originated theoretical base in the area of performance appraisal also denies practitioners some guiding principles. The effectiveness and workability in cross-cultural settings is an issue of strategic importance; this is particularly vital at a time when multinational businesses continue to thrive. According to Chiang & Birtch (2010), for more competitive gains, firms venture into embracing and exploiting cultural diversity.
On a theoretical point of view, performance appraisal is a rational, objective, and very systematic method employed by organizations to manage productivity of the workforce. This tool entails a number of attributes, which affect employees. These include reward system, communication, feedback, reaction of employees, fairness cum equity, and trustworthiness among others (Chiang & Birtch, 2010). Appraisal is still stuck in the theory of work inspiration. Equity and expectancy theories suggest that good appraisal in place will guarantee a distinction between good and worse performers and fairly apportion rewards. Proper appraisal also provides a platform for effective communication on work expectation towards desired performance outcome. Apart from encouraging equity and motivating desired outcomes, a proper appraisal can foster a sense of procedural justice if it is fair and clear.
The measures of individual performance and differences have been conventional and the primary focus of carrying out performance appraisal according to the observation of most scholars (Lam & Schaubroeck, 1999). In this regard, the process of evaluation of individual’s performance is both developmental and evaluative and its main purpose is to help in making managerial decisions. The other reason for appraising performance improves the performance of employees and improves their well-being. This has been the traditional way of appraising performance and based on the assumption that individuals have the ability to make informed decisions in a more responsible manner within an organization. Hence, improving the performance of staff would by default improve the overall performance of an organization.
Issues that Constitute an Effective Performance Appraisal
Evaluation of how an employee is effective is critical in determining the movement of a worker from one business organization to another or from one position to the other within an organization. Evaluation of employee effectiveness enables one to “hypothesize about the circumstances in which formal evaluation will likely generate substantial benefits and so justify the cost of establishing and operating such a system” (Brown & Heywood, 2005, p. 661). The issues fall into four main categories as discussed in the following section.
The Characteristics of Employees
Positive impacts of appraisal are likely to be achieved when most employees are on short-term tenures. According to Brown and Heywood (2005), this statement holds when a number of logical factors are considered. This is because employees with an expected long tenure would be motivated by deferred compensation, which in essence increases the cost of dismissing employees. When the cost of dismissal of employees is high, there will be a reduction in the need for an extensive monitoring system.
The second reason is that for a long tenure employee, there is a likelihood of developing huge capital accumulation that is recognized by an employer in order to make it less likely that normal pays will go beyond those in rival organizations. This will reduce the chances that most valuable workers will leave and seek employment in other rival firms; hence, no need to monitor workers. The other observation in the workforce characteristics manner in which early evaluation is conducted takes place when a worker is given tenure. In this regard, a workforce that has a big number of employees at the beginning of their tenure is highly likely to be subjected to performance appraisal as they are all equal.
These characteristics as argued in the logics above recommend that a business leader, manager or employer whose employees have an expected short tenure should engage in a substantive monitoring process that requires a formal performance system of appraisal. Brown & Heywood foresee that, “If the purpose of the appraisal is simply to monitor performance and provide appropriate rewards, we anticipate the appraisal system will be more prevalent for workforces with shorter-tenure workers” (Brown & Heywood, 2005, p. 662).
Women are less likely to get motivated by future rewards in their career ladder because their expected tenure is short. The consequence of this observation is that employers with a huge percentage of women workers have over the times, used short-term reward system with an extensive monitoring framework. On the other hand, men have an expected long-term tenure, for example, in Australia 19.6% of Australian female workforce has tenure running for ten years and above, which is below the 24.4% expected tenure among male workers (Brown & Heywood, 2005). As a result, performance appraisal is likely to be established in a workforce that has a huge number of female workers.
Job Control
The benefits of performance appraisal can only be realized when the workforce is willing to change their performance in order to comply with the demands of a given system of appraisal. In essence, the monitoring of employees can only take play if employees can increase their output level. One way of achieving this outcome is by putting in place managerial systems that encourage workers to carry out their own duty allocation to respond to an appraisal (Brown & Heywood, 2005).
When employees obey an individual of authority, it is typically difficult to determine whether they are taking such actions out of their own will or because of fear of punishment from their superior. Transformational and transactional leadership styles are effective because of their participatory nature. The understanding that is created by the leader with subordinates who believe that they will act in accordance with their leader’s goals generates one’s influence. This is called transactional leadership. On the other hand, other influences of a leader could be transformational because it brings about emotional excitement and inspiration among the subordinates. It is brought about by the relationship that their leader establishes with them, (Wang et al., 2005).
