pa literature review

8/7/2019 PA literature review

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Performance appraisal continues to be a subject of interest and importance to human resource specialists. For

decades, performance appraisal has received considerable attention in the literature, from both researchers and

practitioners alike. Many authors (Bernardin & Klatt, 1985; Hall, Posner, & Hardner, 1989; Maroney & Buckley,

1992; Thomas & Bretz, 1994) maintain that there is a considerable gap between theory and practice, and that human

resource specialists are not making full use of the psychometric tools available. To support their claim, these authors

cite surveys of practitioners concerning current performance appraisal methods and use.

Nearly two decades ago, Taylor and Zawacki (1976) published the first of two articles that documented trends in

performance appraisal usage among U.S. organizations. When comparing the results of two surveys taken five years

apart, the authors noted a remarkable shift away from what they called collaborative approaches (e.g., MBO, BARS)

and toward the more traditional performance appraisal techniques (graphic rating scales). Taylor and Zawacki

(1984) hypothesized that managers, responding to the legal constraints prevalent in the 1980s, preferred techniques

that were defensible in court. Accordingly, managers tended to be more satisfied with the objective traditionalapproaches, whereas their subordinates seemed to prefer the developmental collaborative methods.

Through the 1980s, researchers continued to document performance appraisal practice. Bernardin and Klatt (1985)

noted that small firms tended to rely heavily on trait-based approaches, while larger firms relied on a combination of

trait, behavioral, and results-based techniques. They noted that one in five organizations did not give employees the

opportunity to review the performance appraisal results. In another study, Locher and Teel (1988) identified graphic

rating scales (57.1%), the open-ended essay (21.3%), and Management-by-Objectives (18.1%) as the most popular

performance appraisal techniques. Unlike Taylor and Zawacki (1984) before them, Locher and Teel identified a

trend toward the use of MBO as a popular technique.

Besides recording current trends in methods used, only a few researchers have clarified how performance appraisal

data is used. Thomas and Bretz (1994) report that performance information is most likely to be used for employee

development or to administer merit pay. They identified the main developmental uses as improving work

performance, communicating expectations, determining employee potential and aiding employee counseling. Other

common administrative uses included promotions, lay-offs, transfers, terminations, and validations of hiring

decisions. In addition, Hall, Posner, and Hardner (1989) identified common objectives of performance appraisal as

reviewing past performance, rewarding past performance, goal setting for future performance, and employee

development. Cleveland, Murphy, and Williams (1989) warned that organizations should exercise caution when

using the same performance appraisal methods for multiple applications (e.g., counseling vs. evaluation), since

different performance appraisal methods may yield different types of data (e.g., qualitative vs. quantitative).

Purpose of Study


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The purpose of this research is to ascertain whether traditional trends in performance appraisal have persisted

throughout the mid 1990s or whether human resource managers have chosen new directions. Specifically, this study

surveyed human resource professionals concerning the types of performance appraisal methods used and how such

data was utilized.

To investigate performance appraisal trends the 1990s, this research investigated the current performance appraisal

practices of human resource managers. The sample consisted of 250 managers in the mid-western U.S. All managers

were current members of the Society for Human Resource Management (SHRM). A 10-item questionnaire was

developed with questions relating to performance appraisal format, frequency, use, and instrument development.

One hundred forty (56%) of the surveys were returned. Table 1 shows the frequency of response to each of the

questions.

Table 1

Frequency of Response to Survey Questions

Question Frequency Percentage Frequency Percentage

1. What is the approximate number of

employees in the company?

0-50 4 2.90%

51-100 19 13.37%

101-200 19 13.37%

201-500 28 20.29%

501 and up 68 49.28%

2. Describe the use of performance

appraisals in your company.

Does not exist 4 2.86%

Exists but is never used 0 0.00%

Discretion of specific managers 12 8.24%

Required for all employees 124 88.57%

3. If performance appraisals are

used, how often are they given?

Quarterly 6 3.59%

Semi-annually 26 15.57%

Yearly 105 62.87%


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Other 30 17.97%

4. What type(s) of performance

appraisal does your company use?

(Check all that apply)

Graphic Rating Scales 56 24.03%

Management-by-Objectives 74 31.76%

Narrative Essay 79 33.91%

Other 24 10.30%

5. Is a different performance

appraisal form used for different

types of employees?

Yes 90 66.20%

No 46 33.80%

6. If a different performance

appraisal form is used, how are

the employees divided?

