Performance Appraisal

J.NGERA,MCIPS
Introduction

• This chapter looks at how performance measurement is applied at the level of individual buyer
and purchasing staff. Like any other organization resource, people must be managed. They
must be sourced, controlled, utilized and developed with a view to fulfil key strategic
objectives such as added value, distinct competencies, organizational learning and
competitive advantage.

• The chapter looks at the framework and approaches of monitoring, reviewing, appraising and
evaluating individual performance.

• Performance appraisal or evaluation is defined as: ‘The regular and systematic review of
performance and the assessment of individual potential with the aim of producing action
programs to develop both work and individual’.
Purposes/benefits of performance appraisal
Individual performance measurement and appraisal has the following purposes:
• To develop a consensus between individual, functional and corporate aims and objectives.
• To enable comparison of actual with planned results as an impetus for problem solving and
improvement.
• To generate and exchange feedback on individual and team performance both as information
for management decision making and to provide feedback for the learning and motivation of
employees
• To identify and resolve reasons for sub-standard performance or barriers to performance (e.g.
skill gaps or problems in systems, leadership or organization)
• To provide a performance related basis for merit pay awards or setting of salary levels.
• To identify the training and development needs of the individual or team in order to plan and
subsequently evaluate appropriate development programs.
• To identify individual potential for career development and plan management succession in the
organization.
Qualities of an effective appraisal system
• Acceptability: The method should be accepted by all staff
• Achievability: Standards and timescales must be realistic and within individual’s
control.
• Appropriateness: Methods and factors must be relevant to the individual’s work
• Flexibility: Methods and measurements must be reviewed and adapted as
circumstances change
• Continuity: Methods should be retained over a reasonable period to allow
comparison of performance over time.
• Comprehension: Method should be simple and easily communicated
• Credibility: Method and measurement should be convincing enough to secure
buy in by all parties
• Cost: The cost of measurement should not be out of proportion to the perceived
benefit of the exercise.
Informal appraisal systems
• This is feedback provided by managers after listening to employees and
observing the flow of work and work relationships. The feedback may be
of two broad types;
• Motivational feedback: to acknowledge, reward and encourage positive behavior or
performance by the team member. Its aim is to boost team member’s confidence.
E.g. Praise, encouragement etc.
• Developmental feedback: Given when an area of the team’s member’s
performance requires improvement, helping the individual to identify the problem
and plan for change. Its aim is to increase the team member’s competence. E.g.
Constructive criticism, coaching or counselling
• Informal performance monitoring reviews and discussions should therefore
take place on a continuous basis as part of relationship between manager
and team. There may be little formal documentation of this process
although feedback, agreed improvement goals and learning may be
written down in an individual’s learning or development log book.
Limitations of an informal appraisal
system
• Managers may obtain impressions of individual’s performance without forming a
coherent, complete or objective picture. This tend to focus on weaknesses or
errors as opposed to proactive development and performance improvement.
• Unfair critical judgements are much easier to make when they do not have to be
made in writing, opened to scrutiny and justified on the basis of defined or
agreed criteria.
• Different managers may apply different sets of criteria and standards of
objectivity. This undermines the value of appraisal for meaningful comparison
and encouragement of performance consistency. It also damages the credibility
and fairness of appraisal in the eye of the appraisee.
• Managers rarely give subordinates adequate feedback on their performance
unless stimulated to do so.
There is therefore a clear need for a system that can be consistent and objective,
efficient, standardized, structured but flexible in delivering performance
feedback in a constructive, proactive and focused manner.
Formal appraisal systems
• Also known as a systematic approach where an organization chooses to
formalize the assessment process and use it in a proactive attempt to
improve business performance and manage the potential of employees
for ongoing skill and career development.

