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Business Fundamentals was developed by the Global Text Project, which is working to create open-content electronictextbooks that are freely available on the website http://globaltext.terry.uga.edu. Distribution is also possible viapaper, CD, DVD, and via this collaboration, through Connexions. The goal is to make textbooks available to the manywho cannot afford them. For more information on getting involved with the Global Text Project or Connexions email us atdrexel@uga.edu and dcwill@cnx.org.
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
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).
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):
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.
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:
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