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Editor: Cynthia V Fukami (Daniels College of Business, University of Denver, USA)

Contributors: The students of MGMT 4340, Strategic Human Resource Management, Spring 2007

By Adam Ruberg

Purpose of appraisals

Historically, performance appraisals have been used by companies for a variety of different purposes, including salary recommendations, promotion and layoff decisions, and training recommendations (Kulik, 2004). In general, “performance elements tell employees what they have to do and standards tell them how well they have to do it” (United States Department of the Interior, 2004). This broad definition, however, can allow for appraisals to be ineffective, even detrimental, to employee performance. Second only to firing an employee, managers cite performance appraisal as the task they dislike the most, and employees generally have a similar disposition (Heathfield, Performance Appraisals Don't Work). One key item that is often forgotten during the appraisal process (by managers and employees alike) is that the appraisal is for improvement, not blame or harsh criticism (Bacal, 1999).

Creating an appropriate appraisal process

One significant problem in creating an appraisal process is that no single performance appraisal method will be perfect for every organization (Kulik, 2004). Establishing an appropriate process involves significant planning and analysis in order to provide quality feedback to the employee. The most crucial task in the process is determining proper job dimensions that can be used to gauge the employee against accepted standards that affect the performance of the team, business unit, or company (Fukami, Performance Appraisal, 2007). Peter Drucker developed a method termed ‘Management by Objectives' or MBO, in order to address the creation of such job dimensions. Drucker suggests that the objectives of any employee can be validated if they pass the following six tests (Management by Objectives—SMART, 2007):

  • S pecific
  • M easurable
  • A chievable
  • R ealistic
  • T ime-related

If an objective meets these criteria, it is considered a valid dimension on which to gauge performance. The standards on which the objective is compared with should also be validated using the SMART method.

Appraisal methods

Numerous methods exist for gauging an employee’s performance, and each provides strengths and weaknesses for given environments. The following outlines some of the more commonly used methods, as well as some recently developed ones that can be useful for various feedback situations:

Questions & Answers

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