Abstract
The standard performance appraisal does not adequately address employer concerns in maintaining ethical and legal compliance. Globalization and increasingly stringent anti-discrimination legislation necessitates the need for an effective performance appraisal system. Successful and legally compliant performance appraisals are becoming a top priority in most companies, and they are looking to their human resource team in order to provide the most effective measures in which to align company goals with employee performance. This research helps define common pitfalls that organizations encounter when their performance appraisal system is inadequate, and addresses the challenge in training effective evaluators. There are many psychological considerations to keep in mind. A poorly orchestrated performance appraisal is ineffectual and may exhibit to be psychologically damaging as well.
Introduction
Performance appraisals often referred to as annual reviews, performance reviews, annual reviews, merit ratings, performance ratings, and employee ratings, are an integral share of any organization (Law, 2006). Although the name may differ, the objective remains the same, which is to evaluate the performance of an employee in relation to the stated goals of the company. Lord and Taylor Co. introduced the first performance appraisal systems in 1914 as a means to rate their employees against the mission and objectives of the company (Law, 2006).
Law (2006), identifies five elements common to almost all performance appraisal systems:
1) Someone else is evaluating the performance, behaviors and traits of the individuals appraised.
2) Scheduled reviews occur annually or quarterly as opposed to being tied to the completion of particular tasks or projects.
3) Such ratings and judgments are systematically undertaken with all employees of a particular department or organizational unit.
4) The process is either strictly mandatory or tied to some reward system (such as pay raises or promotions).
5) The employer will retain ratings in the employee's permanent file.
Performance appraisals are an essential part of any organization and they encourage several important functions. They allow the employer to monitor progress, or lack thereof, in moving toward performance goals that align the employee to company goals. There are many different approaches to developing and implementing an effective performance appraisal system.
Ethical Considerations
Some opponents of the performance appraisal system disapprove of the inherent superior/subordinate roles that define the manager/employee relationship. From a psychological standpoint, this could create an onerous relationship between management and staff if done improperly or without tact. Some experts believe that two positive statements should counter balance every criticism. There seems to be a stunning line between constructive and destructive criticism. Perhaps positive mentoring can replace criticism as the means by which learning and growth takes place.
Through many years of research and based on personal experience, I have found that the consume of criticism is damaging to any relationship. If managers determine to take a mentoring and guiding approach rather than a judging and critical approach, the results could be much more certain and estimable to the manager, the employee, and the organization itself. Communication experts continue to stress the importance of effective interpersonal skills; they discuss how proper communication can develop a harmonious working environment that is beneficial to peak performance.
When conducting performance appraisals, effective communication is crucial in a region that is often highly charged with anxiety for the appraiser and the employee. When management calls an employee for their annual performance appraisal, we can surmise that both parties feel tremendous apprehension and uncertainty. Even when the appraisal is almost entirely positive, broaching the topic of weaknesses or deficiencies is tenuous. What if there were no critical elements to a performance appraisal? What if the entire conversation highlighted the employee's strengths and gave examples of those strengths in action? Management could inquire whether the employee felt there were any weaknesses to address with additional training and development initiatives. By asking the employee about possible weaknesses rather than pointing them out, this could start up the doors of communication rather than setting the stage for barrier building. This come puts responsibility on the employee and sets the stage for start communication, while at the same time, establishing trust between manager and employee. When an employee is empowered, they can then take ownership of their performance without feeling threatened, humiliated, intimidated or devalued (Law, 2006).
The psychology behind effective leadership lends to a managers ability to lead in a distinct and proactive fashion, rather than creating hostility and mistrust between supervisors and their subordinates. There are counterproductive aspects of performance appraisals that need thoughtful consideration before implementation of a truly effective rating scale can occur. Performance appraisals seem to instill awe in the hearts of employees no matter how innocuous the review may be. The possibility that an appraiser will score an employee inferior, incompetent, unworthy or worse, causes tremendous anxiety and wretchedness. Some employees leave the actual performance appraisal feeling "bitter, crushed, bruised, battered, desolate, despondent and unfit for work weeks after receiving the appraisal" (Law, 2006).
