Executive Summary
Purpose: To investigate the use of performance appraisal for internal staffing decisions.
Findings: A critical analysis of a number of literatures on performance appraisal was done to come up with the following findings:
Recommendations: Based on the analysis of performance appraisal systems including the challenges and benefits associated with it, some recommendations were suggested for the pharmaceutical company.
First, it was recommended that the company should lay the foundation of performance appraisal based on the strong elements of the traditional method that is, include a method that correctly measures employee performance without being too critical or too lenient.
Second, it was also recommended that the company should focus on continuous evaluation of the performance appraisal system itself to make sure that no biases or discrimination is there. Apart from that, it should also ensure the privacy and security of employees is not put at risk.
Lastly, the company was given the suggestion to introduce the newest performance check-in system instead of the forced distribution performance evaluation or 360-degree feedback because the new system provides continuous feedback to employees rather than waiting for a year to know if they are rewarded or terminated. It gives them an opportunity to review and improve their own performance.
Conclusion: The report ended with the conclusion that despite some of its flaws, using performance appraisal systems could improve and ease internal staffing decisions.
Table of Contents
The report aims to discuss the efficiency of using performance appraisals for internal staffing decisions. In doing so, the report first provides a thorough analysis of the performance appraisal system followed by the challenges and benefits associated with its use. It then provides a list of recommendations for considering whether the system could be implemented in the pharmaceutical company.
Performance appraisal systems are being utilized by numerous organizations to enhance their decision-making skills for internal staffing. Performance appraisal systems are a way to evaluate employee performance across varied performance dimensions in a systematic manner to help organizations retain and recruit the best talent. These appraisal systems are also used to support other organizational support decisions related to compensation, training and development, promotions, transfers and employment termination (SHRM, 2022). The process of performance appraisal generally includes setting of particular and clear expectations for every employee and provision of formal and informal feedback regarding employee performance.
As explained, performance appraisals are a way of reviewing employee performance and their contribution to an organization. The system of reward and punishment is used after appraisal of employee performance wherein the highest performing employees are rewarded and lowest performers are terminated. The forced distribution performance evaluation system is one such method where employees are ranked and rated based on certain criteria set by an organization (Stewart, Gruys and Storm, 2010). There are a lot of companies such as General Electric and various others which are following the concept of the forced distribution performance evaluation to measure the performance of team members against the determined criteria and make the necessary decisions accordingly. With the help of the forced distribution ranking method, it becomes easy for an organization to see a particular behavior among the employees that the organization expects in the beginning. Kim, Oh and Park (2018, p. 1008) explain the importance of performance appraisals in their review of performance monitoring systems (PMSs) in Korean nonprofit organizations. According to the authors, performance appraisal system is “conventionally managed” as per two major assumptions defined broadly as developmental and summative. What the authors tried to mean is that performance appraisals are managed to assess the development of employees within the organization and summarize the overall performance of the organization. Sharma and Sharma (2017, p. 685) however, are of the view that despite performance appraisals being the most critical of all HR practices, it accounts for a major portion of dissatisfaction among employees “in terms of perceived fairness and effectiveness”. On the other hand, Rubin and Edwards (2018, p. 1939) suggest that performance appraisal systems despite their flaws such as unfair and ineffective leading to complaints of discrimination by employees, are being utilized by government organizations. Thus, it is clear that performance appraisal systems serve as a critical tool to assess employee performance. Besides, the performance appraisal system within a private and government organization plays an important role in guiding the decisions of the top management regarding promotion, rewards, and the required initiatives. As a result, the transparent performance appraisal system serves as a key for the top management of an organization to increase the satisfaction level of the team members while encouraging them to utilize their competencies in the right direction.
Nonetheless, it is important to note that organizations nowadays are doing away with traditional performance appraisal systems and including new systems that are least biased and most effective. As (Elmuti, Kathawala and Wayland (1992) explain, performance appraisals were traditionally used to communicate organizational goals and expectations from employees by employers. The authors further elaborate that traditional performance appraisal systems were used to evaluate which employee needed promotion, which needed demotion and transfer and such and for evaluative the areas for employee development and growth. Although these are still used for the same purposes but the traditional systems were more autocratic where managers used to assume a powerful position and decide the future of an employee. Furthermore, it can be said that the traditional performance appraisal system promotes high biasnesss within the existing decisions of the top management which becomes the reason of the increasing dissatisfaction among employees. Alternatively, Hosain (2016, p. 21)) argue that traditional performance appraisals systems followed one-dimensional model where the entire focus was on what to be achieved. The modern methods such as the 360-degree feedback or forced distribution performance evaluation systems or more recently, the check-in methods are more dynamic in that these focus on not on just the ‘what’ but also the ‘how’ and ‘why’ but these two had flaws and eventually are being scrapped.
