Battle: Performance appraisal Vs Performance management

Sharanya Venkatesh

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07 May 2018

|    6 min read    |

Content Marketing

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Performance Appraisal

‘It means the analysis of an employee's performance and the caliber for his/her future growth and development.’ It is a systematic and logical review, conducted by the organization annually to judge his potential of employees in performing a task.

Performance Management

It is a continuous process of managing the employees in an organization. It is a process of planning, monitoring and evaluating the performance of the employees and their contribution to the organization. The main purpose is to encourage and increase the efficiency and effectiveness of the employees.

Performance appraisal is used in most of the companies when they need to promote their employees. Using various modern methods like Management by objectives, Behaviorally anchored rating scales, Assessment centers, Cost accounting methods and 360 degree appraisal. Companies like Wipro, Infosys, Reliance Industries limited, HCL Technologies go with 360 Degree appraisal. Tata Motors follows a comprehensive system of quarterly appraisal. It uses 90 degree appraisal system also called 2 tiers.

Performance management is gaining a lot of importance in recent times. According to a research by Deloitte, 70 percent of companies are reconsidering their performance management strategy. A few companies who manage to be on top with their strategy are General Electric, Accenture, PricewaterhouseCoopers, Coca-cola and Google. These companies have shifted from a rigid performance management system to a more fluid system where there is regular flow of feedback from the managers

Why doesn’t performance appraisal work?

• Yearly review: The reason why it fails is very much because it is done just once per year. If you wait for a particular month every year to give negative/positive reviews about your employees, they will not be aware of what they are doing. This will lead to poor performance of the employees.
• No corrective plans: After the appraisal is done, the review sheet is just kept in the employee’s file. If you do not use it to follow up with the employees and give them a corrective action plan to develop their efficiency, it’s a waste of time and effort. There should be a follow up plan focused either on performance improvement or career development.
• Time gap: The review happens once in a year. A recent failure or success can effect over the review process. To avoid this, a regular report has to be maintained.
• Time consuming: To review the yearly activities of all the employees and making a report is quite time consuming. Managers tend to postpone the appraisal till there till it becomes urgent. Also, they might give vague feedback just to get away with the process. They need to give specific examples of success or areas of improvement to make the review worth.
• Lack of authenticity: The traditional methods of appraisal (rating scales, checklist, critical incidents, essay test, etc.) are unreliable. This could be because of bias in the review. Employees might not be satisfied with their review results thus, it might create conflicts. This conflict might inflict tension between managers and the employees.

Performance appraisal can be a boon or a bane depending on the manager. This is why companies started with performance management where you do not need to wait for a year to rectify any mistakes of the employees. It is a regular process, helps you to keep a quality check on the employee’s work. An effectively implemented performance management can benefit the company, manager and employees

Let’s see the benefits of it to all the 3 stakeholders: The Company, the manager and the employees

Company’s benefit

• Improved organizational performance
• Improved productivity of employees
• Employee retention and loyalty
• Overcoming the barriers of communication
• Cost advantage

Manager’s benefit

• Reduces conflicts and confusions
• Saves time and energy
• Ensures efficiency and consistency in performance

Employee’s benefit

• Clarifies the expectations of their job
• Self assessment opportunity
• Contributes to improved job performance or job efficiency
• Defines career path
• Promotes job satisfaction

A clearly defined goal and regular assessments of employees will help the companies to bridge the major skill gaps. This will lead the company to design a corrective training and development plan for the employees.

However, not all is perfect with performance management as well. There are a few flaws with it.

• Discourages the employees: As this is done monthly, so it can be quite discouraging for any employee who is not being able to give his best for couple of months. There will be little motivation left for the employee
• Not taken seriously: Because the frequency is more, it is often treated casually. The employees or the managers do not focus much on the outcome of the reviews and just treat it as a formal process.
• Employees may lose self-esteem: With a constant evaluation being done on employees, a few of them might lose self-esteem. This can create resentment towards the management.
• Too short time to give reviews: For assessing any individual you need to measure the outcome of the employee’s work with the set goals. Many a time, the task that is assigned to him may take a couple of more weeks to complete and the review dates fall in the intervening period. Also, an employee can be on long leave for which the task remains incomplete. Thus, any reviews based on a small span of time like a month or two might not be a true reflector of their performance.

It’s always good to keep a balance between performance appraisal and performance management. Depending on your company size, type, industry and other factors, the right mix of both has to there. A hybrid performance review can be made as per the company’s standard. A multinational company, Coca-Cola is an example that uses both review systems to get the best results out of the employees. They set long term goals at the start of the year and tell the employees about the goals. Also, they keep short-term goals for the employees, if they achieve then they are rewarded. Reward system is monthly, quarterly and annually based on the department, scale and job roles. They also prepare a 30-90 days Performance Improvement Plan (PIP) which includes specific and measurable actions with time line. The correct blend of Performance management and Performance appraisal will bring out the best results from the employees.