By.

Juan Skavani Mahaganti

Pasca Sarjana Universitas Klabat.
DEFINITION

According to Grote (2002), Performance Appraisal (PA) is a formal management system that provides for
the evaluation of the quality of an individual’s performance in an organization. Mostly are done by
immediate supervisor (see also Nakervis and Leece, 1997). “The procedure typically requires the
supervisor to fill out a standardized assessment from that evaluates the individual on several different
dimensions and the discusses the result of the evaluation with the employee” (Grote, 2002). In narrow
perspective, PA is a documentation, filling form, checking boxes, once-a-year drill, annual fiasco,
meeting held between lower and higher worker, and they will meet again next year (Grote, 2002; DelPo,
2007; Tourish, 2004).

It’s a common misconception that performance appraisal entails simply filling out an
evaluation form—answering prefabricated questions and checking boxes. If this were the case,
you wouldn’t need an entire book to help you do it right, and your evaluation wouldn’t be
worth the paper you wrote it on. When done correctly, performance appraisal is a process, not
a document—it is a way of structuring your relationship with your employees. A good appraisal
system includes observation, documentation, and communication. It envisions a workplace in
which supervisors know what is happening in their departments (who is doing what and how
well) and document employee performance as it occurs. Supervisors and their employees
should have open lines of communication. Employees should know how they are doing so they
can make adjustments when they veer off track. Supervisors should know what obstacles get
in the way of their employees’ performance so they can remove those obstacles as they arise
(DelPo, 2007).

PURPOSE

Study shows that PA is commonly used by companies now, from every level or industrial background
(Nakervis and Leece, 1997; Bach, 2003). Of course the phenomenon is not without cause, consider that
sometimes PA is a hectic and hated job, time and cost consuming.

Grote (2002) –case in No. 14 is cited from DelPo (2007)- list the purpose of PA as follow:
1. Providing feedback to employees about their performance
2. Determining who gets promoted
3. Facilitating layoff or downsizing decisions
4. Encouraging performance improvement
5. Motivating superior performance
6. Setting and measuring goals
7. Counseling poor performers
8. Determining compensation changes
 9. Encouraging coaching and mentoring
10. Supporting manpower planning or succession planning
11. Determining individual training and development needs
12. Determining organizational training and development needs
13. Confirming that good hiring decisions are being made
14. Providing legal defensibility for personnel decisions
Case : A hospital fires an African-American doctor. She does not have an employment contract,
so the hospital does not need just cause to ire her. Nonetheless, the doctor files a wrongful
termination lawsuit, claiming that she was fired because of her race. When she files her lawsuit,
she has no real evidence of racial discrimination; her case is based on her belief that she was
always treated more harshly than her coworkers, most of whom were white men. The hospital
responds by asserting that she was fired because of her poor diagnostic skills and her inability to
get along with her coworkers. Her attorney requests her performance evaluations.
Well managed PA system can prevent this kind of situation. Further reading about the issue of
legal practice and PA, read “The Performance Appraisal Handbook; Legal & Practical Rules for
Managers” by Amy DelPo.
15. Improving overall organizational performance

PROCESS

Performance Appraisal is an integrated part of company’s Performance Management Strategy (PMS).

Performance Management is “a set of regular, ongoing human resource activities carried out by
managers and supervisors relative to their subordinates to enhance and maintain employee
performance toward the achievement of desired performance objectives” (Vance and Paik, 2006).
Figure 1 describe this on-going process of PMS and PA.
Figure 1 : Performance Management Process
Source : Vance and Paik, 2006

As Figure 1 clearly define, that Performance Management is an on-going process, and latter will “end” in
performance appraisal. And clearly it is not a annually, or half year events. The documentation can be
done annually, but the whole system has to run continuously, as long as company survives. Phase 1 until
3 are part of Performance Planning and Analysis, where management and employee will deal regarding
future appraisal, its method, standards and expected result. It’s to make sure that both sides know each
other standard and expectation, in order to prevent future conflict.
 To put that figure brief, in general we can divide into three phase :