• The formal systematic approach to individual performance evaluation

benefits a range of human resource management applications such as
HRM planning, evaluation of recruitment and selection systems, reward
management and compliance with relevant law and regulation.
Formal appraisal process
1. Identification of criteria for assessment and performance measures.
2. Preparation of an appraisal report by the employee’s manager giving
feedback on the employee’s performance in relation to relevant
assessment criteria.
3. An appraisal interview, allowing an exchange of views about the
results of the assessment, problem solving, target setting for
improvement etc.
4. Provision for review of the appraisal, if required to establish the
fairness of the procedure.
5. Preparation and agreement of improvement or development action
plans, implementation and monitoring of progress.
The assessment typically takes place on an annual or six monthly cycle.
Frequency of appraisal
• Continual or ongoing appraisal: Informal monitoring and review with checkpoints or
milestones measurements and feedback meetings. This approach is useful where there is:
• Tight control and adjustment is necessary

• Job requirements are highly flexible and fast changing

• Managers and team members are in close contact

• Periodic reviews: Involve a series of scheduled appraisal reports usually either quarterly or
six monthly. This provides the benefits of a structured approach but at greater frequency,
where tight control and reporting is required.

• Annual appraisals: Scheduled appraisals and reports done annually. This is usually the
norm
Who should conduct the appraisal?
• Assessment by line manager: This is the most common arrangement where an employee is
assessed by his immediate supervisor. However it is subjective and may affect the working
relationship between the parties concerned.
• Self assessment: This allows the employee to identify their own strengths, weaknesses and
training needs, performance and career aspirations for a following period. However the
process may be subjective
• Stakeholder feedback: There are four types of feedback;
• Peer appraisal: Useful for a more comprehensive appraisal process in regard to interpersonal criteria
such as ability to work with others, communication or conflict resolution. However the method may
be limited by the fact that employees may be reluctant to betray others
• Upward appraisal: Checks on the manager’s leadership style. However it may be difficult to elicit
feedback because of fear of retribution.
• Internal customer appraisal: Used to assess the quality of service and relationship management to
other departments.
• Appraisal of buyer performance by suppliers: Suppliers provide feedback on the buyer’s
effectiveness and efficiency of contracting, negotiation, contract management.
• 360 degree feedback: Both the supervisor and employee assess each other’s performance.
What should be appraised
• There has been a shift in assessment from personality attributes as such integrity,
discipline, initiative etc. to performance or result based criteria by use of performance
measures such as management by objectives, quantified and qualitative performance
indicators.
• Quantitative performance indicators: objective and measureable, assigning numerical
values (such as percentage, number, value or costs) to performance. They therefore
tend to focus on efficiency and productivity levels and are likely to be used where
purchasing roles are primarily clerical and administrative. Examples of quantitative
indicators: Productivity indicators (cost per employee or product, product received per
supplier etc.); Error rate (percentage of rejects); Customer satisfaction (percentage of
full or time deliveries)
• Qualitative performance indicators: Subjective, often related to quality, service,
relationship and contribution issues. They are more relational, strategic supply chain
management roles. Examples include; Internal and external customer satisfaction;
contribution to product quality; effectiveness in cross functional project and team
working; improvement in relationships and partnering with key suppliers; increased
global or enterprise wide focus.
Assessment techniques to be used
• Overall assessment: Manager writes in narrative form his
assessment with a checklist of attributes and performance
measures to comment on.
• Grading and rating scales: The manager is asked to select one
number or degree to which the individual displays a defined
characteristic. Grades are labelled as either poor, fair or
excellent. Numerical values may be added to ratings to give scores
or a graphic scale may be used to indicate general position on a
continuum.
• Behavioral incident methods: Measures employees behavior against
typical behavior of the job. Takes time and effort to develop.
How appraisal interviews are conducted
• Tell and sell approach: Manager informs the employee how he has been
assessed and then tries to sell the evaluation and improvement plan. This
requires human relations skills in order to convey criticism in a
constructive manner and to motivate the employee to alter his behavior.
• Tell and listen: The manager informs the individual of the outcome and
then invites a response. The manager provides opportunity for employee
to participate in working out the improvement targets and methods.
• Problem solving approach: Manager abandons the role of critic and
becomes a facilitator and coach. The discussion is centered less on
assessment than on individual work problems, potential and aspirations.
The employee is encouraged to propose and explore solutions and options
and commit to personal improvement.
Performance management
• The emphasis has now moved from performance appraisal to performance
management. Whilst performance appraisal is viewed as evaluation of past
performance, performance management emphasizes on past and future performance.

