Title Page Performance appraisal systems in Red Square Industries Executive Summary The Red Square Industries implemented performance appraisal system. This report evaluates the current appraisal system and provides implementable solution to the problem. HR director analyses the advantage of the current performance appraisal system in terms of grading, discriminating on basis of performance, rewarding performance and performance appraisal record. Next, he analyses the disadvantage of the appraisal system in respect of lacking top management commitment, leniency bias, poor communication, violation of EEO and static performance appraisal.
Following are the recommendations that the HR director provides to the CEO: •Top management commitment •Prevention of leniency bias •Dynamic performance appraisal •Enhancing communication •Legal treatment in performance appraisal system •Employees feedback Table of Contents Pg Title page Executive Summary 2 Table of contents 3-4 1. 0 Introduction 5 1. Background 5 1. 2Aims 5 1. 3Scope 5 2. 0Literature review 5 3. 0Analysis 6 3. 10 The advantage of the performance appraisal systems in Red Square Industries 6 3. 110 Major type of performance appraisal systems 6 3. 20 Performance appraisal objectives 6 3. 130 The performance appraisal record 7 3. 20 The disadvantage of the performance appraisal system in Red Square Industries 7 3. 21 Lack of top management support 8 3. 22 Leniency bias 8 3. 23 Poor communication 8 3. 4 Violation of EEO requirement 8 3. 25 Static performance appraisal 9 3. 30 Implementable solution 9 3. 31 Management commitment 9 3. 2 Prevention of leniency bias 9 3. 33 Considering the validity and accuracy of the performance system 9 3. 34 Dynamic performance appraisal 9 3. 35 Enhancing communication 10 3. 36 Legal treatment in performance appraisal system 10 3. 37 Employee feedback 10 4. Conclusion 10 Reference list 1. 0 Introduction 1. 1 Background The Red Square Industries implemented performance appraisal system. At same time, it has been troubled for some time by the apparent lack of effectiveness of the appraisal system. 1. 2 Aims The purpose of the report is to evaluate the current performance appraisal system in terms of advantage and disadvantage. As well as, provide the relevant solutions to overcome the problems. 1. 3 Scope The pros of the current performance appraisal system consist of the grading, discriminating performance, rewarding performance and the performance appraisal record.
In turn, the cons of the current system include that lacking top management commitment, leniency bias, poor communication, violation of EEO and static performance appraisal. Finally, the recommendation comprises with top management commitment, prevention of the leniency bias, dynamic performance appraisal, considering the validity and accuracy of the performance system, enhancing communication, legal treatment in performance appraisal system and employee feedback. 2. 0 Literature review The current performance appraisal system brings some advantages to Red Square Industries.
For example, the rewards are corresponding to the related contribution, which is supported by Khan, Farooq and Ullah (2010). They state that the change in reward affects the change in the motivation and performance of employees. At the same time, there are some disadvantages of current performance appraisal system existing in the Red Square Industries. It could reduce the feeling of satisfaction and organisation commitment by the certain types of performance (Stathakopoulos 1997) when lacking top management commitment. In addition, the leniency inhabits the delineation of the rating quality (Frah and Dobbins 1989).
What is more, the employees belong to the union are more lenient and only those rated 1 & 2 get bonus payments, which against the opinion that the EEO in performance appraisal is the minimum requirement (‘EEO is everyone’s responsibility’ 1981). The unfair treatment also creates ill feeling to the employees that may ‘doom the most carefully constructed appraisal system’ (Jawahar 2007). Finally, employee feedback is one of the recommendations. Nickols (2007) states that the Performance appraisal provides employees with feedback regarding their performance to reduce errors and waste, increase quality and enhance employee motivation, commitment. . 0 Analysis 3. 10 The advantage of the performance appraisal systems in Red Square Industries 3. 110 Major type of performance appraisal systems Stone (2010) expresses that performance appraisal systems focus on the individual employee. To judge the performance of staff, the organisations choose several performance systems, including grading. 3. 111 Grading Grading system could describe workers’ performance clearly in specific performance levels, comprising with superior, good acceptable, marginal and unsatisfactory (stone 2010).
Stone (2010) further argues that the forced ranking distribution is the refinement of the grading system, which places the fixed percentage in each grade. For example, the Red Square Industries adopt the forced distribution as its appraisal system. Particularity, the top 10 per cent are superior performers, the next 25 per cent are good performers, the next 45 per cent are acceptable performers, the next 15 per cent are marginal performers and the bottom 5 per cent are unsatisfactory performers.
As a result, the evolution expresses the performers and non-performers. At the same time, it helps managers to overcome the problem that overrating, underrating or rating people as average (stone 2010). Also, it requires managers to take more time to consider about their employees (stone 2010). 3. 120 Performance appraisal objectives 3. 121 Discriminating on the basis of performance The organisations must distinguish the subordinates who perform well or not in the company. Stone(2010) notes that the inadequate performance can not exist in the organisation.