Phase I
1. PA
Employment
PUT INTOinterview.
PRACTICEManager and candidate meet.
2. Job qualifications. Manager accepts candidate's qualifications.
3. Job description. Manager reviews what must be accomplished on the job.
Some companies held their PA annually, some for every six-month, and even more often.
4. Performance criteria. Manager describes how well the work must be performed.
5. PART II: MOTIVATION,
Employment AMBITION,
contract. Manager and POTENTIAL, PERFORMANCE,
candidate agree ANDperformance
on job results and EVALUATION criteria.
Phase II
6. Job training. Manager prepares employee to perform job responsibilities.
7. Performance planning. Manager and employee meet to agree on a performance plan to accomplish work.
8. Work. Manager and employee work together to accomplish job results and specific objectives.
Phase III (Performance Appraisal)
9. Performance review. Manager and employee meet as required to adjust performance plan to new requirements.
10. Performance management Manager and employee meet periodically for a major review of past performance
and to plan performance for the next work cycle.

Table 1: Performance Management Process

Source : Plachy and Plachy, 1988

PERSONAL APPRAISAL IN PRACTICE

To begin, a good PA process needs a good way to gather information. Grote (2002) list 4 most important
information PA need to assess:
1. The Job
Appraiser and/or PA specialist (if needed) have to know the importance of this job. Why
company need to create such job, what are the job requirement, job description, the most
important thing to do in this job, issue surround the job, etc.
2. The Jobholder
Who is suitable for the job? What are the requirements?
3. The Person
Now, you have to know the person deeper. How is his performance compare to the previous
year. Remember, know the person based on the job, not based on individual prejudices
4. The Self-Appraisal or Accomplishment List
If you asked the individual to prepare a list of accomplishments or complete a self-appraisal (and
return it to you in advance), this will be a worthwhile source of performance data.

This information then can be gathered by assigned appraiser (supervisor, specialist, peers, appraisee, or
all). There are two types of information:
1. Qualitative: Information of behavioral remarks, comments, symptom, process, expectation, etc.
2. Quantitative : Numerical information. Information about sales number, revenue, productivity
(number of product per hour or per day), and area covered, etc. Quantitative is easier to be
 measured and less subjective. There are two types of quantitative information; pure numerical
information, and scaled information.
Scaled information is subjective and non-numerical information, but converted into number by
scaling method. For example, 5 for Excellent, until 1 for very poor. Or 1 for Approved, 0 for
Rejected (see additional exhibit, example of performance appraisal form of University of
California).

The appraiser can use combination of questionnaires, observation and interview to gather the
information (an example of the standard PA form can be seen in the exhibit 1). The job can be very
useful, yet sensitive because:
1. Common agreement among HR specialist that subjectivity cannot be avoided.
2. Legal consideration (sexual harassment, racism or libel issue)
3. No standard question or appraisal method available. Most of the organizations have to adjust
the method for their organizational style.

Performance Appraisal by only one appraiser sometimes might trigger subjectivity and bias. To prevent
this, the method known as 360-degree Performance Appraisal is implemented.

“This form deviates from the vertical, hierarchical arrangement in that every member of an
organization is placed at the centre point of a circle embracing all related employees, superiors and
colleagues. This circle frequently extends to people who are attached to distant parts of the
business, or even to members of an external organization (such as suppliers and customers),
provided they are connected with a central figure and the specific work” (Kressler, 2003).

Despite the modification and growing importance, the fact that to conduct an effective, efficient, useful
Performance Appraisal that will bring long term advantageous, can be a frustrating work. For further
reading, read useful book like “The Performance Appraisal Question and Answer Book” by Dick Grote
(2002) or “Performance Management: Getting Results from Your Performance Planning and Appraisal
System” by Robert Plachy and Sandra Plachy (1988).