Another pitfall of the standard performance appraisal is that it fosters a superiority and inferiority role between managers and their subordinates, which seems to hinder an open communication style (Law, 2006). It is easy to feel threatened when faced with such a daunting process intended for the most part to ferret out weaknesses and improve performance. Depending on the management style, the process can range from downright abusive and belittling to empowering and growth oriented.
Many progressive analysts and researchers are trying to move away from traditional performance appraisals to ones that foster growth and development rather than critical judgment. These theorists contend that serious psychological harm can befall employees that face traditional methods of performance appraisal. Personal experience can attest to the fact that these theorists are definitely moving in the honest direction.
In order to dismantle the effectiveness of the standard performance appraisal system, there are certain basic assumptions researchers dispel as no longer accurate. The basis of traditional performance evaluations stems from a negative belief of intrinsic employee motivation. From undergraduate coursework, one understands in considering Maslow's hierarchy of needs, that all people have a basic intrinsic need to feel valued, to belong, and to have a sense of achievement. This higher-level need directly relates to how an individual feels about himself or herself in relation to the world around them.
The myth that most people hate work, and would avoid it if possible, is simply not an lawful assumption. Old schools of thought say that "People must be coerced, controlled, threatened and punished in order for them to put out reasonable effort" (Law, 2006). If one considers how the experts instruct parents to train, teach and mentor their children, these myths are clearly archaic thinking. Derive positive behavior and reinforce it. These are some basic principles that not only apply to children but to adults through all stages of growth. It is basic psychology.
Replacing negative myths with theories that are more in alignment with natural human behavior and intrinsic motivation makes a thought for developing a proper performance appraisal system possible. If one takes a closer inspect at the basic principles involved in the new approach, the incompatibility is starkly dissimilar. If an individual makes the following assumptions then an effective approach is much more likely.
1. People really do like to work. They gain satisfaction from being useful and valued. Many people tie a large percentage of their self-esteem directly to the work they do.
2. Most individuals will seek to develop their skills further when given the chance. It is a basic need to feel competent, marvelous and productive.
3. Ego and self-actualization needs are extremely important and most people will be committed and aligned to company goals if they feel like a valuable member of the team.
4. "Most people are naturally curious, imaginative and creative"
5. There are better methods of inducing desired employee behavior that do not include coercion, punishment and/or abuse
(Law, 2006).
When examination leads one to reflect on human behavior, the standard performance appraisal system is not an effective evaluation tool. It creates more barriers and roadblocks than it creates bridges and roads.
Measuring performance and providing feedback is crucial in keeping employee output in alignment with company goals. It is not the need for performance appraisal that is in question, it is the method by which it takes place.
There are certain organizations that believe in a "culture of coaching" (Lindborn, 2007), which enables a continuous 'feedback loop' (Lindborn, 2007). On the spot, this allows for positive reinforcement for a job done well, and allows correction for something done incorrectly. This continual 'feedback loop' (Lindborn, 2007), is important for employees because they always know where they stand in their performance, and it is beneficial to the organization because it promotes continual growth (Lindborn, 2007).
360-degree Performance Appraisals
Developing a 360-degree performance appraisal is a first step in reducing human error when evaluating employee performance. The result should slash bias and offer procedural safeguards to protect against litigation. Standard performance appraisals are rife with subjective error because only one person, the supervisor, conducts the appraisal. "During the performance evaluation, many mistakes on the fraction of the evaluator, the evaluated, the corporate atmosphere and the chosen method, can result in diminished trust in the evaluation" (Demirkaya, 2007).