Exempt and non-exempt 45 50.00%

Blue collar and supervisory 3 3.33%

Managerial and non-managerial 24 26.67%

Other 18 20.00%

7. Is a performance appraisal

review and feedback session

required in the company?

Yes 126 91.97%

No 11 8.03%

8. Does your company have formal

written job descriptions?

Yes 127 92.03%

No 11 7.97%

8a. If yes, how are the job

descriptions created?

Upper level management 40 31.30%

Employee 16 12.50%


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Group collaboration 28 21.90%

Job analysis 44 34.40%

8b. If yes, how often are the job

descriptions updated?

Never been updated 2 1.56%

Quarterly 0 0.00%

Semi-Annually 2 1.56%

Yearly 26 20.31%

Every 2-5 years 46 35.94%

Other 52 40.63%

9. What is your performance

appraisal used to determine?

(Check all that apply)

Salary decisions 112 27.86%

Promotions 67 16.67%

Employee objectives for coming 111 27.61%

period

Training needs 98 24.38%

Other 14 3.48%

10. What impact do you feel that

performance appraisal has on

successful job performance?

Not important at all 1 0.74%

Of little importance 3 2.21%

No opinion 3 2.21%

Somewhat important 56 41.18%

Very important 73 53.68%

Respondents represented a full range of company sizes: 49% represented large firms with over 500 employees and

the remainder represented smaller firms from various size categories. Most of the respondents (88.57%) reported

that performance appraisal was required of all of their employees. Only four (2.9%) reported that they did not

presently use performance appraisal, an improvement over the 5.9% found by Locher and Teel (1988) and 7.9%

reported by Taylor and Zawacki (1984). Results indicated that human resource managers have a great deal at stake


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in the performance process. For most of these firms (88.6%), decisions based on performance appraisals will affect

every employee to some degree. Therefore the choice of performance appraisal format is not to be taken lightly.

Format

Many companies reported using more than one appraisal format. Among the responses, Management-by-Objectives

and graphic rating scale forms were popular. The percentages reported in the present study for MBO (31.8%) were

similar to those reported by Taylor and Zawacki for the same technique in 1981 (29.5%). However, the use of the

graphic rating scale (24%) fell considerably from the 1984 data (50%). Approximately 10% of the companies polled

used formats classified in the "other" category. These techniques included use of performance standards, matching

performance against job descriptions, and other hybrid techniques. None of the human resource managers reported

using behaviorally anchored rating scales (BARS), although the Taylor and Zawacki survey reported that 11 of 84

(14%) companies used BARS in 1981.

Of particular interest is the percentage of companies using the narrative essay format (33.9%). Under the essay

format, raters are asked to take an open-ended approach in describing employee behaviors. The essay typically

involves a manager listing specific employee strengths and weaknesses, with concrete suggestions for future

improvement. Unfortunately, the exact criteria used in recording narrative information may not be the same in all

organizations. Rater emphasis may vary greatly across a number of variables including traits, goal accomplishment,

and critical incidents. The percentage reported here represents a substantial increase over the 21.3% reported by

Locher and Teel in 1988, indicating a trend toward this format.

Frequency and Use

Though a handful of companies conduct quarterly (3.6%) and semiannual (15.6%) appraisals, the current survey

found that the majority stick to annual evaluations. Although the yearly schedule is commonplace, such long

intervals are not always optimal when considering the purpose and use of the performance ratings. For example,

employee development programs, identification of individual strengths and weaknesses, and performance feedback

are better suited to shorter intervals. On the other hand, when performance appraisal is used for administrative

decisions, such as pay raises, promotions, terminations, or layoffs, they require comparative judgments among

individuals that may be more effectively handled annually.

Information was also gathered concerning current use of performance appraisal information. Salary decisions,

employee objectives, and training needs accounted for nearly 80% of the appraisal use responses. Although this

came as no surprise, what was noteworthy was the total of 402 responses to this question from the 136 total

companies taking part in the survey. This shows that most companies polled used performance appraisal methods for

multiple purposes.


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A large majority (92%) of those responding reported that a review and feedback session was required as part of the

performance appraisal process, an increase over the 79% reported by Bernardin and Klatt (1985). This supports the

conclusion that the performance appraisal process may help form a communication channel between supervisor and

subordinate and also substantiates employee desire for more collaborative appraisal formats.

Discussion

A considerable amount of literature has focused on differences between performance appraisal theory and practice.