• Performance management is a continuous and flexible process which involves

managers and those whom they manage acting as partners within a framework which
sets out how they can best work together to achieve the required results.

• It focuses on future performance planning and improvement rather than retrospective

performance appraisal.

• It provides basis for regular and frequent dialogues between managers and individuals
or teams about performance and development needs.
Key activities in performance management
• Preparation of performance agreements (also known as performance contracts).
They set out the individual or teams objectives, how performance will be
measured, the competencies needed to achieve the objectives and the
organization’s core values.
• Preparation of performance and development plans. These set out identified
performance and personal development needs in order for performance
agreements to be met.
• Management of performance throughout the year. This involves the continuous
process of providing feedback on performance. Conducting informal progress
reviews and dealing with performance problems as necessary.
• Performance reviews: Taking a view of an individual’s progress to date and
reaching an agreement about what should be done in the future. These should
be discussions and not interviews.
Benefits of performance management
• Objective setting gives employees the security and satisfaction
of both understanding their jobs and knowing exactly what is
expected from them.
• If encouraged to participate in objective setting they are more
likely to accept and own change and improvement targets
• Performance management can be used to separate pay setting
issues from the development purposes of appraisal so that the
process is regarded with less suspicion and insecurity.
Personality profiling
• Also called behavioral profiling.
• It’s a knowledge management tool used to provide an evaluation of
employees’ behaviors, personal attributes, values and life skills in
an effort to maximize his or her job performance and contribution
to the company.
• It’s not a measure of intelligence or ability but a measure of
behavior; focuses on observation and describing employees
behaviors.
• There are two main types personality profiling tests:
• Proficiency tests
• Psychometric testing
Proficiency tests
• Proficiency tests are designed to measure an individual’s
current ability to perform particular tasks or operations
relevant to a job. Examples include diagnostic tests,
attainment tests, and placement tests.
• Diagnostic tests: The purpose is to assess supplier or employee
specific weaknesses and problems they may encountered
• Placement tests: The purpose is to sort and place a supplier or
employee in a particular level depending on their capabilities
• Attainment tests: They are tests that measure employee’s
achievement against a set of specified learning objectives.
Psychometric tests

• These are tests that measure the employee’s psychological factors and suitability for
a certain role based on the required personality characteristics, aptitude (cognitive
abilities) and intelligence. The tests identify the extent to which employees
personality and cognitive abilities match those required to perform a certain role.

• Psychometric tests include

• Personality tests

• Aptitude tests

• Intelligence tests
Aptitude tests

• They are designed to predict an individual’s potential for

performing a job or learning new skills. Example of aptitude
tests include:
• Reasoning ability (verbal, numerical, and problem solving)

• Visuo-spatial ability (practical and creative intelligence)

• Perceptual speed and accuracy (e.g. in reconciling figures)

• Psychomotor ability (Hand-eye coordination, fine muscle control etc)

Intelligence tests (IQ tests)

• Designed to measure cognitive ability such as an individual’s memory,

perceptual speed, verbal fluency, logic reasoning and problem solving
skills.

• However such measure does not reflect the range of human

intelligence, also called emotional intelligence.

• The tests also can be biased by giving unfair advantage to employees

from different educational and social backgrounds
Personality profiling tests
• Designed to measure a variety of traits and tendencies in an
individual’s personality in order to suggest how he or she is likely
to behave in a particular work context or in response to
particular managerial styles. Example include:
• Myers-Briggs type indicator model
• The DISC four quadrant behavioral model
• Minnesota Multiphasic personality inventory
• However there is continued debate about the relevance of
personality factors, the accuracy with which the traits can be
measured and the difficulty of eliminating cultural and gender
bias in designing and interpreting tests.