Performance appraisal free essay sample

The Performance Appraisal System is when management examines and evaluates the work behavior of an employee. These results will be used to provide feedback to the employee of success and areas of improvement. The businessdictionary. com defines the performance appraisal system as â€Å"The process by which a manager or consultant (1) examines and evaluates an employee work behavior by comparing it with preset standards, (2) documents the results of the comparison, and (3) uses the results to provide feedback to the employee to show where improvements are needed and whyâ€Å" (Performance Appraisal, n. d. ). Optimal Results of the Appraisal System †¢ For the Employer o Improve employee performance and productivity o Determine the employee needs †¢ For the Employee o Raise Self-Esteem o Opens the communication line between the employee and the supervisor/management o Enhances the relationship between the employee and the supervisor/management An effective performance appraisal can work in two ways, 1) benefiting the employer and 2) benefiting the employee. Non-measurement of competencies was also a concern. Respondents were generally positive about recent experiences of appraisal. The findings suggest that motivated managers have made the system work for them, despite concerns about process, and respondents believe fairness is generally achieved. More attention is required to appraise team effort. There was little appetite for a system that links appraisal to financial reward. The conclusions of the research have informed the main recommendation, to develop a new system that is much more comprehensive, and incorporates training and guidelines. That new system should be developed through engagement with staff. 3 Declaration This first chapter provides an overview of the whole dissertation. It will give background to the research, explain exactly what the issue is that requires research, justify the project, and give an overview of the methodology that will be used. 1. 1 Background to the research Passenger Focus is the statutory watchdog for rail passengers in the UK. It acts as a passenger advocacy service, pushing for service improvements, by engaging with passengers to understand their needs, and then representing their views to the rail industry and relevant public agencies. The organisation was formed in January 2006, resulting from the Railways Act 2005. It took over from the previous Rail Passengers Council and Committees (RPC) federal network that was considered ineffective by stakeholders. In particular, a House of Commons Transport Select Committee Report (2004) criticised the RPC, suggesting that whilst rail passengers need a strong consumer voice, the profile of the RPC is too low. Following this, the Government published its white paper The Future of Rail (H. M. Government 2004). That paper was critical of the RPC, stating that the current federal structure inhibits effectiveness, the profile of the organisation was low, and that involvement with the industry and passengers could be better focussed. The proposals, which have now been implemented, created a new national body, and the regional autonomous committees were abolished. A new three year corporate plan has been adopted and the emphasis of the organisation has moved away from dealing with local parochial issues towards a more strategic operation that ensures the views of passengers are captured and acted upon. Anecdotal views of committee members and staff are no longer used. The views of users are now captured through major research programmes, so the organisation can speak to stakeholders in the rail industry with authority. Output targets for the new organisation include measurement of the numbers of passengers engaged with, and outcomes are measured in terms of service improvements introduced on the basis of passenger views. 10 This is a considerable departure from the previous model. The transformation was considerable, and the end result is consistent with the views expressed by Nutt and Backhoff (1997 p235) ; A transformation creates a sustainable metamorphosis from a vision that produces radical changes in an organisations products/services, consumers/clients, market channel, skills, sources of margin, competitive advantage, and persona, integrating these changes with core competencies. The table below demonstrates the scale of change. Table 1. 1 Summary of scale of change from RPC to Passenger Focus No. of staff RPC 78 No. of non executive committee members 142 Budget p. a. No. of offices Business planning ?6m 9 Passenger Focus 46 16 ?4. 8 2 No corporate plan. Each region developed its own local informal business plan Corporate plan consulted on, approved by National Audit Office, and adopted. Annual business plan adopted. New corporate measures are in place, and the organisation is considered â€Å"fit for purpose† by the sponsor body, the Department for Transport. From a staff perspective, it would appear the transformation has been successful. The figure below shows the 2007 overall measurement of staff satisfaction with the organisation. It can be considered very positive, and is 13% higher than the national government benchmark. 11 Figure 1. 1 Satisfaction levels Extract from Passenger Focus Employee Opinion Survey 2007 Q80. Considering everything, I am satisfied to be working for Passenger Focus. 69% (Difference from national benchmark +13%) Key Positive neutral negative 7% 14% Source: Passenger Focus Employee Opinion Survey 2007 However, one work stream associated with the transformation remains outstanding, that is to design and implement a revised performance appraisal system. Previous work by the author (Mooney 2005) identified weaknesses in the appraisal element of the existing appraisal system. That study also highlighted research by Brumbach (2003) who suggested that the appraisal system can be perceived as a dishonest annual ritual. The literature review of this dissertation will examine this issue much more closely, and test these findings against empirical research. The conclusions will lead to recommendations that the organisation can incorporate into a new system that will be introduced as soon as possible. 1. 