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Title Unit 5: Performance Appraisal Description Individual at Work Module Keywords Objectives Author Psychology Organisation University of Leicester Version V1.0 Date 16 Feb 2010 Copyright

UNIT 5: LEARNING OUTCOMES After studying the unit, students should be able to:

1. Appreciate the background to the measurement of performance in organisations.

2. Describe the types of performance appraisal tools and processes used in

organisations.

3. Discuss organisational issues in the measurement of performance and the feedback of performance data.

4. Identify and discuss the various influences on different stakeholders in the

performance appraisal process.

5. Highlight some of the difficulties involved in collecting and using performance data in organisations, and appreciate how occupational psychologists can help organisations to improve these processes.

6. Review current trends in professional practice and contemporary research.

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5.1 INTRODUCTION Job performance is a central issue in the psychology of work and occupations. In many ways it has often been argued that the main goal of an occupational psychologist is to improve job performance. For example, an occupational psychologist conducts a job analysis with a view to defining, as accurately as possible, the best person to perform the job. The primary aim of optimizing the techniques of recruitment and selection is to find the best possible person to fill the vacant post and perform the role in question. Ergonomic design of work settings is conducted in order to optimise the post-holder‟s comfort and efficiency in performing the role, and thus creating an environment which facilitates the optimum job being completed. In turn, improved job performance results in greater productivity and economic viability. Improvements in job performance are often used as outcome measures in our research: no doubt you will have been more impressed by studies which show how interventions enhance job performance than you might by ones which show employees „feel better‟. If influencing job performance is central to the role of an occupational psychologist then we must find good ways of measuring it. In essence, we need sensitive, reliable, valid, fair and practical methods of measurement. However, as we will see in this unit, some of the goals of performance appraisal are more dependent upon accurate measures of performance than others. In this unit, we will examine how job performance is measured. We will look at the factors influencing the quality of the different sorts of data we obtain. We will critically evaluate different methods of collecting different types of data. As psychologists, we will also consider the important psychological, social and organisational processes that impact upon the measurement and management of employee performance. As you read about performance appraisal, you will often find that organisational practice has „led‟ the research agenda. Organisations try lots of different and new things in their appraisals processes, often before there is substantial research to support their approach. This means that many practitioners and researchers have investigated the quality of different approaches used by organisations. It would be naïve to say that occupational psychologists have led the design and implementation of performance appraisal in organisations. It would be more accurate to say that they have provided a critical analysis of organisational practices, the results of which have helped organisations to improve their approach to performance appraisal. Performance appraisal is a term applied to a variety of processes that involve the assessment and development of an individual and their performance at work. In the United Kingdom, performance appraisal has been with us for the best part of a century. While it is to a large extent about evaluating a person‟s performance at work, three key issues are worth bearing in mind:

1. Performance appraisal is a two-way process. As much as the employer wishes to measure and understand an employee‟s performance, the employee wishes to gain something from the process.

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2. The appraisal process is about the development of staff as well as about assessing their performance; it is about exploring the appraisee‟s potential for development in terms of their career;

3. In appraisal there is an important issue about the extent to which one looks at

the overall picture of the individual and what they bring to the workplace beyond doing the basic job tasks and activities (e.g. to what extent do they help their team to function more effectively?).

Some of the terminology can be confusing with regard to performance appraisal. In this unit we use performance appraisal to describe the process of collecting and using data about employee performance. It does not just refer to the performance appraisal interview (although that is an important part of it). You might see other terms used in the literature such as performance review, or performance management. These are slightly broader terms than performance appraisal (e.g. they consider issues such as aligning individual performance goals with organisational strategy, and may include employee counselling and personal development. It is important to recognize that the appraisal process can be viewed from a number of different perspectives (e.g. the employee, line manager, senior manager etc.). All might have different views of the process and may have different goals in mind. Understanding this „psychology‟ of appraisal has been high on the agenda of occupational psychologists. There is also good evidence that the expertise of occupational psychologists might be needed to help organisations with their appraisal processes. Fletcher (1997) found that 80% of companies reported dissatisfaction with their appraisal process.

A quick task: If you have had a performance appraisal in the past, did you enjoy it and find it useful? What was it that you did / did not enjoy about it? What was it about it that you did / did not find useful about it?

