MAKERERE UNIVERSITY BUSINESS SCHOOL

MASTERS IN BUSINESS ADMINISTRATION ONE -MBA 1

HUMAN RESOURCE MANAGEMENT

GROUP 9

COURSE WORK

QUESTION

Discuss Performance Appraisal and Performance Management.

Performance Management
Employees are an integral and indispensable part of running any business smoothly and
efficiently. Keeping in mind the crucial role of played by employees, has lend to the emergency
of Performance Management as a practice. Using performance management, organizations can
ensure that employees not only fulfill their responsibilities, but do so to the best of their
abilities and up to the organization expectations.

Performance management is thus a comprehensive process that involves monitoring and

developing the desired traits to rating employee progress and rewarding them for their
achievements as it allows management to tap into there full potential.

Performance Management is therefore a systematic process by which an organization involves

its employees as individuals and members of a group in improving organizational effectiveness
in the accomplishment of agency mission and goals. Armstrong and Baron (1998) defined it as a
“strategic and integrated approach to increasing the effectiveness of organizations by
improving the performance of the people who work in them and by developing the capabilities
of teams and individual contributors.”

The performance management process is used to communicate organizational goals and

objectives, reinforce individual accountability for meeting those goals, and track and evaluate
individual and organizational performance results.

PM involves planning, monitoring, developing, rating and rewarding good performance as the
key major components of the process. The performance management process involves the
following steps;

Performance Planning - provides information on establishing performance expectations and

goals for employees to channel their efforts toward achieving organizational objectives.

Monitoring Employee Performance; Provides information on the requirements to conduct at

least one formal written progress review for all employees.

Employee Development – provides information on the importance of evaluating and

addressing employee development to increase the effectiveness of an organization.

Evaluating Employee Performance – provides information on evaluating employee

performance against the elements and standards in an employee's performance plan and
assigning a summary rating of record.

2|Page
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
Recognition – provides information on a large variety of informal and formal recognition
programs, which can be used to recognize and reward employee excellence.
Regardless of organizational size Performance management has three important aspects that
organizations need to look at when they are to initiate the process. These include these are
important to note;

Alignment of organizational goals: Organizations need to have clearly articulated goals. These
goals need to be communicated to everyone in the organization. This will help in seeing that
staff establish individual goals that are aligned with organizational goals. Organizations need to
formalize goal setting and monitor alignment and progress if they are to succeed as it will
enhance management visibility to established individual goals.

Regular formalized feedback: Organizations tend to ignore giving employees ongoing, but
formalized feedback. Evaluating an employee’s performance of critical competencies and goals
is a vital key to the success of an organization as it helps them both the employees and the
organization knows who’s performing, who needs development and who’s not a right fit.

Performance based employee development: For every employee, you need to identify areas
that need development, based on existing performance, invest in appropriate training and
development activities, and then monitor improvements in performance to be sure their
effective. This is how everyone improves and succeeds.

Performance Management is mostly used in the workplaces, where people interact, schools,
churches, community meetings, sports teams, health setting, governmental agencies, and even
political settings. World over people interact with their environments to produce desired
effects.

There are several benefits of Performance Management for instance managing employees or
system performance facilitates the effective delivery of strategic and operational goals.

Involve employees in the planning stage: The mere making of plans alone will not help you to
run your business successfully. You must also focus on the appropriate ways to get business
tasks done. One way of doing this efficiently is to involve your employees in the planning
process. This will not only boost their morale and confidence, but also help you avoid any
communication gaps in the process.
Additionally, it will also help in providing them with a clear picture of what you expect from
them and what they need to accomplish.

3|Page
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
Monitoring the progress of your employees: Just as revision of business plans is sometimes
necessary for the success of your business, measuring the performance of every employee is
also important. This ensures that tasks are efficiently completed on time and on or under
budget. It also points out to you any shortcomings of either your staff or business plans, and
helps you to take the appropriate corrective actions.

Ensuring all around development of employees: Performance management gives you the tools
to instill the desired qualities in your employees in order to get the job done. Development is
not limited to only individuals in your workplace, but also addresses the performance of the
team as a whole. All around employee development not only ensures the personal and
professional growth of your employees, but also the expansion and improvement of your
business.

