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The difference between performance management and performance appraisal

In considering the nature of performance management and performance appraisal
we firstly need to appreciate how these two aspects are related but equally should
not be seen synonymously. In fairly simple terms performance management can
be seen as a holistic process which aims to bring together a number of aspects,
including appraisal. Thus, performance management may be thought of as being
more strategic in its intent to achieve high levels of organizational performance. By
contrast, performance appraisal is best seen as being more operationally focused,
with a focus on individual employees short- to medium-term performance and
development (CIPD, 2005a). Consequently, to fully contextualize the notion of performance
appraisal it is important to locate it within wider issues concerned with
performance management systems (PMS) which may have an organizational, team
or individual focus. Armstrong (2001: 469) suggests that performance management
has a number of aims:
Performance management is about getting better results from the organization,
teams and individuals by understanding and managing performance
within an agreed framework of planned goals, standards and competing
requirements. It is a process for establishing shared understanding about
what is to be achieved, and an approach to managing and developing people
in a way which increases the probability that it will be achieved in the short
and long term. It is owned and driven by management.
Clearly, then, organizations are always seeking improvements in their performance
and these can be sustained by either development-type initiatives or more
evaluative or even punitive measures, potentially encompassing aspects of discipline.
In that sense performance management and performance appraisal can
arguably be seen to again reflect to some degree the notions of ‘hard’ and ‘soft’
HRM. For example, the harder approaches would point to the need for organizations
and managers to seek control over their employees; on the other hand softer
approaches would point to the role of PMS in establishing greater commitment
and developing careers. Recognizing the above discussion this thread will aim to
consider the question of what options are open to an organization seeking to
improve the performance of its employees.

[ by Frank at 3-8-2009 00:18 edited ]
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The nature of performance management and performance appraisal

Recent research undertaken by the CIPD provides a snapshot of a number of features
of performance management, as outlined in Table 8.1.
Clearly one of the most important aspects of enhancing performance is performance
appraisal, which is a critical element of performance management and a
key feature of organizational life. As Bach (2005: 289) notes, ‘performance appraisals
have become far more than just an annual ritual and are viewed as a key lever to
enhance organizational performance’. Performance appraisal is defined by Heery
and Noon (2001: 7) as, ‘… the process of evaluating the performance and assessing
the development/training needs of an employee’. LRD (1997: 3) similarly note
how performance appraisal is, ‘A process of reviewing individual performances
against pre-determined criteria or objectives, involving the gathering of information,
one or more meetings and some form of report which may include a performance
rating’. In sum, then, appraisal is a process that allows for an individual
employee’s overall capabilities and potential to be assessed for the purposes of
improving their performance.
A recent survey by IRS (2005a) suggests that over 90 per cent of workplaces
have some form of performance appraisal, usually a conventional top-down
appraisal system. Moreover there has been a shift in recent years which have seen
more and more organizational members subject to such appraisal, which had traditionally
been geared more to managerial staff. Clearly given the skills mix which
was discussed in previous thread, which points to a predominance of semi and unskilled
workers in tourism and hospitality, there may well be a questioning of whether it
is worthwhile appraising such workers, especially unskilled workers, as these jobs
are likely to involve little technical expertise. For example, notwithstanding the
earlier point about more organizational members being appraised, IRS (1999) suggested
that less than a quarter of organizations across the economy as a whole surveyed
semi or unskilled workers. If these employees are to be appraised some
difficulties may be encountered in attempting to establish readily observable standards
and criteria by which performance can be measured. There may also be the
additional issue in tourism and hospitality of the predominance of small- and
medium-sized enterprises. Goldsmith et al. (1997) note that appraisal is unlikely to
be something that is realistic for a small family-concern type business or a single
person operation. Consequently they advocate that appraisal has certain minimum
requisites or parameters, including :
● the equivalent of at least 20 full-time non-managerial employees;
● a minimum of one layer of professional management between the organization’s
proprietor and operative staff;
● some evidence of departmentalization where individual departments have their
own heads or supervisors.
Given the above discussion it might seem reasonable to imagine that appraisal is
less likely to be a part of a systematic approach to HRM in tourism and hospitality.
However, the evidence seems to suggest that the opposite may in fact be true. For
example, Lucas (2004) in her interrogation of the Workplace Employee Relations
Survey data, found that 85 per cent of managers in the hospitality and tourism
industry had responsibility for performance appraisal. Interestingly, Lucas also
found that performance appraisal is more likely to be used in the hospitality
industry compared to all private sector service organizations. Similarly, Hoque
(1999) found that 89 per cent of the 232 hotels he surveyed regularly used appraisal,
compared to 62 per cent of similar sized establishments in manufacturing. Woods
et al. (1998) also found a high incidence of appraisal within the US. In a survey of
1000 hotels covering all geographic areas, all types of market segment, ownership
type, size and number of employees Woods et al. found that two-thirds of his sample
had an annual appraisal. Clearly appraisal then is a significant part of broader
HRM concerns in hospitality and tourism and we can now go on to consider some
of the challenges facing managers in operationalizing appraisal schemes.