CRITICISM

Performance appraisal was and integrated part of company’s Performance Management, and seen
important for company’s success in business, as more and more business institution adopt it for their
human resources management strategy (Grote, 2002; DelPo, 2007; Plachy and Plachy, 1988).
However, the critics from employee and related subject of performance appraisal, against the
implementation of the system also emerge. Manager hates to measure their employee for some
reason, while in the same time, employee hate to be scrutinized. Time consuming, high cost, and
focused on past result rather than future development, are among the arguments, also additional
findings show that performance appraisal can actually lead to poorer rather than better
performance, tend to create prompt argument between appraiser and employee (Rothwell and
Kazanas, 2003, cited from Martin and Bartol, 1998; Kikoski, 1999). Gloomy predictions about the end
 of performance appraisal even have been prophesied by some writer. As Bach (2003) noted, some
have predict that appraisal would ‘fall apart at the seams’ (cited from Margerison, 1976), due to
employee ambivalence and union opposition, and added that “the days of standardized appraisals
were number” (Bach, 2003, cited from Fletcher, 1993). (Cited from my journal study).

Tourish (2004) revealed even more shaking information. As he cited from various research, that
Appraisal should be avoided if it linked to numeration and payment, because sometimes may lead to
moral hazard and even bankruptcy. As he wrote it:

An illuminating example of what happens when this research is ignored may be in order. Enron was
an organisation that combined both a ranking system and the linking of performance to pay. Its
bankruptcy in 2001 stands (at the time of writing) as the biggest in US corporate history. As with
many other aspects of its internal culture, its approach to appraisal is a valuable case study in what
not to do. An internal performance review committee rated employees twice a year (Gladwell, 2002).
They were graded on a scale of 1 to 5, on ten separate criteria, and then divided into one of three
groups – ‘A’s, who were to be challenged and given large rewards; ‘B’s, who were to be encouraged
and affirmed, and ‘C’s, who were told to shape up or ship out. Those in the ‘A’ category were
referred to internally as ‘water walkers.’ The process was known as ‘rank and yank.’ The company’s
propensity to disproportionately reward those who were high achievers and risk-takers was widely
acclaimed by business gurus (e.g. Hamel, 2000). Faculty from the prestigious Harvard Business School
produced 11 case studies, uniformly praising its successes. However, problems multiplied. People
chased high rankings because the potential rewards were enormous, while low rankings imperilled
both their salaries and eventually their jobs. The appearance of success mattered more than its
substance. In addition, internal promotions due to the appraisal system reached 20% a year. This
made further evaluation more difficult, and inevitably more subjective – how could you honestly rank
someone’s performance when they did not hold a position long enough to render sound judgement
possible? Paradoxically, Enron had a punitive internal regime (‘rank and yank’) but loose control
(those adjudged to be top performers moved on too fast to be pinned down). In this case, ratings and
performance pay formed a lethal mix. Internal staff churn, and a relentless emphasis on achieving
high performance ratings in the interests of obtaining ever-greater personal rewards, contributed to
the lax ethical atmosphere that precipitated the company’s downfall.
Versions of rank and yank have been used by many organisations, including General Electric and IBM.
IBM, in the early 1990s, actually required that one out of every ten employees be allocated a poor
rating, and given three months to improve or be fired (Gabor, 1992). The research evidence
overwhelmingly suggests that such practices produce only defiance, defensiveness and rage (Kohn,
1999).

However, despite all the criticisms, number of companies utilize this system is still growing. I think this is
understandable because some findings correlate the implementation of effective and well created
performance management system and performance appraisal, with employee’s or organizational
success. Waal (2008) in his research titled “The effects of performance management on the operational
sales results of a bank”, showed “that the PM related key events had a significant and lasting positive
impact on the quantitative result of the division” (Waal, 2008).

Table 1: Disadvantage of PA, as identified from literature

Source : Kourkit and Waal (2008)

Other study conducted by Kourkit and Waal (2008), strengthen the previous findings. In this research,
writers try to find out the correlation between “advantageous” and “disadvantageous” of Performance
management, with companies’ success. “The research showed that in general the advantages were
experienced to a much greater degree than the disadvantages, and that specific reasons for use
achieved specific advantages. With the research results, management can convince organizational
members that SPM (strategic performance management), indeed beneficial for the organization (Kourkit
and Waal, 2008. Italic added).