Evaluation of individual performance: Evaluating and rating the performance of your

employees on an individual basis is essential. This gives them a clear picture of where they
presently stand, areas that they need to work on and what they are good at. This way, they can
focus more on their weaknesses and work to strengthen those areas.

You should make it company policy to issue performance reviews while providing your
employees with the feedback that they need to perform better at their jobs. Remember - just
as it is important to point out your employees' weaknesses and shortcomings, it is also essential
to commend them on their strengths.

Rewarding your employees: Rewarding and appreciating your employees' efforts ensures that
their level of their performance and consequently the performance of your business is not
compromised. It ensures optimum productivity, performance and maximum profitability.
Rewarding your staff for a job well done not only enhance their performance but also serves as
a tool to keep them motivated. Therefore, performance management is an effective system
that allows you to achieve the financial goals of your small business.

Creation of a motivated workforce: this is because employee engagement is improved as

everyone understands how they are directly contributing to the organizations high level goals.
It’s also a basis professional development programs are better aligned directly to achieving
business level goals. In the same vain it creates the transparency in achievement of goals.
Improved management control: As management is highly flexible and responsive to the various
organizational needs. It also simplifies communication of strategic goals scenario planning.

4|Page
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
PERFORMANCE APPRAISAL

Performance appraisal is a component of performance management which is used for rating

performance of superiors and subordinates.

Performance appraisal is thus a continuous process of assessing and providing feedback to

subordinates about how well or poorly they are doing their work for the organization. This can
be in terms of quality, quantity, cost, and time undertaken typically by the corresponding
manager or supervisor. Thus it’s a systematic description of employee’s relevant strengths and
weakness in achieving organizational objectives.

For a Successful Performance Appraisal process the following are essential as regards its
effectiveness that is documentation, standards, practicability and simplicity, evaluation criteria,
communication, feedback and personal bias.

Documentation involves the continuous noting and documenting the performance as it helps
the evaluators to give a proof and the basis of their ratings.

Standards: Setting clear, easy to understand, achievable, motivating, time bound and
measurable.

Practical and simple format: The appraisal format should be simple, clear, fair and objective.
Long and complicated formats are time consuming, difficult to understand, and do not elicit
much useful information.

Evaluation technique: An appropriate evaluation technique should be selected which looks at

performance rather than the activities thus it should be based on observable and measurable
characteristics of the behavior of the employee.

Communication: Communication is an indispensable part of the Performance appraisal process.

The desired behavior or the expected results should be communicated to the employees as well
as the evaluators. Open communication system motivates the employees to actively participate
in the appraisal process.

Formalized feedback: The purpose of the feedback should be developmental rather than
judgmental. To maintain its utility, timely feedback should be provided to the employees and
the manner of giving feedback should be such that it should have a motivating effect on the
employees’ future performance.

5|Page
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
Personal Bias: Interpersonal relationships can influence the evaluation and the decisions in the
performance appraisal process. Therefore, the evaluators should be trained to carry out the
processes of appraisals without personal bias and effectively.

There are a number of challenges faced when designing an effective and successful
performance appraisal system. These challenges among others may include the following;

Determining the evaluation criteria. Its one of he biggest challenge faced by top management.
For the purpose of evaluation, the criteria selected should be in quantifiable.

Lack of competence; Raters should have the required expertise, knowledge, training and
experience to decide the criteria accurately.

Errors in rating and evaluation; there is need for the rater to exercise objectivity and fairness in
evaluating and rating the performance of the employees. Errors such as personal bias may
creep in the appraisal process.

Resistance; The appraisal process may face resistance from the employees and the trade unions
for the fear of negative ratings. Therefore, the employees should be communicated and clearly
explained the purpose as well the process of appraisal. The standards should be clearly
communicated and every employee should be made aware that what exactly is expected from
him/her.

Performance Appraisal can be broadly identified as either informal or formal appraisal the
former is carried out on a day to day basis where a manager dims fit and the later is carried
periodically and this can be semi annual, quarterly or even monthly with the aim of letting
Subordinates know there performance levels, Identifying probable candidates who deserve
raises, those who deserve raises and promotions.