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5.2 THE EVOLUTION OF PERFORMANCE APPRAISAL As far back as World War I, WD Scott was credited with coming up with performance appraisal. Formal Performance Appraisal systems were well established by the mid 1950s, with personality-based systems being widely used. McGregor (1957) illustrated the unease surrounding the use of personality-based ratings and advocated a more participative approach and performance-based approach, including an element of self-appraisal. This process looked forward (to what the individual might be able to achieve in the future) more than it looked backward (i.e. the „personality‟ that they had inherited). In the 1960s, the influence of the management by objectives movement meant that performance appraisal developed a greater emphasis on goal-setting and the assessment of performance-related abilities. In the 1970s, appraisal practices became more open to scrutiny and, as a result, a number of legal cases were brought. One outcome of this was an increase in research into rating scales and their use: we discuss this research at some length later in this unit. The use of psychometrics as part of the appraisal process emerged as a trend in the 1970s and gained momentum over the next two decades. The relative objectivity of psychometrics made them more acceptable in the new litigious environment. This was particularly pertinent in assessing potential, where the use of subjective methods to assess promotability became less acceptable. Through the 1980s and 1990s, the concept of performance management came into vogue, and this, according to Williams (1998), provided a more holistic approach to generating motivation, improving performance and managing human resources. For example, in the UK school system, performance management is central to efforts to improve standards in teaching (both locally and nationally). Therefore, when reading about appraisal it should quickly become clear that our focus is not just on accurate measurement. We are also interested in issues such as:

What influences the quality of performance appraisal data?

How do employees perceive the appraisal process?

How might the appraisal process be used to motivate and develop staff?

Whereas, traditionally, job related tasks may have been perceived as the key elements in appraisal, appraisal now tackles a broader set of issues. Briscoe and Hall (1999) propose that employee development is underpinned by a set of „metacompetencies‟ including qualities such as accurate self-awareness, feedback seeking, and openness to a range of ideas and concepts etc. Other factors such as communication and teamwork skills, stress and conflict reduction, handling of emotion and conscientiousness are now often seen as important concepts to be measured and managed through performance appraisal and management processes. More recent developments, including the reduced hierarchical nature of many organisations, have led to the increased use of multi-source, multi-rater feedback

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methods, more commonly known as 360-degree feedback. The kinds of changes that have overtaken organisations have affected the nature of work itself, and the continuing rate of change means that the definition of what a job is, and what good performance is, are less stable concepts. It is also worth remembering that the majority of research on performance appraisal is drawn from a UK / US context. However, as Fletcher (2008) points out, national culture is likely to have a major influence on the way appraisals are conducted. Fletcher (2008) argues that in Western (high individualism) cultures where being assertive and ambitious is valued, appraisal is generally focused on the individual and what they do; in Asian cultures (strong collectivism) the “sense of hierarchy and acceptance of authority, the focus on „Western‟ performance appraisal practices on individual performance, accountability and open confrontation are unlikely to be seen as appropriate” (p. 175). Therefore, it is not always possible to assume that the findings from a piece of performance appraisal research will generalise across all national and organisational cultures.

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5.3 THE OBJECTIVES OF PERFORMANCE APPRAISAL Fletcher (2008) gives an excellent summary of the objectives of implementing an appraisal process. The evaluation is the starting point of the appraisal process. After this comes the reward and encouragement of effort and ability. This may also involve telling someone that they are doing badly. The systematic evaluation of training and development needs allows the measurement of the requirements of the job against the skills of the jobholder. This enables the organisation to determine its training needs, both in the case of the employee in question and the organisation overall. This process allows the organisation to gather data about staff capabilities, which is essential to human resource planning. Finally, the appraisee and their line manager agree the future agenda, specifically for the next appraisal period. This will include key objectives for their post along with addressing training needs in terms of the needs of the specific post, the individual‟s professional development needs and any other training needs, if relevant. From the organisational perspective, appraisal deals with people as aspects of organisations. When an employer takes on employees, part of the process involves people being socialised into organisational norms. Within any organisation, there tends to be a dominant coalition, which dictates the values of the organisation. Such cultural factors have an important bearing on the values which are held within an organisation. These in turn dictate the values which are at the foundation of employee appraisal along with underpinning the competencies against which employee performance is measured. Fletcher (2008) points out that employees will see themselves as benefitting if these organisational objectives are met (i.e. they want to be properly rewarded, discuss opportunities for development etc.). If appraisal does nothing else, it causes manager and subordinates to get together and discuss the subordinate‟s performance. However, this situation has the potential to be quite socially uncomfortable and it only works if the jobholder wants to be appraised. Fletcher (2008) identifies three factors that are particularly important in determining whether the employee engages in the process to help meet the objectives of appraisal. They are:

The employee‟s perception of the assessment as fair

The quality of the employee‟s existing relationship with the person / persons doing the appraising

The impact that the appraisal has on employee reward and their own well-being

Clearly, this presents a rich agenda for occupational psychologists. Undoubtedly, appraisal has a „technical element‟ in terms of how performance is measured. However, it is also a very social process. Theoretically, appraisal is intended to be about the development of the appraisee, both in terms of their professional development and in terms of their role within the organisation. To achieve this, it is essential that the appraisal is about behaviour