Researchers argue that practitioners have not made the best use of recent advances in the area, including cognitive

processing of information, rater training, feedback, and instrumentation. Practitioners, on the other hand, argue that

much of the recent research is directed to an audience of other researchers, whose laboratory studies have become

segmented and have little relevance to the outside world. Much of this debate is healthy to the extent that it

stimulates researchers and practitioners to reevaluate their assumptions concerning the measurement of employee

performance.

The purpose of this paper was to examine changes in performance appraisal practice. Table 2 summarizes the key

performance appraisal trends identified by the present study. The following discussion summarizes these changes in

appraisal format, use, and feedback.

Table 2

Key Trends in Performance Appraisal

Format

* Companies are using multiple performance

appraisal formats for individual

appraisals

* Through the years, Management by

Objectives (MBO) has maintained a

steady level of use among practitioners

* The use of graphic rating scales has

decreased steadily over time

* The use of the narrative essay as a

performance assessment technique is

becoming more common

Frequency and Use


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* Most firms evaluate employee performance

at yearly intervals

* Most companies use performance

appraisal results for multiple purposes

(e.g., compensation, selection, and

training)

* Ninety-two percent of companies report

the use of performance review and

feedback sessions, an increase of 13%

from previous years

Format of Appraisal

Considerable change has. in tact transpired compared with reported figures in the published research of the 1970sand 1980s. Although Taylor and Zawacki documented a movement away from collaborative approaches

(particularly MBO) and toward objective techniques, the current survey shows that the trend did not continue as

predicted. Management-by-objectives still maintains a significant following in the workplace, as does the graphic

rating scale. The rise of the narrative essay is far from an anomaly. It is only conjecture, but many of the companies

in the current survey may be using the essay as supporting documentation for other performance evaluation formats.

However, reliance on the narrative essay as a sole means of appraisal cannot be justified without carefully

evaluating the company's goals and how it uses performance appraisal outcomes. In the end, the suitability of the

chosen method must be evaluated against a number of criteria.

McAfee and Green (1977) identified the key criteria for choosing a performance appraisal method. These included

employee development, administrative, personnel research, economic, and validity criteria. Human resource

specialists must weigh these to determine which format represents the best match with their needs. For example,

formats that meet the administrative requirements of the company (e.g., salary and promotion) may be beyond the

economic means of the firm (e.g., behaviorally anchored rating scales (BARS). Relative to these factors, the

narrative essay format rates well against economic criteria and may be suitable for employee development.

However, it is not amenable to administrative decisions, personnel research, or validity studies.

Use of Appraisal Information

In addition to concerns of format selection, several authors have expressed concern over using performance

appraisal for multiple purposes, especially when those purposes may be conflicting. Cleveland, Murphy, and

Williams (1989) suggest that performance appraisal use can be grouped into four categories: between-individual,

within-individual, systems maintenance, and documentation. Between-individual comparisons are critical for many


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administrative decisions such as promotion, salary, retention, termination, layoffs and employee recognition. Such

decisions are frequently cited as the most common performance appraisal outcome. Within-individual comparisons

are tailored toward employee training and development needs. Typical of this kind of use are performance feedback,

determination of transfers and assignments, identifying strengths and weaknesses and training needs. In the current

survey, within-individual comparisons accounted for nearly 62% of the responses under performance appraisal use.

Systems maintenance uses refer to personnel planning, organizational training need analysis, organizational goal

identification and analysis, evaluation of personnel systems, and identification of organizational development needs.

Finally, documentation uses are needed for validation research, legal requirements, and to record personnel

decisions.

Cleveland, Murphy, and Williams point out that the intended use of performance appraisal affects the rating process

as well as the rating outcomes. Raters typically identify the most salient purpose and then de-emphasize other rating

information that is not deemed to be consistent. That is, acquiring information for the purpose of salaryadministration may obstruct the ability to gather other information needed for developmental feedback. In the

current survey, the pattern of responses suggests that performance appraisal forms serve multiple uses.

Appraisal Feedback

Most of the respondents required a review and feedback session as a part of the overall performance appraisal

process. It is difficult to assess how they used the review and feedback session, although recent developments in the

literature clarify how feedback affects performance. Specifically, the typical feedback session involves a review of

previous performance based on the format chosen. Also, some organizations encourage employee self-appraisal to

foster employee participation during the appraisal review session. However, this kind of feedback does little to

affect performance itself. It does, however, seem to improve the employee's satisfaction with the appraisal process

(Dorfman, Stephan, and Loveland 1986). Of course, appraisal satisfaction is an important variable in the employee's

overall satisfaction, but a large portion of the literature has demonstrated that a happy worker is not necessarily a

productive worker.