There are several approaches to performance appraisal, but a common approach to assessing
performance is to use a numerical or scalar rating system whereby managers are asked to score
an individual against a number of objectives.

Traditional approach: Traditionally, performance appraisal has been used as just a method for
determining and justifying the salaries of the employees and was a common approach in the
1950s. This approach was a past oriented approach which focused only on the past
performance of the employees i.e. during a past specified period of time. This approach did not

6|Page
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
consider the developmental aspects of the employee performance i.e. his training and
development needs or career developmental possibilities.
The primary concern of the traditional approach is to judge the performance of the
organization as a whole by the past performances of its employees.

Modern approach: The modern approach to performance development has made the
performance appraisal process more formal and structured. Now, the performance appraisal is
taken as a tool to identify better performing employees from others, employees’ training needs,
career development paths, rewards and bonuses and their promotions to the next levels.

Appraisals have become a continuous and periodic activity in the organizations. The results of
performance appraisals are used to take various other HR decisions like promotions,
demotions, transfers, training and development, reward outcomes. The modern approach to
performance appraisals includes a feedback process that helps to strengthen the relationships
between superiors and subordinates and improve communication throughout the organization.

The most popular methods used in the performance appraisal process include the following:

Management by objectives: Is a process of defining objectives within an organ so that

management and employees agree to the objectives and understand what they are in an
organization. According to Drucker, MBO is a perspective goal setting, choosing course of action
and decision making, ideally it’s the measurement and comparison of the employees’ actual
performance with the standards set. MBO
 Set targets are usually fulfilled because the objectives are set by both the employee and
management.
 Employee Motivation as they are involved in the process of goal setting. This increases
employee empowerment and job satisfaction.
 Better communication and coordination. Frequent reviews and interactions between
superiors and subordinates helps to maintain harmonious relationships within the
organization.
 Commitment by the employees as goals are not imposed on them but rather they are
involved in goal and objective setting.
 Linking of objectives of subordinates to organization objectives by the manager.
Several limitations
 It emphasizes the setting of goals over the working of plan as a driver of outcomes.
 Under emphasizes the importance of the environment or context in which the goals are
set.

7|Page
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
360-degree appraisal: it’s a process through which employees receive confidential anonymous
feedback from those who work around them. It’s a feedback that comes from all around an
employee thus commonly known as multi source feedback or assessment. 360 degree
respondents for an employee can be his/her peers, managers (i.e. superior), subordinates,
team members, customers, suppliers/ vendors or anyone who comes into contact with the
employee and can provide valuable insights and information or feedback regarding the "on-the-
job" performance of the employee. It’s illustrated as below;

The system has four important integral components that is self appraisal, superior’s appraisal,
subordinate’s appraisal and peer appraisal.

Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his
achievements, and judge his own performance whereas the superior’s appraisal forms the
traditional part of the 360 degree performance appraisal where the employees’ responsibilities
and actual performance is rated by the superior.

Subordinates appraisal gives a chance to judge the employee on parameters such as

communication and motivating abilities, superior’s ability to delegate the work, leadership
qualities and so forth. The correct feedback given by peers can help to find employees’ abilities
to work in a team, co-operation and sensitivity towards others.

Self assessment is an indispensable part of 360 degree appraisals and therefore 360 degree
Performance appraisal have high employee involvement and also have the strongest impact on
behavior and performance. It provides a "360-degree review" of the employees’ performance
and is considered to be one of the most credible performance appraisal methods.

360 degree performance appraisal is also a powerful developmental tool because when
conducted at regular intervals for instance yearly it can help to keep track of the changes and
others’ perceptions about the employees. A 360 degree appraisal is generally found more
suitable for the managers as it helps to assess their leadership and managing styles. MUBS,
several banks in Uganda such as KCB use this technique for performance appraisal.

8|Page
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
Behavioral observation scale: It’s a rating system used in identifying how employees or
trainees display the preferred behavior in an organization. It’s a frequency rating of critical
incidents that the worker has performed. For instance walls of fame in mostly service
industries, notices in an organization and so forth.