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rather than about personality or similar personal attributes (Kluger & DeNisi, 1996). This is because a person can change their behaviour, that is, it is within the control of the person. Personality is a different matter and even if one were to argue that it can be changed, there are related ethical issues. Personality appears to be stable during adult life. The two essential issues are that appraisal is about behaviour, rather than personality and appraisal should be about things which the individual can control. That said, tools such as the Myers-Briggs Type Indicator can be used to help employees understand how their personality helps or hinders them in a variety of different situations at work (and thereby raises self-awareness). When referring to change in behaviour in the workplace, we are talking about the appraiser and appraisee agreeing a commitment to change. This is not about appraisee compliance, and it may well involve the appraiser or others changing their behaviour in order to facilitate behavioural change in the appraisee. As with other aspects of occupational psychology, for example, personnel selection, there are issues of power inequality at play in the appraisal process. While theoretically the appraisal interview may be intended to be a discussion between appraiser and appraisee, the very setting implies a situation of unequal power between the two parties, and as the appraiser is most often the appraisee‟s line manager, this inequality is exacerbated. This issue increases the importance of keeping the focus on job performance. It is neither just a process of filling in forms, nor a judgement on the appraisee as a person.

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5.4 TYPES OF APPRAISAL DATA Traditionally, appraisals can be classified as one of three types:

1. Organisational records, which are regarded as being more „objective‟; 2. Subjective evaluations, which depend on human judgement. 3. A combination of 1 and 2.

It is appealing to see organisational records as providing reliable, valid and fair data. Often they are seen as a „hard data‟ (with subjective ratings seen as „soft data‟). However, closer inspection of objective data reveals that a more critical approach is required. In its favour, organisational data tends to focus on performance outcomes that are crucial to the organisation. Outcomes such as quality and quantity of performance, number of complaints against staff, or levels of absence have a clear link to the success of the company. However, there are a number of potential drawbacks with relying exclusively on such data. First, it is not always easy to identify an objective outcome that is directly, and significantly, influenced by a single employee‟s performance. For example, a call centre employee may find it difficult to reduce the number of customers cancelling their contracts with the company if employees in other parts of the organisation are making mistakes which are very difficult for that call centre employee to rectify. Some objective measures of performance are „distant‟ from the employee‟s influence. Take the example of a software developer: they might work on only a small aspect of the design of a piece of software, and the number of units of software sold might depend upon a host of other factors (e.g. the level of competition in the marketplace, profit margins / price set by the company, effectiveness of the product marketing campaign etc.). A related problem is that organisational data is not always an accurate reflection of employee performance. For example, many companies do not record all instances of employee absence or may record performance data at a team level meaning that the efforts of individual employees cannot be isolated. Second, there are aspects of employee behaviour and performance that do not directly show themselves in observable outcomes. For some jobs, it is easy to measure performance outcomes such as the number of things produced in a working day. However, in the ORG module we saw that transformational leaders inspire employees: at this moment in time, observable or objective measures of „inspiration‟ are not available. Naturally, we might see the impact of that inspiration in the performance of the manager‟s team: a very inspired team may be more satisfied with the working conditions and be more productive in the long term. However, it is not possible to gather objective data on this and other important workplace behaviours. This problem is particularly important for many jobs where performance is dependent upon a large cognitive, or knowledge-based component: in such roles, it is often not possible to „see‟ large and important aspects of job performance. These problems mean that objective data on employee performance is not always easy to obtain and, even if we can, it may suffer from problems with its reliability, validity and fairness. This means that there is an important role for more „subjective‟ evaluations of employee performance. For some time now, subjective performance

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appraisal systems have been the most typical forms of appraisal (Bernthal, Sumlin, Davis & Rogers, 1997). In a UK historical context, the 1920s and 1930s saw merit ratings for blue collar workers, which rated their performance within grades. By the 1950s there was a greater interest in managerial development. More recently, some of the more commonly used appraisal systems include:

Open Appraisal – where the appraisee and their manager discuss any issues they deem appropriate drawn from their experience over the appraisal period. An example of this is the system which has been used in a number of universities which involves a career development discussion but does not incorporate evaluative judgements being made. This may be referred to as a career development staff appraisal.

Closed Appraisal - where there are a number of categories on which the appraisee‟s performance is rated, including an overall performance rating. These categories should be identified through a proper analysis of the job being carried out. An example of a criterion referenced Likert-type scale might be:

1 = well below the requirements of the grade;

2 = below the requirements of the grade;

3 = fully meets the requirements of the grade;

4 = above the requirements of the grade;

5 = well above the requirements of the grade.

In normative referenced scales, employees are compared to their peers.

