Performance appraisal

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Performance Appraisal Effectiveness

Doaa Althalathini

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Performance Appraisal is one of the most important managerial processes.

Each company try to have an effective appraisal system.

Job relatedness.Standardization.Training to appraises.Open communication.Employee access to results.Document the results.Recognize and celebrate employee’s achievements.

Effective Performance Appraisal

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Case # 1

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ALZA Corporation

ALZA is the leading provider of drug delivery systems.

It develops and manufactures pharmaceutical products that enhance healthcare for millions of patients worldwide.

Founded in 1968 by Dr. Alejandro Zaffaroni.

Employs about 10,000 people during 20 years.

Alza was acquired by Jonhson & Johnson in 2001 in a transaction worth US $10.5 billion.

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Previous Appraisal System

ALZA is tying reward bonuses, salary increases and promotions to employee performance ratings.

In the early 1990’s, the company had a numerical ranking system that provided senior level executives with results to make decisions about rewards and promotions.

However, there was a flaw in the system in that manager subjectivity tended to taint results.

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Previous Appraisal System ALZA then created a multi-rater assessment tool.

They believe that most jobs require accountability to people other than single supervisor and feedback from many observers.

Provided not only ranking but also objectives and statistically reliable results.

The system worked well for a number of years but as the company grew in size, the complexity of manually gathering information demands on raters involving in the appraisal process.

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The Problem As ALZA grew, the complexity of managing all this

data enormous.

Some raters were evaluating 25 co-workers at a time.

Human resources spent a great deal of time following up with employees and managers regarding the status of their

evaluations.

This caused fatigue and diminished motivation to participate in the process.

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Automated Performance Appraisals

ALZA decided to consult with software development company.

ALZA learned that it could create an on-screen ranking system and capture quality data from it.

They designed a system with easy-to-use instructions that simplified the rating process “first version was Visual 360”.

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ALZA rolled TotalPerformance out to its entire workforce during its annual fall performance appraisal cycle.

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ALZA gives sufficient training programs to the participants.

The more clear information the employees have on the process and what it is being used for, the more trust can be established.

It’s not allowed to managers to change raters without justification and notification to the employees affected by changes.

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The Results Time Savings: Employees are able to perform their normal

jobs functions during the review cycle.New

Appraisal System

Old AppraisalSystem

Performance Appraisal Cycle. 9 days 6-8 weeks

Hours taken to rate 10 employees on 8 rating factors.

1 hour Average 5 hours

Time spent by managers to prepare summary evaluation using feedback from direct reports.

15 - 30 minutes

4 hours

Managers completed appraisalOn planned

timeup to 18 months late. Employees waited up to two years for pay increases.

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The Results Lower administrative requirements:

One person in HR can manage the process. He can set up the system “Specifying participants, grouping ratees, assigning competencies” in two –three hours.

It takes 20 hours per week to manage the process where previously it required full-time.

HR employees now spend 80% less time administering and managing a similar cycle.

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The Results

Savings cost:

Save about approximately 300,000$ per appraisal cycle.

Save the company paper and photocopying costs.

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The Results Optimize the data collected by TotalPerformanceby producing reports that previously were impossible to generate.

This give a clear and precise picture of goals attainment at any given point of time.

It was able to align rewards and recognition program with the actual performance results of The employees. Thais contributes to the overall effectivenessof ALZA organization.

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Case # 2

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Xerox corporation

In the mid-1980s Xerox corporation was faced problems with its performance appraisal system:

1. performance appraisal system was not working.2. Rather than motivating the employees, its

system was leaving them discouraged and disgruntled.

Xerox recognized this problemand developed a new system toeliminate it.

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The original system used by Xerox encompassed seven main principles:

The appraisal occurred once a year. It required employees to document their

accomplishments. The manager would assess these

accomplishments in writing and assign numerical ratings.

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The appraisal included a summary written appraisal and a rating from 1 (unsatisfactory) to 5 (exceptional).

The ratings were on a forced distribution, controlled at the 3 level or below.

Merit increases were tied to the summary rating level.

Merit increase information and performance appraisals occurred in one session.

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New Appraisal System Xerox formed a task force to create a new system.

The members of a task force are: senior human resources executives, consulted with councils of employees and a council of middle managers.

Difference form the new & old one in many key respects:

1. The absence of a numerical rating system.2. The presence of a half-year feedback session.3. The provision for development planning.4. Prohibition in the appraisal guidelines of the use of

subjective assessments of performance.