[ by Frank at 3-8-2009 00:17 edited ]

Table 8.1 Features of performance management

Feature                                                                                 Percentage
_____________________________________________________
Individual annual appraisal                                                   65
Objective setting and review                                                   62
Personal development plans                                                 62
Career management and/or succession planning            37
Coaching and/or mentoring                                                    36
Competence assessment                                                      31
Performance related pay                                                        31
Self-appraisal                                                                            30
Twice yearly/biannual appraisal                                             27
Continuous assessment                                                        14
360-degree appraisal                                                             14
Subordinate feedback                                                            11
Rolling appraisal                                                                     10
Peer appraisal                                                                          8
Competence related pay                                                         7
Team appraisal                                                                         6
Contribution related pay                                                          4
Team pay                                                                                    3
_______________________________________________
Table 8.1 Features of performance management

Appraisal in practice

To begin to assess the impact of performance appraisal we should start with a simple
question: Why should organizations appraise people at work? Arange of writers
(see e.g. Bach, 2005; IRS, 2005a, b) suggest a number of reasons, including:
● Appraisal can be an integral part of ensuring that organizational members are
aware of what is expected of them and can thus play an important part in socializing
organizational members to ‘buy in’ to the organizational culture. For
example, Groeschl and Doherty (2002: 58) note how, ‘Its value as an organizational
socialization process is closely associated with organizational attempts
to manage “culture”, another essential element of the HRM approach to the
employment relationship’. Indeed, Bach (2005) notes that increasingly organizations
are now using performance management as a means to introduce cultural
changes in organizations.
● Improve current performance.
● Provide feedback: We all seek approval and conformation that we are doing the
right thing, and we also like to advise or direct others on how they should do
things.
● Increase motivation.
● Identify training and development needs.
● Identify potential.
● Let individuals know what is expected of them.
● Focus on career development and succession planning.
● Award salary increases/performance related pay.
● Evaluate the effectiveness of the selection process.
● Solve job problems.
● Set objectives: Using the SMART mnemonic, specific or stretching (define precisely
what is required in clear language), measurable (both quantitatively and
qualitatively), accepted (objectives agreed and not imposed), realistic (achievable
and fairly allocated) and time-bound (clear target dates). For example, in a
tourism and hospitality context it might be things like servers trying got
increase their sales per shift, chambermaids cleaning more rooms, receptionists
attempting to become more skilled in information technology, improving communication
skills or learning to speak a foreign language.
In reality, in most workplaces staff are being continually monitored and assessed by
management in an informal manner. Indeed, ACAS (2005: 2) suggest that, ‘regular
dialogue between managers and their staff about work performance should, of
course, be encouraged’. That said, the danger with such informality is that it is very
much dependent on individual managers and whether they are giving regular feedback.
Consequently, ACAS further note that an appraisal system can develop a
greater degree of consistency by ensuring that managers and employees meet formally
and regularly to discuss performance and potential. What we are concerned to
examine in this thread is the formalized manner by which staff are assessed during
performance appraisals. That is, the process of reviewing individual performance
against pre-determined criteria or objectives, involving the gathering of information
and one or more meetings on a quarterly, 6 monthly or annual basis, and producing
some form of report which is likely to include a performance rating. As described
above performance appraisal can be seen in a fairly positive vein and useful in terms
of things like raising morale, clarifying expectations, improving upward and downward
communication and so on (and see HRM in practice 8.1).