An example of this type of scale might be

1 = in the top 1% of employees in terms of performance

2 = in the top 16% of employees in terms of performance

3 = in the middle 68% of employees in terms of performance

4 = in the bottom 16% of employees in terms of performance

5 = in the bottom 1% of employees in terms of performance

Mixed Appraisal - which as the name suggests involves a mixture of open and closed appraisal.

A quick task: Before moving on to the next section, write down what you think might be the advantages and disadvantages of using the two main rating scales shown above. This will help you to think about the psychometric properties of different rating scales.

Within each of these formats, it is usual that a set procedure is followed:

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1. The appraisee fills in a form of some description which details their activities during the appraisal period. This usually involves describing activities against objectives which were either set at the outset of the appraisal period or else emerge during the course of the appraisal period. This provides the fundamental material for the appraisal process. Later in this unit we will look at how self-assessment and self-awareness are used in the appraisal process.

2. The line manager, or some other senior employee, fills in the evaluation, if

relevant. In the case of 360-degree appraisal, a number of different stakeholders might be involved. In a closed or mixed appraisal this involves evaluating the appraisee‟s performance against the objectives referred to above along with other specific criteria of the job. In a non-evaluative appraisal, this stage may not happen.

3. The appraisal interview is often the pivotal stage of the appraisal process,

where the appraisee and line manager get together to discuss the appraisal along with the activities of the appraisal period that gave rise to it. In a closed appraisal system, this would involve the appraiser outlining the ratings which the appraisee was receiving along with the rationale behind them. There would be room for some discussion around this. In an open appraisal system, the parties would discuss performance over the appraisal period along with the relevant circumstances and issues.

4. There is some follow-up activity where an agreement between the employee

and the line manager might be written down as a set of objectives or goal to be met before the next appraisal. This might also include plans for training and development.

In a study in the public sector, Wraith (1975) observed that some organisations combine the appraisal of performance with an assessment of potential on a single occasion, while others separate them. The same author comments that some of the respondents in his study felt that the former situation was primarily due to managers‟ unwillingness to spend the time involved in handling the two procedures separately. If the appraisal is of an evaluative type, then such evaluation is likely to include: performance on tasks, personal qualities, potential both professionally and within the organisation. Both evaluative and non-evaluative appraisals should include a training plan or personal development plan. In some organisational contexts, training may not be just about skills, but also about socialising, aligning to organisational norms, engendering “acceptable behaviours”. It is also generally accepted that when monetary reward is discussed, the atmosphere created is not generally conducive to an open discussion of development needs.

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5.5 BIAS AND PERFORMANCE MEASUREMENT IN SUBJECTIVE APPRAISAL Earlier on in this unit we discussed why subjective ratings were needed in the performance appraisal process. A common feature of appraisal systems is the use of a form of rating scale to gather subjective judgements about job performance. When evaluating these rating scales, reliability, sensitivity, fairness and validity are key issues, because in using rating scales acceptable measurement can only be achieved if the factors themselves are clearly defined, understood and interpreted in the same way by all participants. The definitions of reliability and validity referred to in this context are as follows:

Reliability is the consistency with which something is measured; validity is the extent to which an instrument measures whatever it is intended to measure (Saal & Knight, 1995). So, in performance appraisal terms, can we be sure that appraisal is consistent across employees and those doing the appraising? Can we also be sure that what we are measuring is employee performance and not something else? (e.g. how much the manager „likes‟ the employee)

Sensitivity refers to the extent that the measure reacts to, and shows, actual differences in performance

Fairness is the extent to which the measure is free from bias against certain groups of people on non-job-related grounds.

Of course, as with employee selection, it is important that the criteria for the appraisal are based upon a good job analysis (otherwise the content validity of the appraisal is likely to be adversely affected, and the quality of the performance data collected is likely to be compromised). A good job analysis is an essential starting point for the design of a good performance appraisal process: this defines the competencies and elements of performance that need to be assessed, and provides a common framework that can be used to facilitate consistency across raters (i.e. all employees doing the same job are evaluated using the same criteria). However, appraisal involves the use of terms which present inherent difficulties, for example „satisfactory‟ and „average‟. Different managers might apply different standards (what is seen as average performance by one manager, might be seen as poor performance by another). One-to-one appraisal is an interpersonal process and so is subject to the consequent effects of human dynamics. There is a tendency for the appraiser to work at the belief level and ignore the evidence. This is partly because human judgement contains a number of unconscious „flaws‟. The fundamental attribution error refers to people‟s tendency to account for others‟ actions in terms of dispositional rather than situational causes (Baron & Byrne, 1984). Because of this effect we tend to perceive others as acting as they do largely because they are ‟“that kind of person” and ignore the many

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possible situational causes that may affect their behaviour. As a result managers might tend to see poor performance as a personal failing on the part of the employee rather than as a problem brought about by lack of resources or poor support. Another bias is the „similar to me effect‟: we tend to make positive evaluations about people who resemble ourselves. Lefkowitz (2000) found that positive affective regard, i.e. the liking of the appraisee by the appraiser is associated with:

higher ratings on the appraisal;

greater halo effect, thus a strength in one area positively affects the appraiser‟s assessment of performance in other areas;

reduced accuracy in the appraisal process;

a disinclination to punish poor performance;

better interpersonal relations between appraiser and appraisee.