Other performance appraisal techniques include;

Essay appraisal: The appraiser is asked to write an essay on the employee’s strengths,
weaknesses and potentials. This technique is more valid and formal than complicated methods
of appraisal. The biggest drawback in this method is that it is difficult to combine and compare
the essays as it may touch upon various aspects of one’s performance and qualifications.
Another drawback is the variability of length and content in the essays.

Forced distribution; the rater is given a series of statements about an employee and these
statements are arranged in blocks of two or more. The rate indicates which statement is the
most or least descriptive of an employee. For instance work is reliable, learns fast. There is no
bias in rating

Critical incident method; the manger writes down positive or negative performances behaviors
of an employee throughout the performance period.

Graphic rating scale: This method is both consistent and reliable. A person’s quality and
quantity of work is assessed in a graphic scale. A variety of factors are taken into consideration
including his/her personal traits like cooperation and reliability. Although the graphic scale is
widely used, it is under frequent controversy. But the graphic scale is more economical to
develop and it is not complicated. Therefore it is easily acceptable by raters.

Forced choice rating: This technique is unbiased in comparison to other techniques. This also
does not involve the intervention of a third party in appraisal. In this method, the raters are
asked to choose from among groups of statements those that best fit the individual employee
who is rated and those that least fit him/her. The statements are then weighed and scored the
same way psychological tests are scored. This technique is limited to lower and middle
management levels in companies as the levels of jobs are similar to make standard common
forms with this group.

Field review: The field review is a group judgment technique and it tends to be fairer and more
valid than individual ratings. Here a member of the personnel department meets with small

9|Page
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
groups of raters from each supervisory unit and goes over each employee’s ratings with them.
In this way, each rater conceives uniform standards, arrives at group consensus and identify
areas of disagreement between inter raters. But it is time consuming and arduous.

Critical incident appraisal: This technique is appreciated by many employees and employers
because it is natural and gives a supervisor actual factual incidents to discuss with the
employee. In this method, supervisors are asked to keep a record on each employee and to
record actual incidents of positive and negative behavior. The discussion between the
supervisor and his subordinate deals with actual behavior and not on traits. Here the
performance of the employee and not his personality gets criticized. The employee will
specifically get to know how to perform differently if he wants to be rated higher the next time.

Work standards approach: In this technique the organizations set the daily work standards for
the employees instead of asking the employees to set their own performance goals. This
technique aims at improving productivity and makes possible an accurate and objective
appraisal of work of employees and supervisors. Considerable amount of time is spent on
observing the employees on the job, simplifying and improving the job where possible and
arriving at realistic output standards. Different people are evaluated differently and it becomes
difficult to rate them for comparison especially at the time of deciding promotions and salary
increase.

The performance appraisal process is a process that evaluates employee performance. It’s a

systematic process that involves five steps that is planning, developing, performing, assessing
and reviewing as illustrated below;

Establishing performance standards: The first step in the process of performance appraisal is
the setting up of the standards which will be used to as the base to compare the actual
performance of the employees. This step requires setting the criteria to judge the performance
of the employees as successful or unsuccessful and the degrees of their contribution to the
organizational goals and objectives. The standards set should be clear, easily understandable

10 | P a g e
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
and in measurable terms. In case the performance of the employee cannot be measured, great
care should be taken to describe the standards.

Communicating the Standards: Once set, it is the responsibility of the management to

communicate the standards to all the employees of the organization. The employees should be
informed and the standards should be clearly explained to the. This will help them to
understand their roles and to know what exactly is expected from them. The standards should
also be communicated to the appraisers or the evaluators and if required, the standards can
also be modified at this stage itself according to the relevant feedback from the employees or
the evaluators.

Measuring the Actual performance: The most difficult part of the Performance appraisal
process is measuring the actual performance of the employees that is the work done by the
employees during the specified period of time. It is a continuous process which involves
monitoring the performance throughout the year. This stage requires the careful selection of
the appropriate techniques of measurement, taking care that personal bias does not affect the
outcome of the process and providing assistance rather than interfering in an employees work.

