Performance appraisal refers to the practice of assessing the achievement of individuals. In an industrial/organisational psychological context, performance appraisal is often extended to mean the entire process of identifying, evaluating and developing employee work performance, with the goal of honing employee performance and employer expectations, ultimately to create a single cohesive team (CCH, 1988).
In this context, performance appraisal is the process of comparing what the employee actually does with what the employee is expected to do; as such, it is best used in conjunction with feedback to allow the employee to hone their performance to the employer’s expectations (CCH, 1988). Without this feedback, the employee has little idea whether their performance is adequate, and consequently will not attempt to improve or alter their behaviour.
Performance appraisal also facilitates greater objectivity in decision-making, as those making the decisions are able to refer to quantitative information (CCH, 1988).
Effective performance appraisal has widespread application within an organisation; for example, it can be used as a basis to modify work practises and the working environment, identify employees suitable for promotion, training, transfer and dismissal, and as a determinant of reward (i.e. salary) (CCH, 1988).
The act of assessment is comprised of two distinct parts, those being measurement and evaluation; measurement is the act of collecting data concerning the assessed employee’s performance, while evaluation is the comparison of the measured data with a set of standards (Schuler, 1992).
However, no measurement or evaluation can be done until the criteria for what constitutes a “good job” is defined. Criteria are the important desirable attributes of performance; they define what the employer is looking for in employee performance (Schuler, 1992). Most occupations will have multiple criteria, which then requires that the criteria are weighted according to importance (Schuler, 1992).
Typically, criteria fall into several larger categories, termed dimensions (Schuler, 1992). These dimensions serve to sort criteria into various meaningful groups.
Once criteria are identified, performance standards can be set. The function of performance appraisal is to quantify employee performance; a performance standard is an arbitrary quantity of performance chosen by the employer, a line in the sand to distinguish between performance that is satisfactory and performance that is not (Schuler, 1992). Often there will be intermediate measures, rather than simply “satisfactory” there may be “excellent”, “bearable” or “substandard”; at each point a standard is set, and thus the set of standards becomes a scale, each mark on the scale defining a new level of achievement. Defining performance standards assigns a range of values to a criterion (Schuler, 1992).
Once established, a criteria/performance standard yardstick can be used to measure and evaluate the performance of employees. However, the possession of objective tools does not guarantee objectivity, as the tools can be used subjectively. Interpersonal conflicts, misapprehension, cognitive biases, ineptitude and any other of the plethora of human actions and reactions can invalidate measurements obtained with performance appraisal tools, and as such, attention must be paid not only to nervous employees but also to the selection and training of those using the tools, the raters (CCH, 1988).
The exclusion of error is an important consideration, as any contamination of the collected data will affect the results. Error in performance appraisal manifests itself in many forms. CCH (1988) describes the “halo effect”, where a particularly outstanding feature in a ratee’s profile “outshines” the rater’s opinion on the ratee with respect to specific criteria, leading to similar ratings on all criteria. Schuler (1992) describes the “horn effect”, a similar process whereby a particularly negative ratee characteristic outshines other ratee characteristics, also leading to similar ratings on all criteria. CCH (1988) describes errors of central tendency (where all ratings tend to lie around the centre of the scale), errors of leniency or strictness (where all ratings tend to lie around the poles of the scale), and “recent error”, where the rater recalls (and rates on) the employee’s most recently exhibited behaviour (rather than “normal” behaviour). Schuler (1992) mentions “primacy bias”, where the rater pays special, undeserved attention to information collected initially.
CCH (1988) goes on to discuss “logical error”, where seemingly related criteria are rated similarly, when they may not be related at all; bias and prejudice, where irrelevant personal characteristics (such as age, sex, race and so on) are allowed to cloud the ratings; lack of information, where a rater attempts to use non-representative (i.e. irrelevant or of little relevance) criteria, standards or measurements; and fear, where a rater is unwilling to be frank for fear of giving offence, creating disharmony, or through concern for personal well-being. CCH (1988) also points out that failure to understand the motivation of employees when undertaking assessment and subsequent assessments may lead to erroneous conclusions; employees are nervous when scrutinised and may remain so afterwards. Schuler (1992) discusses contrast effects, where employees rated consecutively unduly influence the rater’s impression of those employees following.
As the effect of error is reduced, the validity and reliability of an appraisal increases.
Similarly, modification of criteria and performance standards also change the outcome of the appraisal. An ill-defined criterion or standard allows inappropriate (or more subjective) interpretation by raters, thus enhancing the effect of error and heightening the level of contamination. Conversely, the refinement of criteria and performance standards reduces the effects of error and facilitates more valid and reliable results.
CCH (1988) Employee Assessment, Appraisal and Counselling, second edition. CCH Australia Ltd., North Ryde, Australia
Schuler, R.S. (1992) Managing Human Resources, fourth edition. West Publishing Co., New York, USA