If training raters are aware of the influence of unconscious biases, this might help them to consciously reduce some of them (Fletcher & Williams, 1984). However, intervention studies show that problems with subjective forms of ratings do not seem to be entirely eliminated through rater training or the re-design of rating scales2 (e.g. Kasten & Weintraub, 1999; Murphy & Cleveland, 1995; Murphy, Cleveland, Skattebo & Kinney, 2004). It has been argued that managers are perfectly capable of forming private judgements of performance that are accurate. However, when they have to make these public, they can be motivated by social and organisational processes to provide inaccurate public ratings. That is, the social context in which the ratings are publicized activates a number of sources of bias. Bernardin & Villanova (1986) found that rating inaccuracy was often a reflection of a deliberate conscious process of distortion used to serve the rater‟s agenda and not unconscious bias or error. Often performance ratings are „bunched‟ around either moderate or high performance. Negative information is less likely to be conveyed than positive information (Argyris, 1980). Thompson & Dalton (1970) noted the particular threat posed by appraisal to the employee‟s self-esteem while being rated as „satisfactory‟: a consequence of this is the tendency to rate appraisees as average or above, due to the interpersonal awkwardness of telling someone their performance is below average. Lewis (1985) observes that there is a tendency to mark at the middle of the scale or higher. Raters may avoid giving negative news, because they employ empathic buffering (Waung & Highhouse, 1997). Later we will look at rating scales that have been designed to „force‟ raters away from the mid-point or to discriminate between employees. There is evidence to suggest that in performance appraisal, managers are using ratings to achieve goals that are contrary to the goal of providing accurate performance ratings. Ratings may be motivated by a fear of conflict with poor performing ratee (e.g. Longenecker, Sims and Gioia, 1987). Rating inflation may also be used to improve an individual‟s performance by increasing self-efficacy (Longenecker, Sims and Gioia, 1987). Managers might also consistently inflate ratings to protect their employees‟ reputation, or even their own reputation as good

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managers (if employees are seen to be performing poorly, this may reflect badly on the manager themselves: see Gioia & Longenecker, 1994).

The prevailing culture within an organisation is often seen as being driven by a power elite, a clique which controls the organisation‟s norms from above (see the ORG Module). This is an example of the influence of politics within organisations. The political nature of performance has been addressed by a number of writers. For example, Longenecker and Gioia (1988) found deliberate manipulation of performance appraisal for political purposes, such as getting rid of subordinates, and scaring or punishing poor performers.Gioia & Longenecker (1994) suggested that the impact of political influences is less in the assessment of lower level jobs in organisations but has a major impact at higher levels within organisations. The problem of rating inflation also appears to be related to the personality of the rater. In situations where poor supervisor ratings are likely to result in conflict, managers high on the Big 5 personality dimension agreeableness (see the PSA Module) inflate their ratings much more than those who describe themselves as low on this dimension (Yun et al., 2005). This appears to be because those high on agreeableness appear to be particularly keen to avoid conflict situations. Therefore, they tend to inflate their ratings more when they know they will have to continue working with the employee in the future and / or they are aware that the employee sees themselves as a good performer. The effect is so strong that in jobs where the consequences of poor performance are significant, and subjective ratings are the main means of performance appraisal, it may be necessary to select raters who are not high on agreeableness. It also suggests that there should be some component in appraiser training that helps raters to develop skills that will help them to deal with conflict (Waung & Highhouse, 1997). Bernardin and Villanova (2005) discuss the issue of rater self-efficacy in terms of whether the ratee believes that he or she can deal with potential conflict effectively. On this basis, developing the rater‟s belief that they can deal with potential conflict from a disgruntled poor performer could reduce the rater‟s motivation to inflate their ratings.

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5.6 IMPROVING RATING SCALES The human biases that can operate in performance appraisal mean that it is difficult to obtain accurate data from the use of traditional rating scale techniques (i.e. marking each appraisee on a Likert-type scale for their performance against a series of attributes). However, designing different rating scales can help to improve their psychometric properties. Many of these approaches may go some way to preventing the rater from employing conscious biases or manipulating ratings for their own ends. Some alternatives to traditional rating scale techniques include:

Forced distribution, whereby all appraisees have to fit into an overall statistical distribution of scores so the appraiser cannot „opt out‟ by marking each one as average (e.g. „performance places this employee in the top 1% etc.);

Paired comparisons and rank ordering, where each employee‟s performance is compared to each other doing the same job, thus generating a „league table‟ of performance (e.g. Steve is better than Dave and Joanne, but only Steve is better than Alan);

Forced choice, where the scale does not have a mid-point and so the appraisee‟s performance has to be ranked as good or poor using brief descriptors of good and not so good behaviour (i.e. the use of a scale with an even number of rating points).