The literature concerning performance appraisal feedback does suggest that specific feedback gained from the job

itself does affect performance (Bretz, Milkovich, & Read 1992). If performance improvement is desired, perhaps

emphasis on job redesign is necessary. For example, production workers whose job has been redesigned to include

feedback concerning their own quality are more likely to see improvement than those who receive feedback from

external sources such as quality control officers. Organizations should rethink how they use performance appraisal

and tailor the process to the kinds of outcomes they desire.

Concluding Comments


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The practice of performance appraisal appears to be changing, but not necessarily in the direction specified in earlier

research. While some criticisms can be levied against the practices reported in this survey, it is important to note that

the respondents felt that their performance appraisal systems had an important effect on job performance (nearly

95% of the respondents reported important impact).

Human resource practitioners should regularly review and evaluate the effectiveness of their performance appraisal

practices, especially in terms of their impact on employee performance, their bearing on employee development,

their contribution to strategic human resource planning, and their legal compliance. In the end, each company has to

come to terms with employee satisfaction and performance appraisal systems, as well as the decisions made from

appraisal outcomes. Companies should be careful not to respond to fads in the appraisal area, but should rest their

decisions on the specifics of their organizational context.

Two current managerial challenges, total quality management (TQM) and the use of work teams, raise new

questions regarding the use of performance appraisal. These management philosophies may be incompatible with

more traditional performance appraisal techniques that may encourage competition among workers (e.g., for the

same dollars in the merit pool) instead of the cooperation and integration required for the effective implementation

of either work teams or TQM principles. Specifically, managers must consider the strategic objectives of the

organization as well as specific performance assessment objectives when choosing one of many appropriate

performance appraisal techniques. Performance appraisal instruments must be compatible with current management

philosophies.

Dr. Smith, whose research interests include compensation management, human resource practice, and management

teaching, has published in several management journals, including the Journal of Applied Psychology. Dr. Hornsby,

who has published nearly 40 articles and is completing a book on human resource management, focuses on

compensation, teambuilding, corporate entrepreneurship, among other areas. Roslyn Shirmeyer, a graduate of Ball

State's Human Resource management program, works in that field in Orlando, Florida.

REFERENCES

Bernardin, J. H., & Klatt, L. A. (1985). Managerial Appraisal systems: Has practice caught up to the state of the art?

Personnel Administrator, November, 79-82, 84-86.

Bretz, R. D., Milkovich, G. T. & Read, W. (1992). The current state of performance appraisal research and practice:

Concerns, directions, and implications. Journal of Management, 18(2), 321-352.

Cleveland, J. N., Murphy, K. R., & Williams, R. E. (1989). Multiple uses of performance appraisal: Prevalence and

correlates. Journal of Applied Psychology, 74(1), 130-135

Dorfman, P. W., Stephan, W. G., Loveland, J. (1986). Performance appraisal behaviors: Supervisor perceptions and

subordinate reactions. Personnel Psychology, 39, 579-597.


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Hall, J. L., Posner, B. Z., Hardner, J. W. (1989). Performance appraisal systems: Matching practice with theory.

Group and Organization Studies, 14(1), 51-69.

Locher, A. H., & Teel, K. S. (1988). Appraisal trends. Personnel Journal, September, 139-140, 142, 145.

Maroney, B. P., Buckley, M. R. (1992). Does research in performance appraisal influence the practice of

performance appraisal? Regretfully not? Public Personnel Management, 21(2), 185-196.

McAfee, B. and Green, B. (1977). Selecting a performance appraisal method. Personnel Administrator, May, 61-65.

Taylor, R. L., & Zawacki, R. A. (1976). A view of performance appraisal from organizations using it. Personnel

Administrator, June, 290 292, 299.

Taylor, R. L., & Zawacki, R. A. (1984). Trends in performance appraisal: Guidelines for managers. Personnel

Administrator, March, 71-72, 74 76, 78-80.

Thomas, S. L., & Bretz, R. D. (1994). Research and practice in performance appraisal: Evaluating employeeperformance in America's largest companies. SAM Advanced Management Journal, 59(2), 28-34.

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