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New Appraisal System The new system has three stages, as opposed to the

one-step process of the old system.

The first stage:

Occurs at the beginning of the year when the manager meets with each employee.

They work out a written agreement on the employee’s goals, objectives, plans, and tasks for the year.

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New Appraisal System

The second stage: Occurs at a mid-year.

Mandatory feedback & discussion session between the manager and the employee.

Progress toward objectives and performance strengths and weaknesses are discussed, possible means for improving performance in the latter half of the year.

Both the manager and the employee sign an “objectives sheet” indicating that meeting took place.

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New Appraisal SystemThe third stage:Take place at year’s end.

Both the manager and the employee prepare a written document, stating how well the employee met the preset performance targets.

They then meet and discuss the performance of the employee, resolving any discrepancies between the perceptions of the manager and the employee.

A developmental planning session in which training, education, or development experiences that can help the employee are discussed.

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New Appraisal System A follow-up survey was conducted the year after the

implementation of the new appraisal system. Results were as follows:

1) 81% better understood work group objectives2) 84% considered the new appraisal fair3) 72% said they understood how their merit raise was

determined4) 70% met their personal and work objectives5) 77% considered the system a step in the right direction

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Conclusion

It can be clearly seen that the new system is a vast improvement over the previous one. Despite the fact that some of the philosophies, such as the use of self-appraisals, run counter to conventional management practices, the results speak for themselves.

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Case # 3

HSL Bulgaria Company

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HSL Bulgaria Company “HSL Bulgaria is a local company, a subsidiary of HSL International (multinational company), it has been established in 90’s with a business strategy to build a retailer network in Bulgaria. The company business plan was to establish a network of over 100 outlets and today HSL has exceeded its target and has a leading position in its industry. In 2009 “HSL –Bulgaria has won second place in the Best Employers survey amongst 91 participants.

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The company management believes that the effectives improvement of the individual performance brings improvement of the overall business performance of the organization and creates a performance driven environment.

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Managers and team leaders confirmed that there is: - continuous work with the employees in areas of communication. - Inform people about future plans, business results, new projects. - Ongoing dialogue between staff and management. - Employees can ask questions, challenge the status, come up with suggestions and new ideas.

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Appraisal system in “HSL Company: combined methods in their performance appraisal system - Management by Objectives. - Behaviors assessment. - Ranking employees based on relative comparison. - Reward decision at the end of appraisal cycle.

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Performance Appraisal Structure: - Identify and formalize the personal objectives derived from the organization objectives. - Mid term performance review (review performance against objectives, identify gaps, discuss strengths and weaknesses and future opportunities). - Clear and constructive feed back ( Manager communicates to staff (Discuss the manager's observations and outcomes) . . - Performance Rankings . - Remuneration review (An effective reward policy monetary and non-monetary reflects and support the company’s strategy).

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HR Specialists in the company believe that in order to be productive the performance appraisal should be aligning the interests of the employees and the organization so they decided to assess and analysis the appraisal system, Opinions and attitudes of employees regarding the process Data Collection: -Questionnaires method : 41 employees. Different types of questions : -Demographic Information: ( Age, Gender, Professional level).

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- The employee’s attitude towards work, opinion of the performance appraisal , clear understanding of the process and the level satisfaction and engagement with the company.

- Understanding the clarity of the performance appraisal and feedback. Interview Method: Find some information about the structure of the performance appraisal (Managers, employees).

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Summary of findings: - The Company does a good job to make people aware of objectives and outcomes of the PA process. - The company makes good use of performance appraisal, links successfully companies- employees objectives. - Managers skillfully provide feedback to employees. - Employees in the company mostly believe that their manager’s judgments are fair and objective. - 95% of employee believe that positive performance appraisal should lead to salary increase.

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- All employees believe that positive performance assessment should lead to employee promotion. - 88% of employees believe that their work is linked to the profitability of the company. Recommendations: - Set goals effectively. - Preparation is the Key. - Focus in development. - Open and honest feedback. - Line Manager’s role. - Appraisal discussions.

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- Performance review frequency. - Proper Performance Recording.

- Ensure ongoing process, Full participation and success .

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Conclusion: - Engaged employees are not only motivated to work they also know what and how to do more effectively because they know the strategy and company objectives - More engaged to the company people are, the better financial results are likely to be achieved. -Raising and maintaining employees engagement lies in the hands of an organization and requires a balanced blend of time, efforts, commitments and investment.

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Thanks

Performance appraisal

Business

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