Performance Appraisal Systems: Techniques, Methods, and Common Errors
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Performance Appraisal Systems
Many companies establish methods to improve employee performance and correct errors. Performance appraisal systems are well-established in organizations. Information gathered by these systems is used to decide wage adjustments, promotions, and training. Managing and evaluating performance remains a challenge for most managers. Performance management is the process of linking individual or group performance with the main strategic mission and values.
Objectives of Performance Management Systems
- Motivate Performance: Employee motivation and performance are key factors for business success. Owners and managers strive for good performance.
- Aid Continuous Improvement: Performance management systems help identify areas for improvement and track progress.
- Help Individuals Develop Skills: Managers need to encourage employees to take ownership of their jobs and develop new skills.
- Building a Performance Culture: Creating a performance culture requires a systematic approach to managing the performance of the organization, teams, and individuals.
- Determining Promotions: Identifying the best candidates for promotion is crucial. Internal hires offer the advantage of company knowledge and reduced ramp-up time.
- Eliminating Poor Performance: Individuals can be categorized into high, medium, and poor performers. Poor performance must be addressed due to its negative effects.
- Help Implement Business Strategy: Every business should have written goals. Goals are only effective if people are responsible for achieving them.
Reasons for Performance Management System Failure
- Incorrect Employee Evaluation: Unfair or biased evaluations can undermine the system.
- Unconstructive Feedback: Feedback should be specific, actionable, and focused on improvement.
Performance Appraisal Techniques
360-Degree Feedback
This appraisal technique provides feedback on employee performance from multiple sources, including subordinates, peers, and supervisors. The increasing use of 360-degree feedback is due to:
- The need for cost-effective alternatives to assessment centers.
- The need for continuous measurement in continuous improvement efforts.
- The need for job-related feedback.
- The desire for further leadership development.
Ranking Method
This system requires raters to rank subordinates based on overall performance. Advantages include:
- Employees are ranked according to their performance level.
- It's easy to identify the best and worst performers.
Common Errors in Performance Appraisals
- Contrast Effect
- First Impression Error
- Halo-Horn Effect
- Similar-to-Me Effect
- Central Tendency
- Stereotyping
Conclusion
Harvard University separates appraisal methods into two types: traditional methods (emphasizing personality traits like initiative, creativity, and integrity) and modern methods (evaluating work results, which are more objective).