Using transformational leadership, employees become aware of their need to grow and are further motivated to perform better and at higher levels (Wang et al., 2005). A transformational leadership creates change in the subordinates’ beliefs and values, influences their expectations, and provides them with their needs based on the hierarchy of needs. Transformational leadership yields when subordinates eventually become leaders and the leaders become moral agents. Therefore, transformational leadership is the outcome of a leader’s character, the intensity of his beliefs and values, and his ability to express and communicate an influential vision (Wang et al., 2005).
Human Resource Management Practices
Scholarly studies reveal that Human Resource Management (HRM) practices work in unison (Brown & Heywood, 2005). HRM practices that have internal impacts generally increase the performance of firms (Kato & Morishima, 2002). Performance appraisal and employee training among other consultative forums are some of the HMR bundles that affect organizational performance. Job redefinition serves the purpose of employee allocation that in turn improves performance appraisal. One of the responsibilities of HRM is to train workers and this justifies the need for a formal appraisal. “Performance appraisal also seeks to generate improvement of productivity through the monitoring of workers” (Brown & Heywood, 2005).
Organization learning is a sustainable strategy in establishing change in HRM, which ensures that a firm remains competitive in the market (Ellis and Spielberg, 2003). Conventional discussions on organizational learning have always centered their learning process on contemporary discussions in two different ways. The first learning process is based on an organizational framework that borrows ideals from cognition development conjecture, also referred to as meaning-based social construction. The other learning process inculcates development, dissemination, and deployment of knowledge-based methods as main assets of developing learning process in an organization. Process-based organization learning involves conventional methods that organize joint learning sessions despite having different views and dedication. There is a need of exploiting organization learning through “social cohesion and mutual identity visible within communities of practice, and adopt theories recognizing that learning can be generated from tension and negotiation, competition and conflict” (Wu, p. 2).
Structural Factors
The preference of an official appraisal system is likely to attract large economies of scale according to Brown & Medolf (cited in Brown & Heywood, 2005) if measured by employee population. This implies that a small firm with limited number of employees will have high capital cost in appraising performance and to encourage the adoption of a particular appraisal system. On the other hand, cost of capital will diminish in a firm that has a large number of workforce and the resultant benefit of appraisal will accrue to a firm. In addition, larger organizations, in most cases, have long chain of command that decision-making process must follow. This subjects an appraisal system to scrutiny thereby making it more valuable.
Large firms are likely to have problem in internal control and as such, most business leaders prefer division of labor and specialization of managerial tasks. Such a measure could also bring other problems, for instance, the need to ensure that worker productivity at the various levels is maintained.
The Top Quality Management Toolkit
There is a shift from the traditional way of performance appraisal to new and separate measurement systemic tool. The new tool identifies existing links between actions carried out by employees and unit-level outcomes. Total Quality Management (TQM) is one of the modern managerial tools whose implementation is achieved trough teamwork and adjustments in business operation processes. Murphy & Cleveland refute that the focus on individuals to improve performance is disruptive towards achieving organizational performance (cited in Lam & Schaubroeck, 1999). Performance appraisal ought to have positive impact but only if raters are used to design the specific desired outcomes in order to make informed performance observations. The observations should then be used to deliver feedbacks that are in line with the achievement of intended consequences. Lam and Schaubroeck (1999) point out that, “From a TQM or any other system-oriented point of view, performance appraisal is first of all an instrument that facilitates organizational goal achievement” (p. 446).
Implementers of TQM are organization leaders who must work as a unit. The effectiveness of team leadership can be evaluated in many ways. A suitable criterion has the potential to offset multiple leadership benefits in behavior and cognition domains. According to Morgeson, DeRue, & Karam (2010), “Behavioral criteria would include such things as quality and quantity of task performance as well as contextual performance, which could include helping fellow team members or engaging in prosocial behaviors directed toward the larger organization” (p. 30). Leadership role requires that one carries his/her job to the expectations of an organization so that a team’s whole ability can be quantified (Kaiser, Hogan & Craig, 2008).
Bezuijen, van den Berg, Dam & Thierry (2009) investigated behaviors of leaders and how their perceived leadership expectation would affect employees’ engagement in learning responsibilities. They used the Rosenthal’s Pygmalion model in validating their hypotheses. Kierein & Gold (2000) used meta-analytic synthesis to affirm that expectations of organization leaders are related to performance mechanisms in place. Employee learning is an important facet in addressing performance in an organization; hence, the more employees engage in learning activities, the more achievement an organization would realize.