However, such scales still leave room for different managers to adopt different definitions for same position on the rating scales. Behaviourally Anchored Rating Scales (BARS) as suggested by Smith & Kendall (1963) involve clear behavioural descriptors of good and bad performance. Use of this technique allows the appraisee‟s work behaviour to be evaluated based on the behaviours they do or do not exhibit. For example, in rating employees on a competency “analysis of risk when making decisions” a simple BAR scale may look something like this:

5 = Shows evidence of carefully evaluating all the risk factors in decision making

4 = Looks at the important risk factors in decision making, but may ignore certain

peripheral small risk factors

3 = Somewhat inconsistent consideration of major and minor risk factors when making decisions

2 = Ignores some of the major risk factors when making decisions

1 = Does not consider risk at all in decision making

A similar rating method is the Behavioural Observation Scale (BOS). These scales are expressed slightly differently. Drawing on the previous example:

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Shows evidence of carefully evaluating all the risk factors in decision making

Rate from 1 (Strongly Agree) to 5 (Strongly Disagree).

The production of scales such as these requires a very careful analysis of the job being carried out. Latham & Wexley (1981) suggest the use of a Critical Incident Technique (CIT) that involves jobholders and supervisors generating a series of behaviours, based on critical incidents, that are then used as the basis for BARs or BOS to measure performance. However, despite the greater time and effort required to construct more objective scales, e.g. BARS, the results have sometimes been disappointing (Jacobs, Kafry & Zedeck, 1980). It is essential that raters are made aware of the biases that may operate and that they are trained to use the scales in the way they are intended to be used. It appears that no approach to subjective rating is entirely free from bias. This begs the question: if we cannot entirely eliminate biases, are some biases a bad thing? Rating inflation might help managers achieve important goals (such as motivating employees) and enhance manager-subordinate relationships. But the same biases may mask poor performance. Therefore, organisations must consider the objectives of the appraisal before deciding to opt for a system that attempts to entirely remove inflation (Murphy & Cleveland, 1995). For organisations which need to identify poor performance the impact of rating inaccuracy needs be carefully assessed and managed. When the accurate identification of employee performance is paramount (e.g. in safety critical work environments) all efforts should be made to manage sources of inaccuracy. This may not be such a major issue where employee development is a key objective in the performance appraisal process. However, in order for the appraisal process to be ethical the reliable, valid and fair measurement of performance should be a core objective of the performance appraisal process.

A quick task: What sources of performance appraisal data might one be able to collect for the following jobs?

A doctor (e.g. a General Practitioner)

A sales assistant in a shop

A taxi driver For each job role, try to identify 1-2 objective and 1-2 subjective sources of performance appraisal data. What are the strengths and weaknesses of each of these sources of appraisal data? How important is it that each of the sources provides accurate data in each of the different jobs?

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5.7 USING APPRAISAL TO ENHANCE PERFORMANCE Rather than being a means of accurately measuring employee performance, the main benefit of performance appraisal may well lie in using it as a medium for vocational guidance. Some of the roots of the difficulties surrounding the conduct and use of appraisal include:

an appraiser‟s tendency to base their judgements on their beliefs about what has been going on, rather than their experience and observation. That is, they work at the belief level and set aside the evidence;

it is often perceived by appraisees as being primarily about evaluation when, ideally, appraisal should be about change and development;

it should be about engaging commitment to change on the part of the appraisee among others, not about forcing compliance;

it should be focused on job performance rather than on completing forms. Appraisal is supposed to be about reviewing work performance and giving feedback in order to facilitate improved performance. The feedback given should include:

a balanced review of performance, covering both positive and negative aspects;

any one interview should involve discussion of not more than two limitations of the appraisee (otherwise self-efficacy may be at risk);

an opportunity for the appraisee to put across their own views;

good communication between the involved parties outside the appraisal situation as well as inside it.