Comparing the actual with the desired performance: The actual performance is compared with
the desired or the standard performance. The comparison tells the deviations in the
performance of the employees from the standards set. The result can show the actual
performance being more than the desired performance or, the actual performance being less
than the desired performance depicting a negative deviation in the organizational performance.
It includes recalling, evaluating and analysis of data related to the employees’ performance.

Discussing results: The result of the appraisal is communicated and discussed with the
employees on one-to-one basis. The focus of this discussion is on communication and listening.
The results, the problems and the possible solutions are discussed with the aim of problem
solving and reaching consensus. The feedback should be given with a positive attitude as this
can have an effect on the employees’ future performance. The purpose of the meeting should
be to solve the problems faced and motivate the employees to perform better.

Decision making: The last step of the process is to take decisions which can be taken either to
improve the performance of the employees, take the required corrective actions, or the related
HR decisions like rewards, promotions, demotions, transfers etc.

When executed in the right manner and reference made to the performance data, the process
can be of a benefit to the organization as it may;

11 | P a g e
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
Performance appraisal provides a continuous record of performance by which an employee’s
progress or lack of it can be judged.

It can be used as an aid of internal staff adjustments such as lay offs, transfers and promotions
for employees in a given organization.

They also indicate an employees suitability for other jobs in the same or other departments as
uniform performance measures may have been established as a basis upon which capability
may be judged.

Despite the above benefits that accrue to performance appraisal, it also has it limitations which
among others include the following;

Supervisors are often reluctant to prepare periodic appraisals of each of their subordinates.
This is true in cases where such results are to be discussed by the subordinates.

It’s based on comparisons between expected performance and actual performance. Expected
performances may however based on job descriptions that are out of date as a result of non
reviewing them periodically.

Most performance are linked to salary increments. In these cases there is tendency for rater to
inflate appraisals for fear of damaging their relationship with subordinates.

Performance appraisal is an important aspect in determining who employees’ performance is

contributing to the achievement of the overall organizational goals. This process is thus prone
to errors which include leniency, central tendency, halo effect, recency error, rater effect and so
forth.

In leniency errors the evaluator consistently evaluates the employee on the high end. This error
can be controlled through clearly identifying and defining dimensions of performance.

Halo effect is where an employee is rated highly on one dimension is subsequently rated high
on other dimensions and this is based on the original impression by the rater.

Recency error occurs when rating is influenced recent occurrences in the employee’s behavior.
The rater is largely influenced by the most recent occurrences as opposed to the occurrences as
regards the entire period.

12 | P a g e
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
For effective implementation of performance appraisal and to reap the many benefits that are
attributed to the process management should;

The process should have support, understanding and cooperation form all the parties involved
in the process. This would help in avoiding suspicion and failure of the process as it tends to
build confidence of the parties involved in the process.

The process should be continuous. Supervisors should continuously assess how their staff are
motivated on job to enhance effectiveness and efficiency.

Managers should posses counseling skills in various areas such as problem identification,
listening to mention but a few.

More people should be involved in the process so that the people being assessed do not feel
that they are at the mercy of their immediate supervisors.

Conclusion:
Formal appraisals by managers are often ineffective in improving the performance of
subordinates. Individuals who are given criticism about there performance tend to become
defensive and resentful. There performance after appraisal tend to decline, therefore to correct
this problem, there are suggestions by researcher that appraiser and appraisee should set
performance goals and evaluate progress towards these goals.

13 | P a g e
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)
References
 M S Shookla, A Handbook of Human Relations: With Structured Experiences and
Instruments, 2004
 Michael Armstrong, Armstrong's Handbook of Human Resource Management, Practice
Alan Price, Human Resource Management in a Business Context, 3rd edition
Waswa Balunywa, Business administration fourth Edition
 Paul Hersey and Keneth Blanchard, Management of Organizational Behavior, Prentice
Hall
 Peter Drucker, The Practice of Management, Heinemann Publishing
 The internet
 Waswa Balunywa, Handbook of Management, Rising Sun Publishers

14 | P a g e
Group Nine HRM 2010-11 (Performance Management & Performance Appraisal)