Critically Evaluate the Potential of Performance Appraisals to Manage Employee Behavior, Motivation and Productivity Effectively

Critically evaluate the potential of performance appraisals to manage employee behavior, motivation and productivity effectively

A performance appraisal can be defined as an intermittent, formal evaluation of an employee’s contributions ( Randhawa, 2007). Performances Appraisals (PA) have been widely researched and continue to be used in a variety of business organisations in providing a basis for HR Practices (Iqbal, 2012). Motivation, conduct and performance of the employees can be viewed as essential tools for the sustainable success of any organization (Cobre, 2013). This essay will evaluate the potential of PA to effectively manage employee ‘behaviour, motivation and productivity’. It shall argue that the competency based scheme can be viewed as the most effective PA method for this management. It will however ultimately conclude that the overall success of a PA is largely dependent on a mutual commitment to the set scheme from both the manager and employee. It shall further argue that Motivation, productivity and behaviour usually express a strong positive correlation and can therefore be assessed as one factor where appropriate. The essay will first outline the most common PA schemes and general practices hypothesising that they are implemented as intended. It will then investigate the rating and assessment methods of PA in the context of the schemes and will finally explore pitfalls of PA strategies.

Behaviour, Motivation and Productivity will be considered separately with analysis based on their own merits, however it is important to recognise throughout this critique that evidence suggests a strong link between the three factors, specifically with regards to the impact of increased motivation on productivity (Cobre, 2013). Additionally, Sullivan (2011) argues that in order for an employee to increase their productivity a behaviour modification is likely to occur. Therefore one specific outcome may be considered with the context in mind of a likely knock on or corresponding effect on the non-described factors.

There are two different methods to rate employee performance using a PA scheme; Relative and Absolute testing. Relative performance evaluates an employee’s conduct against other employees using a rating system of traits or behavioural dimensions. Gibbons and Murphy (1990) suggest that Relative performance evaluation provide employees with a motivation to perform well and consequently increases their productivity. Whilst in theory this may be the case, in practice, increased competition and a motivational shift to perform better than colleagues may create undesirable behavioural changes such as less collaboration and team play. This is in turn may hinder the overall team performance and therefore the relative employee productivity. Lexicon (2017) supports this view suggesting that the method can encourage workers to engage in behaviour such as sabotaging the efforts of co-workers and hiring incompetent co-workers. By way of contrast, Absolute Testing uses a predetermined job standard to compare the employee performance to. Chimoriya (2016) suggests this is seen as more fair than Relative testing and so motivates the employees to be more productive if they feel that their efforts will be recognized and rewarded. Absolute performance can consequently be deemed as more effective than relative performance when utilized efficiently, specifically in a team based environment (Woolf, 2015).

People who carry out PA vary in their observations of its purpose, intended consequences and nature of application (Murphy & Cleveland, 1995). With this theory in mind it can be seen that there are a variety of different PA schemes.

As Zarzana (1995) describes the Objective Setting scheme uses the MBO methodology to assess whether agreed goals have been met. It contradicts the suggestion that PA practitioners are generally guided by the notion of ‘what is’ rather than ‘how it should be’, instead It aspires to increase desired employee behaviours and work practices by providing high but realistic aims to fulfil (Iqbal, 2012). It may however restrict employee productivity if a goal is achieved, as motivation may not be present to perform above the objectives. To combat this companies are increasingly using ‘Stretch Goals’ to ensure employee consistency and help create a results orientated culture, which under Adler (2014) can be consequently seen as a more productive environment for employees. This ensures employees maintain high levels of motivation to succeed where this culture is embedded.

Like the Objective Setting scheme the Self-Appraisal method can also uses Absolute Assessment, however is more reliant on the honesty and full participation of the employee; they are required to complete a self-assessment report to then be used to measure their progress. This allows reflective thinking and hence has the potential to allow an employee to better understand how they work and where their strengths and weaknesses are (Swan, 2008). Thus allowing increased productivity in the workplace and enhanced behaviour, as they are theoretically able to recognize where and how to better utilize their work and interpersonal skills. It may also be more useful where managers are have limited time that they can commit to the PA. It does, however, lack an in depth outside perspective, which may limit its effectiveness as it is dependent on the self-critique of the said employee.

Rating Scales PA uses specific job traits as categories to assess an employee’s performance. The desired effect is to understand the shortfalls of an employee so that they may be more productive in areas assessed as lower. A scoring system may also provide an employee with more motivation to gain a higher score next time (Performance Appraisal Rating Scales, 2015). However, selective perception, which is the human tendency to make prejudiced valuations of what a person is "really like" and then pursue evidence to support this whilst ignoring evidence that might oppose it, may result in inaccurate and therefore less useful PA. (North, 2016) Additionally, managers may also be reluctant to rate their subordinates constantly low/high which may affect performance and motivation if the accuracy is limited. Managers may also have a central tendency which can deem a PA inefficient as it has not identified key strengths or weaknesses. Therefore, with an average score employees are likely to lack motivation as well as the ability to modify behaviour and performance methods; to target the weaknesses and enhance strengths, as these have then not been fully identified, so limiting overall productivity ( Sahota et al., 2011). These errors are a particular issue when using the Relative testing as it may not be a fair comparison due to appraiser marking variations and ‘errors’. Consequently, this may result in the demotivation of the employee and undesirable behaviour. This scheme therefore has less potential to successfully increase employee motivation, productivity and behaviour particularly using Relative testing.

Similarly to rating scales, a Competency Based assessment may also use a score system however it uses feedback sources that extend beyond just the manager and employee. It aims to provide an accurate and nonbiased assessment of an employee. It is therefore more useful in providing relevant and applicable advice, so enabling the employee to be more productive. In one study, when using a multi-feedback system, the reliability coefficient increased from 0.52 to 0.8 (Moonen–van Loon et al., 2015). As Smither et al. (2005) suggest, valuable and accurate feedback improves learning behaviour and motivation, learning may then consequently increase employee productivity as the employee becomes more efficient. Additionally, the all rounded assessment may also result in a larger amount of motivation of an employee to perform well consistently- no matter who they work with or for- due to the need to impress a range of people. This scheme is susceptible to the same pitfalls as the Rating Scales scheme, though due to the use of multiple sources creating a combined perspective, despite the increased cost and time of this scheme, it is less prone to these errors and hence likely to provide a more accurate representation and so consequently increased employee motivation, productivity and behaviour. This can be seen as the scheme that offers the greatest potential for success, because it limits the human scaling errors and bias that may allow inaccuracy; it can also be appropriately used with Relative or Absolute methodology.

Although, as shown, there are a number of different and specific PA schemes there are a several emerging trends that are more widely used across the schemes to ensure PA is successful in increasing employee behaviour, motivation and productivity. There is a greater focus on managing strengths not weaknesses. In fact one survey found that strength-based companies realized better employee productivity and consequently better sales and profit. (Lavoie, 2016) This can be seen as applicable across all schemes as ratings, goals or feedback focus may be modified to align to this strategy. An additional trend is that PA are increasingly used to promote or demote employees, often using the relative bell curve methodology (Pimpa, 2005). This system keeps employees under pressure and motivates them to be more productive due to the financial incentive, it is however important to monitor the pressure applied, as too much pressure may result in poor behaviour and low levels of performance (Frey and Osterloh, 2005). This trend can consequently be seen as a key aspect of PA in order to allow them to maximise employee motivation, productivity and behaviour.

Perhaps the most important