Kourkit and Waal try to find the answer for dissatisfaction of PA process and they found out that there is
no correlation between advantages created by Performance Management with dissatisfaction. In other
word, companies where PA system works well will create the advantages it has promised. Future studies
are needed to identify about what is going on with PA system in bankrupt companies (like Enron). Is it
poor performance management might result their bankruptcy?
Figure 2 : Relation Model developed by Kourkit and Wall (2008).
Source : Kourkit and Wall (2008)

TQM (Total Quality Management) by some also seen as the opposite of PA. Adoption of TQM, which
emphasize more in team effort (Wikipedia, accessed 2010), didn’t seems to lessen the spreading and
growing importance of PA. Some have tried to reconcile the difference by creating a PA system that
actually works so well in TQM (Marr and Kussy, 1993). This criticism is closely related with argument of
team (emphasized by TQM) Vs. individual appraisal (PA). However, Kessler (2003) find out that,

There is some evidence to suggest that use of team pay to support job design may have
positive outcomes in terms of individual and organizational performance (Wageman 1995;
Burgess et al. 2003). However, the take-up of team pay remains low with well under 20 per
cent of organizations using it (CIPD 2003). Salary progressions based on team performance
is even less in evidence; these findings are confirmed by other surveys (Thompson and
Milsome 2001: 13). This low takeup suggests that despite some evidence of effectiveness,
administrative difficulties remain in introducing team pay. It is not always easy to find a
standard of team performance that can be linked to pay because teams often break up
quickly and do not therefore represent a stable base for a pay. Moreover, it remains
 questionable whether team working in the strictest sense is as widespread as assumed (see
Cully et al. 1999: 43). Team-based pay may well be rare simply because genuine forms of
team working are scarce.

AVOIDING THE PERIL

Performance Appraisal process, as we have seen, proven to be a dangerous game. However, it is

necessary for company’s success. Failure of PA process can sometimes attributed to human
shortcomings. Tourish (2004) list 8 of that phenomenon that must be carefully avoided:
1. Appraisers frequently fall victim to the halo effect. There is a tendency to assume that a positive
attribute or a job related success in one area automatically implies success in others.
2. Personal liking bias means that when supervisors like a subordinate, for whatever reason, they
generally give them higher performance ratings, their judgment of the subordinate’s work
performance becomes less accurate and they show a disinclination to punish or deal with poor
performance.
3. The horn effect arises when a problem in one area is assumed to be representative of defects
elsewhere
4. The consistency error suggests that we have an exaggerated need to feel consistent in our
opinions and judgments, and to assume that people and circumstances are more stable than
they actually are (Millar et al., 1992).
5. The fundamental attribution error, discussed above, means that an appraiser tends to attribute
poor performance to the personality of the interviewee, rather than to the situation.
6. The similarity bias means that we are attracted to people who look like us, sound like us and
form a convenient echo chamber for our own ideas.
7. The ‘what is evaluated problem’ arises when the behaviors being evaluated differ from those
required to obtain organizational goals.
8. Each of these problems is exacerbated by ingratiation effects. People with lower status
habitually seeking to influence those of greater status by exaggerating how much they agree
with their opinions, policies and practices, and so ingratiate themselves with the powerful, and
sometimes might create bias to these so called powerful.

DelPo (2007) also found that unwise selection of words can lead to poor PA system. Not only create
false hope and false impression, it also might lead to legal problem. Brief, based on the fact, rather than
personal conclusion is better than a long, “trying to be funny” or conclusive word. The latter, might bring
not only false facts, but also future problem.