He further stresses that the failed performers would be supplied opportunity and assistance to improve their grads, but they will be transferred, demotion or termination if they can not match the requirement. For instance, Red Square Industries give employees rated 5 roughly 3 to 6 months to improve their performance by training before they get sack. Grote (2000, cited in Stone 2010) notifies that the organisation like’ Microsoft annually weeds out about 5 per cent of its employees through its performance appraisal system’.
The up or out program brings great benefits to the organisation. it not only motivates those well- done performers by discriminating the good performers and non-performers, but also it saves much potential costs if they continue keeping the poor employees , such as dissatisfy the customers, damage public images, lost sales (stone2010). In a word, the Red Square Industries discriminate staff, which is one of performance appraisal objectives. 3. 122 Rewarding performance Most organisations would reward the employees who have contributions.
Stone (2010) indicates that based on the objective measure of performance like forced distribution system or performance based discrimination, the organisations make decisions that who is being rewarded. In Red Squared Industries, the salary increases and bonus payments are performance related. Those rated 1,2 and 3 would receive relevant salary increase. Those rated 1 or 2 would get bonus payments. The employees rated 4 and 5 are given legally required increases. As Murray (2005, cited in Stone 2010) says that ‘if you deliver, you will get paid but if you do not deliver, you will suffer the impact of that’.
As a result, the reward performance related system motivates the staff to contribute and approach good performance. In addition, the different level of contribution, the rewards that staff receives are correspondingly different. The bonus payments are only rewarded to those rated 1 or 2. Those rated 4 and 5 only get legally required salary increases. Stone (2010) points out that the excellent performers with higher rewards and the lesser performers with least rewards could ‘encourage a performance-oriented behaviour and a performance-oriented culture’.
Therefore, the change in reward affects the change in the motivation and performance of employees (Khan, Farooq and Ullah 2010). Employees may lose their passions and give up forwarding if everyone gets the same awards no matter how good the performance is. In other words, the top performers would be motivated to keep remaining their excellent contributions while the bad performers would be encouraged to do better due to the incentive of the high performance related awards. 3. 130 The performance appraisal record The record is the document that records the ’performance rating and comments for employees’ (stone 2010).
As we know, the Red Square Industries do make the performance appraisal record to note down the distinction of subordinates’ performance. The record could largely help the organisation identify those who play important role in achieving the objective of the organisation. 3. 20 The disadvantage of the performance appraisal system in Red Square Industries 3. 21 Lacking top management support The factor that lack of top management support is the barrier to the effectiveness of performance appraisal schemes (stone 2010). Stone (2010) supports his opinion that ‘the best CEOs never hesitate to fire when they must’.
However, the managers of Red Square Industries are reluctant to fire trouble some non-performing employees who belong to a union. As well as, they refuse to rank anyone as a 4 or 5. They fail to follow the grading system and discriminate on the basis of performance. Otherwise, the managers send the wrong signal to employees that they do not need to worry if they do not perform well (stone 2010). What is worse, it could reduce the feeling of satisfaction and organisation commitment by the certain types of performance (Stathakopoulos 1997). 3. 22 Leniency bias Leniency bias occurs when manager rates their employees either consistently high or low’ (stone2010). For example, some managers argue that their department is different. They say that most of their employees are stars or starlets and refuse to rank anyone as a 4 or 5. Leniency bias is one of the aspects that cause rating errors. It makes the appraisal system become inaccurate and nonsense (stone2010). Farh and Dobbins (1989) further support Stone’s perspective, they say the leniency inhabits the delineation of the rating quality. 3. 23 Poor communication
Negative communication and participation inhabit development scheme, hence prevent the appraisal process (Lansbury 1998, cited in Stone 2010). In Red Square Industries, when a ‘star’ is perceived by co-workers as really belonging to another ranking group, they are reluctant to communicate and cooperate. What is worse, the rating system fosters envy and negative competition. The typical attitude is that if they are hothots, let them solve the problem. As a result, it stops employee development that is the aim of performance appraisal. 3. 24 Violation of EEO requirement
EEO requires ‘performance appraisal must be job-related and non-discrimination’ (stone 2010). However, employees in Rea Square Industries rated 5 who belong to a union are treated more leniently in terms of termination and pay increases than the employees who are not union members. Additionally, those with a 1 rating are referred to as ‘star’. Those with a 4 or 5 rating are called ’dog’. Employees rated 3 are called ‘workhorses’. What is worse, bonus payments are only given to those rated 1 or 2 and those rated 4 or 5 are only given legally required increases.
Many managers claim that the forced distribution of employees creates too much ill feeling due to the unfair treatment. Jawahar (2007) says that ‘an unfavourable reaction may doom the most carefully constructed appraisal system’. What is more, EEO in performance appraisal is the minimum requirement (‘EEO is everyone’s responsibility’ 1981). 3. 25 Static performance appraisal The appraisal program is not successful among the managers and workers in the Red Square Industries. Mohrman (1995, cited in Stone 2010, p. 295) says that ’they are concerned with the past performance rather than with improving future performance’.