While performance appraisal systems are critical for internal staff selection and other decisions such as training and development, promotions, termination and transfer, there are a number of challenges that organizations face in implementing it. Some challenges like biasedness, discrimination and inefficiency have been discussed earlier, some others need to be pointed out. Liu and Dong (2012, p. 157) point out some visible challenges of performance appraisal especially in developing countries like China where the system was introduced only a few decades back. The authors find that underdeveloped practice of performance appraisal, and operational defects are two of the major challenges for the implementation of the appraisal system. On the contrary, Tuytens and Devos (2012, p. 760) argue that there are also some benefits of the appraisal system related to the efficient use of this systems namely it allows for an improved interaction between the managers and employees. The author also lists some challenges that include employee dissatisfaction, legal issues in case the system breaches employee privacy and security.
A number of organizations namely Adobe, Deloitte, Gap, Microsoft and recently Accenture have done away with the traditional annual performance appraisal system and introduced systems that regularly provide feedback on employee performance (Sarkar, 2016). Sarkar (2016, p. 7) argues that old systems such as the 360-degree feedback and forced distribution evaluation systems used to categorize employees under high, average and low performers that resulted in decreasing morale of the employees and reduced performance. The new systems such as performance check-ins are being largely used to replace the old once-in-a-year systems and increasing scope for managers and employees to interact more on work, progress and goals on consistent basis. Nevertheless, these too are not without flaws as it has been reported that majority of employees fear constant monitoring by their employers (Peoplemanagement.co.uk, 2022). As it could be seen, using performance appraisal could be tricky but definitely advantageous if implemented correctly.
The following recommendations are suggested for the pharmaceutical company to follow while implementing and using performance appraisal for internal staffing decisions.
Firstly, the company should lay the foundation of performance appraisal based on the strong elements of the traditional method that is, include a method that correctly measures employee performance – not too critical, not too lenient.
Secondly, the company should focus on continuous evaluation of the performance appraisal system itself to make sure that no biases or discrimination is there. In addition, it should also ensure employees’ privacy and security is not put at stake.
Thirdly, it is recommended that the company introduce the latest check-in system instead of the forced distribution performance evaluation or 360-degree feedback because the new system provides continuous feedback to employees rather than waiting for a year to know if they are rewarded or terminated. It gives them an opportunity to review and improve their own performance.
From the analysis above, it is hence evident that performance appraisal systems are useful tools that support decision-making related to internal staffing. The report provided an overall picture of performance appraisal starting from its meaning to its traditional and latest use. The challenges and benefits of using performance appraisal were also discussed. The discussion revealed challenges related to inadequate training, operating defects and such and benefits included enhanced employee-manager communicating and improved employee morale. Lastly, some recommendations were provided to the pharmaceutical company in implementing the performance appraisal system.
Elmuti, D., Kathawala, Y. and Wayland, R., 1992. Traditional Performance Appraisal Systems: The DemingChallenge. Management Decision, 30(8).
Hosain, M., 2016. 360 Degree Feedback as a Technique of Performance Appraisal: Does it Really Work? Asian Business Review, 6(1), p.21.
Kim, M., Oh, H. and Park, S., 2018. How to Encourage Employees’ Acceptance of Performance Appraisal Systems in Korean Nonprofit Organizations? An Empirical Exploration of the Influence of Performance Monitoring Systems and Organizational Culture. Nonprofit and Voluntary Sector Quarterly, 47(5), pp.1007-1030.
Liu, X. and Dong, K., 2012. Development of the Civil Servants’ Performance Appraisal System in China. Review of Public Personnel Administration, 32(2), pp.149-168.
Peoplemanagement.co.uk, 2022. Has employee monitoring gone too far? [online] Peoplemanagement.co.uk. Available at: <https://www.peoplemanagement.co.uk/article/1746464/employee-monitoring-gone-too-far> [Accessed 4 May 2022].
Rubin, E. and Edwards, A., 2018. The performance of performance appraisal systems: understanding the linkage between appraisal structure and appraisal discrimination complaints. The International Journal of Human Resource Management, 31(15), pp.1938-1957.
Sarkar, A., 2016. Is it time to do away with Annual Performance Appraisal System? Human Resource Management International Digest, 24(3), pp.7-10.
Sharma, A. and Sharma, T., 2017. HR analytics and performance appraisal system. Management Research Review, 40(6), pp.684-697.
SHRM, 2022. Managing Employee Performance. [online] SHRM. Available at: <https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingemployeeperformance.aspx> [Accessed 4 May 2022].
Stewart, S., Gruys, M. and Storm, M., 2010. Forced distribution performance evaluation systems: Advantages, disadvantages and keys to implementation. Journal of Management & Organization, 16(1), pp.168-179.
Tuytens, M. and Devos, G., 2012. Importance of system and leadership in performance appraisal. Personnel Review, 41(6), pp.756-776.
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