The initiative to develop more relevant management tools in the wake of competition from the globalized economy, business enterprises must look for ways to retain market dominance and market leadership. By adopting TQM, organizations strive to meet new customer demands and survive in the turbulent markets. Modern organizations find conventional employee appraisal measures to be irrelevant in improvement efforts. Firms have generally accepted TQM as a management tool in implementation of operations strategy. However, there are critical factors for proper investigation to minimize the challenges facing TQM. These challenges fall into two categories:
a) Soft quality factors
b) Hard quality factors
Conventionally, soft quality factors relate to issues of policymaking, guarding internal stakeholders’ interests and leadership. Implementing soft factors needs constant redress because they are difficult to put on hold. Hard factors are measures undertaken to ensure soft factors meet their targeted achievement. Examples of hard factors include benchmarks, measuring business performance, and customer and supply management among other. TQM factors need proper mindset for ensuring quality management. As such, it is basic to lay defining role of top management, involvement of employees, and adopting effective tools of the practice on a formidable ground. It is difficult to classify leadership as either hard or soft factor because leadership plays important role both as soft and hard factor.
TQM and Performance Appraisal
The issue identified by Lam & Schaubroeck (1999) is how process focus approach works in appraising performance of organizations. The authors found out in their research that process focus approach yielded more positive effects in performance appraisal than result focus approach in their postulated satisfaction levels, accuracy of the appraisal, general organization improvement, and final achievable results. However, there was no significant result noted on how teamwork and individual performance considerations would help in the evaluation process (Lam & Schaubroeck, 1999). These results are in line with the positive effects associated with TQM and the general support that TQM practitioners have agreed on. Employees derive more satisfaction when a management system that seeks to improve work process indulges their opinions in results evaluation. This is the fundamental ground for further improvement of employees’ performance. In addition, employees are likely to highly rate a process focus appraisal that has unprecedented accuracy level in the evaluation process. They would be more willing to accept the proposed outcomes of such processes. These findings by Lam and Schaubroeck (1999) are consistent with observations made by Taylor et al. (1995) on interactional fairness and how it affects appraisal outcomes. Employee behaviors and attitude are important in creating an all inclusive system that would create favorable working environment for greater achievements in performance.
Managing Performance
Cascading Organizational Goals and Adopting Individual-Centered Goals
A number of scholars have came up with measures of improving performance management systems within business organizations; however, the most effective and comprehensive system to adopt remains a challenge. To change to managerial scene with implementable and popular management tools, Pulakos & O’Leary (2011) proposes the use of four performance management practices. To begin with, the authors propose replacement of organizational goals with the roles of individual workers. Cascading organizational goals help everybody working within an organization is related in the various departments and production units. By mastering the alignments of every section, organization’s operations and priorities are streamlined. The understanding of how interrelated sectors of an organization are is vital in cascading redundancy and work duplication.
The organizational goals are irrelevant in running organization because according to Pulakos & O’Leary (2011), “First, high-level organizational goals are often lofty and broad, which often causes confusion and frustration when managers attempt to cascade them” (p. 148). The second reason to disapprove the use of organizational goals is the time it takes for such goals to be achieved. The process of cascading goals is long, and as such, it is a waste of time, as it requires a series of meetings to be held across organization’s departments. However, changing the management criterion from an organizational goal to individualized system of operation requires plenty of time and calmness to achieve the intended goals. This long time allows the changes in the performance cycle to reach individual levels before the individuals make their own written goals.
Setting SMART Goals
In the modern business environment, the evaluation of employee effectiveness is based on how SMART they are in carrying out their duties. SMART stands for Specific, Measurable, Attainable, and Time-Bound goals that ought to be developed at the initial stages of any given rating cycle. The purpose of the SMART goal is to enhance the performance of individual workers by looking at the expected and adopted criterion of an employee based on individual job specification. In addition, SMART encourages workers to achieve significant results while at the same time removes the impediments to fair subjectivity in the whole process of evaluation. Despite the fact that employers have to communicate critical expectations from employees, it is still flimsy to conclude that “setting formal goals for each employee is the most effective way to accomplish this or that this is even viable for all jobs” (Pulakos & O’Leary, 2011, p. 150).