Some common appraisal mistakes include the 'halo' or 'horn' effect. Evaluations with the halo effect will consider only the positive aspects of an employee's performance while the horn effect only takes into consideration an individual's weaknesses. So in essence, the evaluation is either all suited or all bad, which is rarely ever realistic (Demirkaya, 2007). Other common pitfalls include being too lenient and rating everyone high, or being too strict and rating everyone low. A more suitable reflection of a performance appraisal will have low and high scores for different competencies, and areas requiring improvement, as well as areas in which the employee is highly competent (Demirkaya, 2007). Those with the responsibility of conducting performance appraisals should be thoroughly trained on how to properly conduct them, thus avoiding legal and ethical mistakes. One of the main concepts to keep in mind is that trust in the effectiveness of the performance evaluation is crucial to its success. If employees do not trust appraisal measures because of the lack of objectiveness, the evaluation process is position up to fail.
Some of the best performance evaluations cover a broad range of performance criteria that include concrete and observable behaviors as well as observations that are more subjective, involving personality traits such as creativity or adaptability (Demirkaya, 2007). According to Lindborn (2007), a "culture of coaching" helps managers identify specific behaviors, through continual observation that lead to success on critical tasks. It allows the appraiser to behold high performers as well as employees who are working well below accepted standards. This observation lends to the development of performance criteria designed to create a solid and comprehensive performance appraisal system. These core competencies are direct, observable behaviors that set the standard by which organizations measure their employees. This is an objective procedure to evaluate performance, in which to avoid legal and ethical pitfalls (Lindborn, 2007).
Effective training for managers and supervisors is vital to the success of any performance appraisal system. A properly trained rater will support organizations clear the first hurdle. Coaching and guidance should appear in the supervisor/employee relationship. Organizations need coaching in order to obtain highly successful management skills, which includes the ability to perform successful performance appraisals. The training should be comprehensive and include guidance on the consume of effective performance "conversations" (Plunkett & Homer, 2007). Helping managers to do skills that identify target behaviors by which to assess performance, is also critical. Managers need training on what behaviors to sight for, and how to nurture and form core competencies identified as being beneficial to the organization (Plunkett & Homer, 2007).
It is vital to the organization's success to ensure proper management training to identify desired performance behaviors, and properly assess competencies based on those chosen measures. "Choosing what measure(s) to use to monitor performance and to motivate wonderful performance is critically important in all organizations because what you measure is what you get" (Merchant, 2007).
An interesting aspect of the 360-degree approach is that it allows employees to consume self-assessment measures. An individual tends to be harder on one-self than they are on others, and this could expose to be an insightful tool when it comes to the 360-degree performance appraisal. According to Hardy (2007), the use of self-evaluation may be useful in triggering the guilt response when if a task is performed poorly. When rating oneself, it may cause an individual to be more reflective and figure out ways to improve performance on their own. A poor rating of oneself is less likely to invoke the self-preservation, or defense mechanism, as would critical evaluation by another party.
Another effective argument for the 360-degree approach is that standard performance appraisals are a relative conflict of interest when only one party does the evaluating. Research has concluded that it is very difficult for a manager to be both an evaluator and a coach (Badawy, 2007). Superiors should use discretion when developing personal relationships with subordinates with whom they will be evaluating. These situations tend to promote bias and no matter how much caution is used in evaluation; both parties are only human (Badawy, 2007).
Legal Considerations
The legal and ethical issues surrounding performance appraisals are complicated. EEOC laws help curtail intentional or unintentional discrimination in the workforce. Even though these laws are stringent, they are not always clear-cut. Whenever an organization approaches an appraisal system, they must first consider whether the policies and practices may unintentionally discriminate against distinct groups of protected individuals and take measures to prevent such practices. If these measures are not taken, the organization by be liable in a court of law. An employee's entire career in terms of promotion, pay scale, benefits and mobility within an organization rests on the shoulders of an effective appraisal system. The outcome of any given performance appraisal is steep, and therefore the legal implications are significant. Several guidelines may help in the development of, or honest compliance of performance appraisal systems.
- Thorough, detailed and objectively based documentation is essential.
- Type all evaluations as responses, or comments on the evaluation form, as a web attachment. Avoid handwritten documentation in pencil.