If these conditions are not met then the process may be counterproductive. Early work suggested that feedback would generally be effective in increasing employee performance (e.g. Erez, 1977). However, Kluger and DeNisi (1996) conducted a meta-analysis of well-designed studies of feedback interventions. They found that praise could actually have a debilitating impact on performance. Factors found to enhance performance included focusing feedback on tasks with which the employee was highly familiar, focusing discussion on the task rather than the employees‟ attributes, and drawing attention to discrepancies between actual performance and desired performance. They also found that the impact of feedback was short-lived, and needed to be provided often: this shows that a good performance appraisal system is not a substitute for i) frequent discussions about performance and ii) the provision of feedback learning opportunities to get feedback while doing the job. In some appraisal systems, the appraisee is passive. Therefore, the individual does not have a significant input to the process, they merely receive an evaluation on their performance over the given appraisal period. However, in general the appraisal

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interview is a sensitive interpersonal situation, where the skill of the appraiser and maturity of both parties are key to whether a successful outcome is reached. Vecchio (1991) suggests that in practice, emotional tension and defensiveness is the outcome of the interaction of superior and subordinate in sharing appraisal information in the feedback interview. This can be a real block to employee development. While this is a potential danger, it does not have to be the case. Byron (2007) has shown that managers‟ ability to perceive subordinates emotions has an impact on their subordinates‟ satisfaction with the appraisal process: this may be because their skill in perceiving emotions allows them to be more supportive and / or persuasive. In many organisations appraisal is still a matter of rewarding people as individuals, not as team members. While appraisal may be a part of a system which encourages competition between colleagues, these colleagues may be required to perform as team members. Thus an employee may be in the invidious position whereby they are officially expected to operate as a team player, while their eligibility for reward is dependent on their performance as an individual, often in competition with their „team mates‟. This emphasis creates a problem for the development of high involvement work teams. In the UK, a particular example of this is what is often referred to as the „long hours‟ culture. Organisations may not state that employees have to stay at work beyond the usual „office hours‟. However, when an employee sees their colleagues staying late they may be reluctant to leave the office at a conventional hour due to a feeling that they may not be pulling their weight in some way. So they join their office‟s culture of staying at work late in the evening, while any possible benefits to productivity may be questionable. Anecdotes abound, such as the one about the employee who always had a coat on the back of his chair so that people were never sure if he was in or out. This exemplifies a situation where alienation can occur in large organisations, where there is an emphasis on winning, which of course begs the question “what happens to those who are less successful?” With regard to performance appraisal, there may be an issue here as to how much control the individual feels they have in their work environment and consequently how much involvement the appraisee may feel they have in the appraisal process, and thus the outcomes of it for them. Cawley, Keeping and Levy (1998) carried out a meta-analysis on 27 research studies that looked at participation in the appraisal process. The authors differentiated between:

instrumental participation – that allows the appraisee to influence the outcomes of the appraisal; and

value expression – that allows the individual to voice their opinions irrespective of the influence this may have.

The research indicated a strong relationship between participation and appraisee satisfaction, with value expression being the more important of the two. Multi-source multi-rater techniques often allow the employee to rate themselves so that their own views can be considered in the appraisal process. While it helps employees feel more involved and satisfied with the process, other raters can be influenced by the

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employees‟ self-rating. Sharples & Randall (2008) found that when raters were aware that an employee had overestimated their performance, the raters tended to inflate their ratings of that employee in order to avoid conflict. In organisational settings, it is often the case that people do not always show what they can do because they do not want to be manipulated. In theory, appraisal is supposed to be about the appraisee‟s professional development. This should have benefits for the organisation: people may often feel that organisations use the appraisal process to reinforce organisational norms. This may be done by rewarding behaviours which fit in with organisational norms whilst being negative about behaviours which do not fit in with organisational norms. This may sometimes set aside issues of how appropriate any of these behaviours are in a professional sense or, in extreme cases, in an ethical sense. A quick task: Think back to the ORG Module. Identify a valid theory of motivation. What might this theory say about how performance appraisal should be designed and executed in order to motivate employees to improve their performance?

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5.8 CONTEMPORARY PRACTICE Summarising some of the main points to emerge so far we find:

1. a need for good measures of performance (whether objective or subjective);

2. there is plenty of room for subjective judgement and personal evaluation, and such biases are hard to eliminate because they are helpful to one or more of the key stakeholders in the appraisal process;

