In the mid-1980s Xerox corporation was faced with a problemits performance appraisal system was not working.

Rather than motivating the employees, its system was leaving them discouraged and disgruntled. Xerox recognized this problem and developed a new system to eliminate it.

Old Performance Appraisal System The original system used by Xerox encompassed seven main principles: 1. The appraisal occurred once a year. 2. It required employees to documenet their accomplishments. 3. The manager would assess these accomplishments in writing and assign numerical ratings. 4. The appraisal included a summary written appraisal and a rating from 1 (unsatisfactory) to 5 (exceptional). 5. The ratings were on a forced distribution, controlled at the 3 level or below. 6. Merit increases were tied to the summary rating level. 7. Merit increase information and performance appraisals occurred in one session. This system resulted in inequitable ratings and was cited by employees as a major source of dissatisfaction. In fact, in 1983, the Reprographic Business Group (RBG), Xeroxs main copier division, reported that 95 percent of its employees received either a 3 or 4 on their appraisal. Merit raises for people in these two groups only varied by 1 to 2 percent. Essentially, across-theboard raises were being given to all employees, regardless of performance. New Performance Appraisal System Rather than attempting to fix the old appraisal system, Xerox formed a task force to create a new system from scratch.The task force itself was made up of senior human resources executives; however, members of the task force also consulted with councils of employees and a council of middle managers.Together they created a new system, which differed form the 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. The new system has three stages, as opposed to the one-step process of the old system. These stages are spread out over the course of the year. The first stage occurs at the beginning of the year when the manager meets with each employee. Together, they work out a written agreement on the employees goals, objectives, plans, and tasks for the year. Standards of satisfactory performance are explicitly spelled out in measurable, attainable, and specific terms. The second stage is a mid-year, mandatory feedback and discussion session between the manager and the employee. Progress toward objectives and performance strengths and weaknesses are discussed, as well as possible means for improving performance in the latter half of the year. Both the manager and the employee sign an objectives sheet indicating that the meeting took place. The third stage in the appraisal process is the formal performance review, which takes place at years 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. This meeting emphasizes feedback and improvement. Efforts are made to stress the positive aspects of the employees performance as well as the negative. This stage also includes a developmental planning session in which training, education, or development experiences that can help the employee are discussed. The merit increase discussion takes place in a separate meeting from the performance appraisal, usually a month or two later. The discussion usually centers on the specific reasons for the merit raise amount, such as performance, relationship with peers, and position in salary range. This allows the employee to better see the reasons behind the salary increase amount, as opposed to the summary rank, which tells the employee very little. A follow-up survey was conducted the year after the implementation of the new appraisal system. Results were as follows:

81 percent better understood work group objectives 84 percent considered the new appraisal fair 72 percent said they understood how their merit raise was determined 70 percent met their personal and work objectives 77 percent considered the system a step in the right direction

In conclusion, it can be clearly seen that the new system is a vast imporvement 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.

Questions:
1. What was the problem in the old performance appraisal system ? major problem of rating is : -

Central Tendency Errors Central tendency errors occur when the rater avoids the extremes of the performance scale and evaluates most employees somewhere near the middle of the scale. The error results in most employees being rated as Average. Leniency, strictness, and central tendency errors limit the ability of the performance appraisal to discriminate between the performances of employees. Thus employees are grouped together at the low, mid-point, or high end of the scale and it is virtually impossible to differentiate performance levels among the employees.

Recency Effects The recency bias occurs when performance is evaluated based on performance in formation that occurred most recently. Essentially, supervisors rate the employees most recent behavior. Recency errors are most likely to occur when there is a long period of time between performance evaluations (such as a year).

Leniency/strictness Errors Leniency and strictness error occur when the rater tends to use one of the extremes of a rating scale. When leniency errors occur, most employees receive very favorable ratings, even though it is not warranted by their performance. Leniency errors can occur for a number of reasons. For example, a supervisor may be uncomfortable comforting particularly aggressive employees with less than favorable evaluations. To avoid conflict, the supervisor might choose to rate everyone high. It is also possible that the supervisors own performance evaluation is based partially on the performance of his/her work group. Rating everyone favorably gives the impression that the entire work group is very effective.( Anthony, 1999) Strictness errors, which are the opposite of leniency errors, occur when the rater erroneously evaluates most employees unfavorably. In this case, supervisors may simply want to appear tough or they may have unrealistic expectations of performance. Regardless, most employees are assigned rating at the lower end of the performance scale. Favoritism Favoritism is a positive bias towards a specific type of employee. The favored employee possesses specific characteristics and attributes preferred by managers. Regardless, favoritism is an unfair bias towards one group or person over another group or person. It is very difficult to eliminate favoritisms. It is human nature to prefer certain behaviors, attributes, and characteristics over others. Beyond internal conflict between employees, favoritism will cause serious morale problems. Teamwork can never be achieved when favoritism is present.

2. What type of performance appraisal is central to new system at Xerox? Which, if any, of the criteria for a successful appraisal does this new system have?

Management by Objectives ( MBO) 1. One method that attempts to overcome some of the limitations of result appraisal is Management of Objectives. MBO is a philosophy of management first proposed by Peter Drucker in 1954 that employees establish objectives through consultation with their superiors and then uses these objectives as a basis for evaluation. MBO is a system involving a cycle that begins with setting the organizations common goals and objectives and ultimately returns to that step. The system acts as a goal setting process whereby objectives are established for the organization, departments and individual managers and employees. 2. A significant feature of the cycle is the establishment of specific goals by the employee, but those goals are based on a broad statement of employee responsibilities prepared by the supervisor. Employee-established goals are discussed with the supervisor and jointly reviewed and modified until both parties satisfied with them. 3. The goal statements are accompanied by a detailed account at the actions of the employee proposes to take in order to reach the goals. During periodic reviews, as objective data are made available, the progress that the employee is making towards the goals is then assessed. 4. Goals may be changed at this time as new or additional data are received. At the conclusion of the period of the time, the employee makes a self-appraisal of what she/he has accomplished, substantiating the self-appraisal with factual data wherever possible. 5. The interview is an examination of the employees self- appraisal by the supervisor and the employee together. 6. The final step is reviewing the connection between individual and organizational performance.

7. To ensure success, MBO programs should be viewed as part of a total system for

managing, not merely an addition to the managers job. Managers must be willing to empower employees to accomplish their objectives on their own, giving them discretion over the methods they use. Essay Method In the Essay method, the appraiser requires to compose a statement that best describes the employee being appraised. The appraiser is usually instructed to describe the employees strengths and weaknesses and to make recommendations for his/her development. The Essay method provides an excellent opportunity to point out the unique characteristics of the employee being appraised. This aspect of the method is heightened when a supervisor is instructed to describe specific points about the employees promotability, special talents, skills, strengths, and weaknesses. The major limitation of the essay method is that composing an essay that attempts to cover all

of employees essential characteristics is a very time-consuming task. Plus, the quality of the performance appraisal may be influenced by the supervisors writing skills and composition style. Example, good writers may simply be able to produce more-favorable appraisals. It tends to be subjective and may not focus on relevant aspects of job performance.