In jobs where goal setting is easy, there is subsequent technicality in meeting performance requirement as defined in production metrics. This case mostly applies to manufacturing firms. However, in the recent times, there has been upsurge of information and service-based firms that require an added knowledge in the implementation of performance requirements. According to Pulakos, Mueller-Hanson & O’Leary (2008) and supported by Casio (1998), the knowledge service-based jobs have fluid and unpredicted job patterns, which necessitate continuous improvement to remain relevant in their objectives.
Top management in the service-orientated organization is more complex and ambiguous because the management involves substantial amounts and a large number of staff who possess diverse professional skills than a CEO or managing director (Denis, Langley & Pineault, 2000). Before contemplating any move, organization leaders must engage their expertise and structural mechanisms to exercise power. For a new CEO, the process of introducing a new manager should be well articulated. “The coarse-grained archival and survey data used in most studies are ideally suited to testing hypotheses about the precursor and outcomes of succession events, but ill-suited to exploring the process through which leaders become integrated over time” (Denis, Langley & Pineault, 2000, p. 1065). One way of introducing a new leader as suggested by Simons (1994), is through managerial control that conceives leadership as a progressive phenomenon.
In addition, socialization as an integration process does not directly deal with leaders but as means through which a new leader initiates concepts of organization culture within his/her prescribed roles (Denis, Langley & Pineault, 2000). However, in general, the authors conclude that leadership integration borrows the ideals of both the socialization and managerial control to bolster effectiveness of an organization’s leadership. They, however, contend that further research is necessary to validate the propositions (Denis, Langley & Pineault, 2000).
The bottom line effectiveness of SMART goals is to address the needs of the various work demands in organizational setup. In the emerging firms of the modern world, formal goal setting mechanisms would not enhance performance management; unless the firm under consideration is rare job situations in which they can be applied. The recent competency model in appraising performance considers the behavioral performance standards to gauge the applicability of performance management system.
Frames of reference are often learnt and internalized unintentionally from various frames of reference within a given culture. In most cases, frames of reference that complement each other have high chances of being embraced. A frame of reference is a product of mindset and the resultant opinion. Mindset is a set of broad and generalized assumptions that act as a sieve through which the meaning of our experiences is interpreted. The mind has variety of habits such as, for instance, psychological or sociolinguistic, through which life experiences are interpreted. It is out of the mind that humanity would develop various behaviors such as being conservatives, introverts, team player, respectful, inquisitive, egocentric, and judgmental. Comprehensive universal sets of beliefs contribute to worldviews as far as human frames of reference are concerned. It is from these frames of reference that we attain and enjoy values such as sense of steadiness, consistency, self-esteem and identity. These values determine our aspirations, expectations and attitude that direct on how to make judgments. They give direction to specific decisions and actions that automatically follow upon making critical reflections on life experiences.
Monitoring Competencies
Most firms focus on goals that would result in more gains, but an exclusive consideration on results would result in underachievement in performance. This is because attention on how employees accomplish their tasks is given little considerations even though their output yield expected results for a given firm. Amid the fact that one can achieve expected results to boost overall performance of an organization, working under such condition would limit output exhibit ineffective behavior. “Performance that reflects how an employee accomplishes work is typically evaluated by rating their competencies e.g., communication, critical thinking, managing resources, etc.” (Pulakos & O’Leary, 2011, p. 151). Upon introduction of competencies, there were no specific definitions or procedure to direct its use within an organization.
Later, developing competencies were defined in terms of expected performance standards within the various levels of their usefulness. Nonetheless, no single format would apply in all situations with same level of accuracy and error rating. The relevance of standardizing performance is the ability of the concept to communicate what is expected of employees, which in turn increases transparency in the evaluation process.
Process focus approach is effective way of performance appraisal. As discussed, the identification of unique business processes helps in enhancing relevance as employees’ sentiments are taken into consideration. Employees’ concerns are important as they involved in the production processes. Therefore, result oriented goals should be taken into consideration alongside views of the employees. It is important to classify factors in appraising performance as either soft or hard in order to address internal and external factors in accordance with how they affect operation and performance.
TQM is applied in running business organizations as implementation strategy. Though classification of hard and soft factors of TQM is difficult, TQM is a modern way of staffing business operations. Firms need to distinguish their operations as either soft or hard in order to achieve the desired benefits of TQM. A number of organizations apply TQM with different strategies with intention of remaining competitive. Therefore, the success of TQM is majorly is a management responsibility and the behavior of employees towards implementing the new toolkit. Nonetheless, the best approach to adopt in performance appraisal and performance management will be dictated by organization environment, the type of firm and leadership approach adopted by leaders