3. given the opportunity to do so, there is a tendency for appraisers to rate

everyone as „average‟ or „above average‟. Much of the research discussed so far is based on the traditional model of an appraiser carrying out an appraisal on a subordinate. However, modern organisations‟ frequently use multi-source multi-rater (MSMR) techniques, more commonly known as 360-degree feedback. Such techniques generally involve a process whereby a post-holder is rated on various competencies, that is, job-related behavioural dimensions, by one or more of their managers, peers and subordinates. On some occasions, clients‟ or customers‟ ratings of the individual are also included in the process. The dimensions rated frequently focus on attributes such as leadership and teamworking, and are sometimes linked to the individual‟s self-rating. The advantage of such an approach is that each rater is likely to be able to observe different aspects of the employee‟s job performance. In jobs where employees have a high degree of autonomy, managers may rarely see the employee working, whereas peers and customers may have many more opportunities to see the employee performing a wide range of different tasks. However, this abundance of data does create a problem when using changes in ratings as an outcome measure because different groups of raters have different perspectives on the role and the efficacy with which the individual is performing it (as well as seeing different aspects of the employee‟s performance). Lievens, Conway & De Cort (2008) found that when evaluating others‟ performance, peers tended to place more value on citizenship behaviour than on task performance. Antonioni (1996) observes that MSMR techniques became widespread in the USA and the UK throughout the 1990s but they were not as quick to be adopted elsewhere. In the USA, they are usually linked to rewards delivered in the appraisal; in the UK, they are often used in a staff and management development context. The speed with which the MSMR approach has been taken up has meant that despite the fact that there is a lot of literature in the area, much of it is not empirically based. This includes literature on how to develop and implement 360-degree feedback systems. London & Smither (1995) make some observations on the implications of the implementation of such systems. MSMR often involves the employee rating their own performance, with the discussion then being based around making the employee aware of how others see their performance in comparison with how others see their behaviour. Competencies in which the

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employee overestimates their performance are often then used as the focus for development activities. While the assumption may be made that if 360-degree feedback ratings on an individual improve, this reflects improved performance, the question remains as to what extent this is due to the appraisal feedback received. London & Smither (1995) question whether increased congruence over time between self-ratings and ratings from others are due to improved performance or the individual‟s self- awareness being enhanced by the appraisal process. Reading 5.1 (Fletcher & Baldry, 2000) discusses whether the improvement of self-awareness drives the effectiveness of 360-degree appraisal. A further issue mentioned in the literature in this area is that people‟s ratings may improve due to them ingratiating themselves to those whom they believe will be rating them, or the use of other impression management techniques. While this may be an issue for 360-degree feedback, the issue of people attempting to ingratiate themselves to their managers has had a direct bearing on the area of appraisal throughout the past century during which such systems have been used. There are some significant differences in the way MSMR is implemented in different countries. Brutus et al. (2006) report that in the UK raters are chosen by the employee being rated in the vast majority of cases, but this is rarely the case in China. The same study also revealed that MSMR is often only used for top management in the UK, but is much more likely to be used at middle management and below in organisations in other countries (e.g. Spain, Australia, China). With reference to 360-degree feedback systems, a further issue is that many managers do not want feedback from subordinates. This is particularly true in organisations which are hierarchically structured or have a history of bureaucratic systems and traditional means of appraisal. In such cases, managers may feel particularly vulnerable or threatened by their employees being able to have an input to their (the manager‟s) appraisal ratings. If appraisal is directly linked to pay, through performance related pay systems, then this situation is exacerbated. As a result many organisations focus on using MSMR appraisals for employee development rather than for deciding upon employee rewards.

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5.9 CONCLUSIONS This unit has, for the most part, addressed traditional forms of performance appraisal up to and including the contemporary emphasis on the use of multi-source multi-rater techniques. While methods may vary and focuses may differ any good staff appraisal should:

Draw together biographical data on the individual‟s work performance to evaluate performance and explore aspirations and training needs;

Explore the individual‟s career history to establish how they came to this point and where they aim to reach; it should also investigate change points in the individual‟s history as these are often key to understanding motivations and aptitudes;

Gather good quality performance appraisal data. As occupational psychologists we can use our expertise to help make staff appraisals a win-win situation for both individual and organisation, with each party benefitting. One can draw an analogy with career guidance in both the methods used and the objective of optimising people‟s careers. To get the most from it appraisal should be viewed as a personnel development activity. In recent years, the nature of appraisal schemes has changed with a greater reliance being placed on objective methods such as psychometric tests and development centres. There is also the continuing emphasis on 360-degree techniques, despite the fact that Furnham as far back as 1993 argued that the enthusiasm for bottom-up appraisal had gone off the boil. The fact that 360-degree techniques have spread so widely, so quickly, may be a consequence of the changes in organisational culture that have taken place. In an environment where many organisations have an increased customer facing ethos, it seems logical that a range of people, including customers, would have an input to evaluating job performance. Another contemporary issue is the linking of pay to performance which is likely to have wide-ranging consequences for appraisal across the employment spectrum. Making pay directly commensurate with appraisal ratings brings a whole host of issues into play, and may not be compatible with using appraisal for development purposes.

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5.10 READINGS Reading 5.1 Fletcher, C. & Baldry, C. (2000). A study of individual differences and self-awareness in the context of multi-source feedback. Journal of Occupational and Organizational Psychology, 73, 303-319. Reading 5.1 Lefkowitz, J. (2000). The role of interpersonal affective regard in supervisory performance ratings: A literature review and proposed causal model. Journal of Occupational and Organizational Psychology, 73, 67-86.

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