HRM in practice 8.1 Appraisal: Some good news

Research conducted by Armstrong and Baron (2005) on behalf of the Institute of
Personnel and Development in the late 1990s found that employees and managers
offered favourable rather than unfavourable views on appraisal. Some of the comments
from the research included:
‘You need appraisal to get the best out of people and develop them.’
‘In a one-to-one meeting, people can bring things out to their supervisors who say
“I’ve never been aware of that: why didn’t you tell us before?” That’s definitely an
advantage.’
‘For me, the real strength of the process lies in the continuing dialogue and negotiation
as the year goes on.’
‘You’re one-to-one with your boss. You’ve chatted, and it wasn’t as if it was your
boss. It was more relaxed. He would listen and then you’d chat about it. I enjoyed it.’
What are some of the likely difficulties in appraising employees in tourism and hospitality?
Despite the above discussion, which points to why performance appraisal might
be thought of as a ‘good’ thing, in reality there is much debate and concern surrounding
the notion of appraisal. For example, W. Edwards Deming, a leading
advocate of TQM, has suggested that appraisal is wrong in principle and an ineffective
management philosophy, describing it as a ‘deadly disease’ (cited in Bach,
2005). Similarly, Stephen Covey, the well-known management guru, has described
appraisal as a ‘disgusting habit’, outmoded and more suited for an industrial age
that no longer exists (cited in IRS, 2005a). Indeed, as long ago as 1957 the famous
management theorist Douglas McGregor, of Theory X and Y fame, was suggesting
that appraisal is the most contentious and least popular part of a manager’s job.
Managers dislike the process as they do not like ‘playing God’, which leads to a
judgemental and ultimately de-motivating approach:
The respect we hold for the inherent value of the individual leaves us distressed
when we must take responsibility for judging the personal worth of
a fellow man. Yet the conventional approach to performance appraisal forces
us, not only to make such judgements and to see them acted upon, but also
to communicate them to those we have judged. Small wonder we resist!
(McGregor, 1957: 90).
Managers may also regard appraisal as a waste of time and overly bureaucratic
and may also see it as a process that involves relatively high costs in setting up the
scheme and training employees in using the scheme (and see HRM in practice 8.2).

HRM in practice 8.2

HRM in practice 8.2
Appraisal: Some common negative managerial thoughts about appraisal
‘Well, here we go again, I’m sure you don’t like this business any more than I do, so let’s
get on with it.’
‘Now, there’s nothing to worry about. It’s quite painless and could be useful. So just
relax and let me put a few questions to you.’
‘I wonder if I will end up conning you more than you will succeed in conning me.’
‘Right. Let battle commence!’
In part, some of these negative views of appraisal could potentially be
addressed by training for managers to ensure that they are clear of the importance of
appraisal. For example, IRS (2005a: 9) note that, ‘if managers are not properly
trained and committed to the appraisal system, the performance review can become
just a paperwork exercise, at best, or – at worst – a harmful one’. This view points to
the issue of whether appraisals per se are problematic or whether much of the problem
lies in carrying out the appraisal, specifically whether appraisals are performed
poorly by uninterested or badly trained managers. Training, then, may help managers
to appreciate the importance of appraisal within a broader performance management
approach and also the need to develop coaching skills to facilitate a more
developmental approach.
Such training may be appropriate in attempting to address some of the problems
which may plague appraisal such as (Bach, 2005; Torrington et al., 2005; IRS, 2005a):
● Prejudice, for example, sex or race discrimination.
● Subjectivity and bias, especially with regard to rater bias.
● Insufficient knowledge of the appraisee – so appraiser position is based on position
in hierarchy, rather than any real knowledge of person’s job.
● The ‘halo’ and ‘horns’ effect where managers rate employees on the basis of their
personal relationships rather than by objective measure of their competencies and
abilities.
● The problem of context – the difficulty of distinguishing the work of appraisees
from the context in which they work, especially when there is a degree of comparison
with other appraisees.
● What might be termed the ‘paradox of roles’ in terms of the conflation of judge
and counsellor (mentor) role which can lead to confusion. For example, in the
shift from an evaluative to a developmental approach managers have to manage
such tensions.
● The paperwork – overly bureaucratic and simply about form filling.
● The formality – for both appraiser and appraisee it can be an uncomfortable
experience.
● Outcomes are ignored.
● Everyone is ‘average or just above average’, for example, managers may find it
difficult to give an employee a bad rating as they would not want to justify the
criticisms in the performance review interview.
● Appraising the wrong features – too much stress on easily identifiable things
like timekeeping, looking busy, being pleasant and so on.
● ‘Recency bias’ leading to a tendency to base appraisals on the recent past, regardless
of how representative it is of performance over the course of the previous
year.
In many respects the above issues reflect what Bach (2005) calls the ‘orthodox critique’,
wherein many of the problems above could potentially be addressed by
seeking to remedy the imperfections in the design and implementation of the
appraisal system or by improving managerial training in conducting appraisals.
For some though there may well be much more fundamental criticisms to be made
about the process of appraisal.
Bach (2005) notes the emergence of more critical accounts of appraisal, in particular
recognizing how, ‘unitary assumptions about the benevolent purposes of
appraisal are replaced by a more radical ideology concerned to examine managerial
objectives, especially tighter control over behaviour and performance, the potential
to individualize the employment relationship and the scope for managers to use
appraisal as a veneer to legitimate informal management’ . For example,
many of the criticisms, drawing on the work of Foucault, see appraisal as inherently
sinister and about aiming to control all aspects of employee behaviour and eliminating
scope for employee resistance, so appraisal is simply about bolstering managerial
power and control; a point that is similar to some of the criticisms of

