Performance Appraisal

Reasons for Conducting Performance Appraisals

Performance appraisal serves a number of purposes for organizations and human resource professionals. First, results of performance appraisals are used to make administrative decisions, such as salary raises, promotions, and termination. Management also uses appraisal results to provide employees with feedback as to how well they are doing and what they can do to improve. Third, performance appraisal information is used for human resources and succession planning purposes. Finally, organizations use performance appraisal for research purposes, such as validating selection tests and evaluating the effectiveness of training programs.

Measurement of Performance

Job performance can be appraised with several types of measures. Objective performance measures include behaviors, such as absenteeism, accidents, and number of claims processed, and outcomes, such as patient volume, number of products made, and service costs. A main advantage of objective measures is that they reduce subjectivity in the appraisal process. However, such measures are not applicable to many jobs, particularly given the shift from a manufacturing to a [Page 421]service-oriented industry base, such as in the health care industry. In addition, objective counts of behaviors or outcomes are not always complete portrayals of the full range of performance. Finally, objective measures are often influenced by external factors beyond the employee's control, such as illness, equipment breakdowns, inadequate supplies, and cooperation of management and coworkers.

Consequently, subjective judgments are used frequently for appraising employee performance. Typically, supervisors rate an employee's performance along a variety of criteria, including personal traits or characteristics (such as dependability, work ethic), work-related dimensions (such as quality of work, work output), and specific behaviors. Using subjective judgments of work dimensions and behaviors makes the performance appraisal process applicable to a wider variety of jobs, gives the rater the ability to factor in external influences of performance, and can result in a more comprehensive performance assessment.

However, this approach requires a significant amount of time for the rater to observe, review, and evaluate performance. Further, there can be several biases and errors in the subjective appraisal process. For example, a rater may give the same rating to an employee across all work dimensions, regardless of how much the person's performance varies on each dimension. Known as “halo error,” this happens when a rater allows a general impression about the employee to influence ratings on all dimensions. Other biases occur when a rater rates everyone unjustifiably low on the rating scale (“severity error”), unjustifiably high on the rating scale (“leniency error”), or unjustifiably in the middle of the rating scale (“central tendency”). Some raters allow their first impressions of an employee's performance or behaviors to overly influence their ratings (“primacy effect”), whereas other raters overly weight the most recent behaviors (“recency effect”). Finally, performance appraisal ratings can be influenced by the fundamental attribution error. Specifically, this error suggests that a rater will tend to attribute an employee's success to external or situational factors beyond the employee's control, whereas employee failure will be attributed to factors within the employee's control. Failures, then, tend to receive more attention when a rater makes his or her ratings.

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