- Never amend an evaluation later, or change information on the evaluation without the yell written consent and knowledge of the employee.
- Avoid any documentation that refers to an employee's run, sex, national origin, disability, age or other potentially discriminatory data.
- Hire an attorney for any legal compliance issues
("Minimize performance evaluation risks," 1998).
In order for an appraisal system to be effective, it must assess actions and behaviors that are clearly measurable. When appraisals do not measure specific behavioral criteria then legal issues can be raised which challenge the validity of the appraisal methods venerable.
"For example, in Squire vs. General Motors (Mich. Ct. App., 1989), the plaintiff, along with another individual, was laid off for economic reasons. Performance evaluations were the criterion used by General Motors to select individuals to be laid off. The plaintiff, who filed an age discrimination suit, attempted to show that there was a statistically significant relationship between age and performance evaluations given to salaried employees. The courts decided in favor of the employer" (Schraeder, Self & Lindsay, 2006).
General Motor's performance evaluations focused on core competencies, as defined by specific behavioral objectives. In this case, General Motor's stringent documentation, and a valid performance appraisal system proved first-rate during litigation. When considering what type of performance appraisal system to expend, one of the first considerations must be the legal implications involved.
In today's highly litigious climate, it is unwise to implement a performance appraisal system that utilizes the 'opinion' of one person without objective and measurable observations. In a court of law, this type of appraisal may be subject to suspicion and could easily be target for a discrimination case. Individuals have inherent bias and in order to get a clear characterize of the performance of each employee, an effective appraisal incorporates a range of measures. One device of incorporating a system of checks and balances is to exhaust an approach in which several people are included in the assessment process. This may comprise several layers of management, co-workers, and include an employee self-assessment. This broad arrive has the benefit of avoiding single rater bias. Bias is less likely to occur when a 'board' of people assesses the performance of a single individual. This should reveal a more accurate picture of an employee's performance and take into consideration their varying roles within the organization.
Performance appraisals can be difficult to make effectively, and legal ramifications can be costly if done incorrectly or poorly. According to Catino, Darr & Campbell (2007), consideration of several key points is crucial in maintaining legal compliance, and in accordance with EEOC laws. The organization is more apt to win their case if the following apply:
1. The appraisal instrument is based on a written job analysis.
2. The appraisal is based on behavioral criteria that can be measured.
3. There is a written manual for appraising, and then coaching an employee.
4. Reliability and validity of the appraisal decisions have been documented.
5. The employee has reviewed the results of an appraisal.
6. Organization can point to that appraising and coaching of employees is fair
(Catino et al. 2007).
In addition to legal considerations concerning performance appraisals, there are ethical considerations as well. Sometimes performance appraisals can cross the line and become abusive and harassing. An uneducated manager can unwittingly make statements that are abusive, hostile and discriminatory if he or she lacks proper training. Research has shown that "criticism has a negative effect on performance and that mutual goal setting, and that criticism does not improve performance" (Badawy, 2007).
Conclusion
An organization is responsible to multiple stakeholders. The prevention of costly legal mistakes due to non-compliance with EEOC laws is a necessity in a very competitive and global market. One lawsuit has the ability to put an organization out of business and the ramifications to these stakeholders are costly. In order to maintain legal compliance, an organization has to be familiar with state and federal regulations concerning labor law and civil rights issues. The first step in this process is to have a highly trained human resource staff that has done necessary research and development, and can safely proceed forward with a legally compliant, and ethically sound, performance appraisal system. The second step should involve consultation with an attorney, EEOC specialist or other knowledgeable person so that the implemented procedures and policies are legally compliant.
Performance appraisals will continue to be one of the most important functions that a human resource manager has. They are the catalyst by which growth and change can occur in an organization. Performance appraisals have the new ability to align employee performance with company goals to create a more harmonious, efficient and profitable organization. In today's global environment, it is of utmost importance to remain competitive. An effective performance appraisal is one way by which these strategic goals are achievable.
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