[ by Frank at 3-8-2009 00:17 edited ]
organizational culture outlined in previous thread. In sum, Bach suggests that critical
perspectives seek to highlight that it should not be assumed that clearer objectives
and training of appraisers will necessarily yield satisfactory results. Consequently
it is important to recognize how, ‘the contested nature of appraisal, the specific
managerial objectives sought, and the nature of the context in which it is applied,
all have an important bearing on the impact of the appraisal process’ .
Thus, we can appreciate that appraisal is very much a contested issue, both conceptually
and practically. Equally, though, as Holdsworth (1991: 65) rightly suggests,
‘appraisal is a compulsively fascinating subject, full of paradoxes and love–hate relationships.
And appraisal schemes are really controversial … Some schemes are popular,
with overtones of evangelical fervour, while others are at least equally detested
and derided as the “annual rain dance”, “the end of term report”, etc.’ (and see HRM
in practice 8.3 for how a number of the issues discussed above were played out
within ANO, a French hotel chain, which introduced a new appraisal system).
Ultimately, despite the debates surrounding its utility, appraisal is a fact of
organizational life, and as Bratton and Gold (2003: 252) note, ‘making judgements
about an employee’s contribution, value/worth, capability and potential has to be
considered as a vital relationship with employees’. Moreover, as we noted above
there may be an argument, rather like employment interviewing, to say that the
process in itself is not necessarily flawed, but the individuals operationalizing it
are insufficiently skilled.
Given the reality of performance appraisal being an inevitable part of a manager’s
life we can now look at the practicalities in appraising employees. In appraising
employees a number of writers have outlined two main perspectives the evaluative
and the developmental. In the former approach the main aim is to make a
judgement about an appraisees performance, with such a judgement being made
against aspects such as the job description and established objectives, which may
be linked to extrinsic rewards. Often this will also involve managers making rating
or ranking decisions that differentiate between staff on the basis of their relative
performance. On other hand, developmental approaches are likely to have a different
premise, where the appraiser and appraisee aim to discuss the progress, hopes
and fears of the appraisee in a mutually supportive atmosphere and where the
ultimate aim is on developing performance by building on employees strengths
(and see HRM in practice 8.4).

[ by Frank at 3-8-2009 00:18 edited ]

HRM in practice 8.3 The rhetoric and reality of appraisal in ANO Hotels

Groeschl and Doherty (2002) report on the introduction of a new appraisal system in
ANO, which is part of a French multinational travel and tourism group and operates at
the three star level. In 1998 a standardized appraisal system was developed for the company
as a whole in order that it could be implemented in all their brands, including ANO.
This attempt at standardizing appraisal was to ensure that all employees across the company’s
various brands would be appraised against the same criteria to ensure a consistent
evaluation of employee performance. The new appraisal system was developed at the
corporate headquarters and the working group which developed the system initially
evaluated the old system to identify weaknesses. Once this was done they then developed
suggestions and proposals for the new system, which were then sent to regional management
teams for their comments and feedback. These exchanges continued for
6 months before finally there was agreement on the standardized criteria and a number
of aims and objectives. A key aim of the new system was to ensure a basis for planning
for action, particularly with regard to career progress. The new appraisal system was an
example of a development-oriented appraisal system and the appraisal format was considered
a formal and sophisticated document. Employees were assessed with ratings
ranging from ‘very good’ to ‘insufficient’ on 13 standardized competencies, including
aptitudes and skills. Although the process of introducing a new appraisal system seemed
well planned and thought out there was still some issues that emerged. For example,
some managers seemed unable to sufficiently differentiate from day-to-day feedback
with the formal appraisal process. Appraisers would also often be inconsistent in their
preparation for appraisal, failing to notify appraisees sufficiently in advance or not filling
in the appraisal form correctly. Appraisers would also often run appraisals in public
spaces, such as bars and restaurants, which runs counter to the advice often offered in
textbooks. Lastly, there was also significant variance in the appraisers style. Some
appraisers recognized the developmental nature of the new system and developed an
advisory/supportive role in the appraisal; whilst others were much more judgemental and
authoritarian. In sum, although ANO had clear objectives, documentation and guidelines,
all of which reflected good practice HRM, the implementation proved rather trickier.
Closer monitoring of the process by the HR managers, or line managers with a strong
interest/involvement in HRM could have improved the situation. Equally, the case seems
to point to the need to provide managers with the appropriate skills which allows them
to take on more of a facilitator or coaching role in the appraisal process.
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