Organization is comprised of human, which is all unique, so also the organization. Standardized PA
schemes from industry to industry, from size to another size will be better if was avoided. The common
mistake that also always lead to rejection to PA is, the believe that PA is just an annual ordered ritual.
Useless but a must. In fact, PA is a never stop process. The shift in paradigm regarding PA is needed now
days. Formal, written and companies scale PA can be held annually, monthly, quarterly or half-a-year,
but everyday informal PA through Management By Walking Around, Management By Objectives,
through constant communications and immediate daily basis feedback, might lessen the hectic work of
annual PA and might reduce the frighten about PA.
If I can extent the scope of Performance Management Process, PMS actually started since the
recruitment. If the recruitment ran well, it will reduce the burden of PA, since all employees are ready,
or willing to improve. Future study also needed in this part to know whether good recruitment system is
correlated with successful PA scheme, and vice versa. Communication is also the most important.
Employee must have the willingness to hear the feedback, while management also must be willing to
receipt critics regarding the PA schemes and procedure. At very last, but one of the most important,
Company’s value, philosophy, vision and mission is also are fundamental in PA system.

CONCLUSION
 PA is an integral part of human life. We have experienced it since the moment we can
remember and understand word. We live by it, cope with it, and shaped by it. Strengthened and
weakened by it. In school we received report card, in university we get grades, those all are part
of life’s Performance Appraisal. Even as Christian, I believe that PA will continue in the afterlife.
Appraisal is needed, it is necessary for company’s or employee’s development. Some study
reported that PA is correlated with performance, and the growing number of user of this
method, strengthen its position of importance.
 PA is needed to measure performance, personally. PA is irrelevant under assumption that all
member of organization has done and will do a fine job with, or without evaluation. But as long
as improvement are needed, changes are required, development is necessary and competition is
heating up, Performance Management and Appraisal is necessary.
 Well managed PA can be a successful mean of development, while poor one can lead into
disaster. Wisdom is required here, perfected with technical knowledge.

REFERENCE
Bach, Stephen (2005), “New Directions in Performance Management” in Managing Human Resources
(4th edn), Stephen Bach (ed.), Blackwell Publishing, Massachusetts: USA.
DelPo, Amy (2007), The Performance Appraisal Handbook: Legal & Practical Rules for Managers,
Special Sales Department, California: USA.
Grote, Dick (2002), The Performance Appraisal Question and Answer book: Survival Guide for
Managers
Kourtit, Karima and Waal, A.A. De, Strategic Performance Management in Practice: Advantages,
Disadvantages and Reasons for Use (July 31, 2008). Available at SSRN:
http://ssrn.com/abstract=1192264
Plachy, Roger and Sandra J. Plachy (1988), Performance Management; Getting Results From Your
Performance Planning and Appraisal System, AMACOM, New York: USA.
Rothwell, William J. and H. C. Kazanas (2003), Planning and Managing Human Resources : Strategic
Planning for Human Resources Management, HRD Press, Massachusetts: USA.
 Thomas J. Marr "Performance appraisal in the age of TQM - total quality management". Physician
Executive. FindArticles.com. 13 Feb, 2010.
http://findarticles.com/p/articles/mi_m0843/is_n5_v19/ai_14244299/
Tourish, Dennis (2004), “The Appraisal Interview Reappraised” in Key Issues in Organizational
Communication, Routledge, London: UK.
Vance, Charles M. and Youngsun Paik (2006), Managing a Global Workforce: Challenges and
Opportunities in International Human Resource Management, M. E. Sharpe, Inc., New York: USA.
Waal, A.A. De, The Effects of Performance Management on the Operational Sales Results of a Bank
(August 2, 2008). Available at SSRN: http://ssrn.com/abstract=1198082
Wikipedia contributors, "Total quality management," Wikipedia, The Free Encyclopedia,
http://en.wikipedia.org/w/index.php?title=Total_quality_management&oldid=343669632
(accessed February 13, 2010).

Reference note: The exhibited example of Appraisal Form can be downloaded from
humanresources.ucr.edu/Forms/PerformAppraisal.doc. Copyright belongs to University of California
 CLASS PRESENTATION

TOPIC:
PERFORMANCE APPRAISAL

DISUSUN OLEH:
JUAN SKAVANI MAHAGANTI
UNTUK MEMENUHI TUGAS MATA KULIAH
HUMAN RESOURCES MANAGEMENT
MR. RONNY WALEAN PhD.
FEBRUARY, 2010