People look back where they have been and do not attempt to explore how to grow and develop. For instance, those rated 3 become unmotivated, because they regard their rating as meaning they are only average. The static performance can not match the aim of the performance appraisal of the employee continual development. 3. 30 Implementable solution 3. 31 Management commitment To succeed the performance appraisal system, it requires the management commitment (Regel 1987, cited in Stone 2010). Regel (1987, cited in Stone 2010,p. 04) further states that ‘all members of the management team need to understand appraisal’s purpose and should agree that it is critical for management to participate in and support the system’. Therefore, if the management commit to the appraisal system, it will work. 3. 32 Prevention of leniency bias Due to leniency bias, the rating error generates. Therefore, the managers should prevent it to create the fair and accurate appraisal system. The managers of Red Square Industries should correctly distinguish the performance. As a result, the appraisal system would not be nonsense and it ould facilitate employees to grow and develop. 3. 33 Considering the validity and accuracy of the performance system Sometimes the rating will not reflect the actual judgement, so it requires the manager to recognise this (stone2010). Stone (2010) further illustrates that ensure performance related are being assessed to achieve validity and make sure generating the consistency results to reach reliability. 3. 34 Dynamic performance appraisal Stone (2010) explains this system is not just judgement about performance, but the motivation to employees toward new goals.
The Red Square Industries workers should learn to improve themselves relying on the rating system. Compared to the static program, the dynamic program is ‘more likely to be effective, credible and sustainable’ (Anderson 1992, cited in Stone 2010, p. 315). 3. 35 Enhancing communication Positive communication develops the employees themselves and facilitates job satisfaction (Stone 2010). The workers in the industries should cooperate and well communicate to each other, no matter others’ rating. Help each other and improve together to accomplish the organisational goal. 3. 6 Legal treatment in performance appraisal system Get rid of the call like ‘dogs’ or ‘workhorses’ which refer to those rated a 5 and 4 respectively, which will eliminate the ill feeling of employees. Furthermore, the fairness of the appraisal system would encourage people to participate to the organisation. Legal treatment is the desire of employee. Also, it is the process of EEO. 3. 37 Employee feedback Performance appraisal provides employees with feedback regarding their performance to reduce errors and waste, increase quality and enhance employee motivation, commitment (Nickols 2007).
There are pros and cons of performance appraisal system in Red Square Industries. Employee feedback could help to minimize the disadvantages of the appraisal system. 4. 0 Conclusion In a word, the current performance appraisal system presents advantages in the Red Square Industries. Firstly, the grading system describes the specific performance level, which helps managers to overcome the overrating, underrating, rating people as average and requires managers to take more time to consider about their employees. Secondly, discriminating performance leads to motivate those well- done performers and save potential costs.
Thirdly, reward performance results in motivating contribution and good performance. Finally, performance appraisal record helps to identify those who play important role in achieving the objective of the organisation. There are also some disadvantages of the current performance appraisal system. Firstly, it lacks top management commitment, which leads to send wrong signals and reduce the feeling of satisfaction to employees. Secondly, the leniency bias causes rating errors and inhabits the delineation of the rating quality.
Thirdly, poor communication stops employee development. Fourthly, the Red Square Industries violate EEO which is everyone’s responsibility. Last but not least, the static performance appraisal can not match the aim of the performance appraisal of employee continual development. Finally, the solution comprises with top management commitment, prevention of the leniency bias, dynamic performance appraisal, considering the validity and accuracy of the performance system, enhancing communication, legal treatment in performance appraisal system and employee feedback.
Reference list ‘EEO is everyone’s responsibility’ 1981, Management Review, Vol. 70 Issue 3, (online ebscohost). Farh, JL & Dobbins, GH 1989, ‘Effects of self-esteem on leniency bias in self-reports of performance: A structural equation model analysis’, Personnel Psychology, Vol. 42 Issue 4, p835-850,(online ebscohost). Jawahar, I 2007 ‘The Influence of Perceptions of Fairness on Performance Appraisal Reactions’, Journal of Labor Research, Vol. 28 Issue 4, p735-754,(online ebscohost).
Khan, KU, Farooq, SU &Ullah, MI 2010, ’The Relationship between Rewards and Employee Motivation in Commercial Banks of Pakistan’, Research Journal of International Studies, Issue 14, p37-54, (online Ebscohost). Nickols, F 2007, ‘performance appraisal’, Journal for Quality & Participation, Vol. 30 Issue 1, p13-16, (online ebscohost). Stathakopoulos, V 1997, ‘Effects of Performance Appraisal Systems on Marketing Managers’, Journal of Marketing Management, Vol. 13 Issue 8, p835-852, (online ebscohost). Stone, RJ 2010, Managing Human Resources, 3rd edn, John Wiley & Sons, Milton.