2 Research Question The overall research problem concerns the credibility and effectiveness of performance appraisal systems. The literature review will outline many criticisms about the design and application of such systems. It was clear from conducting the literature review that much had been written about experiences of performance appraisal, but little could be found about expectations of the system. The aim, therefore, of this dissertation is to assess the gaps between expectations and experiences, from the staff perspective, of performance appraisal, in order to inform an improved system. Five objectives have been identified, and by tackling these inter-related objectives, through the linking of previous research, a detailed literature review, and new empirical research, solutions to the problem should be identified. The objectives of this research are; i. To analyse and critically review literature on performance, and in particular how it is appraised 12 i. To conduct a critical review of the features of the current Passenger Focus appraisal system. iii. iv. v. To understand what staff expect from the system To capture experiences of the appraisal process To use the gap between expectations and experiences to provide empirical evidence that will inform an improved system. 1. 3 Justification for the research There are two key reasons for undertaking this research. One is to dea l with a current â€Å"live† performance management issue, and the other is to try to fill a gap in academic research. Consumer representation of rail passengers has recently undergone considerable change. Out of the embers of the previously inefficient federal network of Rail Passenger Council Committees has been born Passenger Focus. The new body was launched in January 2006, with a new corporate plan, three year business plan, and, critically, new ways of working. The previous ways of helping passengers, through tackling anecdotal issues was cast aside. The new organisation would put rail users at the heart of industry decisions. It would do that through undertaking significant market research. e actually asking passengers what mattered to them. With the launch of the new organisation came a new streamlined national board, and a small Executive Management Team (EMT). The author, as a member of the inaugural EMT was charged with ensuring effective staff performance is delivered from the outset. A new, but interim, Performance Appraisal system was put in place, but it was recognised that it would no t be fit for purpose as the organisation took off. So, answering the research questions will assist in the development of a new effective performance appraisal system a â€Å"live† management problem. If employees are not happy with the existing appraisal system, they would be unwilling to take a full part in it, which in turn would lead to lower productivity (Wright and Cheung 2005). Secondly, an initial examination of relevant literature found gaps in the research. Much research has been undertaken on performance appraisal, not much of that complimentary of theory and practice. Roberts and Pregitzer (2007), as an example, suggest that performance appraisal is a yearly right of passage that triggers dread and apprehension in the most experienced, battle hardened managers. This study provides 13 new empirical research on the views of recipients of performance appraisal – an area identified as a major gap in research on the subject (Simmons 2002, Redman et al 2000). 1. 4 Methodology 1. 4. 1 The research paradigm adopted is interpretive. According to Saunders et al (2007) the interpretive paradigm is a philosophical position which is concerned with understanding the way we humans make sense of the world around us. The reasons for this approach are set out in detail in the methodology. 1. 4. 2 The research approach is inductive (or qualitative). The approach is more concerned with human issues than pure science. The literature review does not set out a definite theory, but does establish a conceptual framework to aid the gathering and analysis of data to answer the research question. 1. 4. 3. Research strategy. The chosen research strategy is a cross-sectional case study. The empirical data will be based on qualitative interview methods. This will offer the highest chance of successful research, as it will measure human response. It can also be achieved within the timescale of the project. In summary, the research methods will include †¢ †¢ Focus group with volunteers from staff forum Semi-structured interviews focusing on expectations and experience of performance appraisal †¢ Use of secondary data from detailed (and independent) Employee Opinion Survey The research will allow comparison between groups of employees, to determine if length of service or seniority is a factor. Confidentiality will be assured to participants, and the report will be edited to protect identification of individuals before it is circulated to the organisation’s management board. 1. Outline of the chapters 1. 5. 1 Chapter 1 This chapter gives an overview of the whole project. It sets out what the research area is, breaks it down into a series of objectives for the project, and relates this 14 to the background of the organisation that is to be studied in depth. This chapter also gives an overview of why an interpretive paradigm has been selected, and sets out and justifi es the research strategy. 1. 5. 2 Chapter 2 This chapter reviews literature relevant to the research objectives. It builds a theoretical foundation upon which the research is based. It commences with an examination of what performance is, and why it is measured. The chapter then considers how performance appraisal fits into the parent discipline of performance management. A review of literature covering appraisal systems and their application follows, and this includes reference to recent appraisals at Passenger Focus. The above secondary data will then lead to the building of the conceptual model that will be developed through the research. 1. 5. 3 Chapter 3 This chapter describes the methodology that will be used to gather the primary data. It will outline the research paradigm selected, set out the research strategy, and also justify the selection of the methodology. Ethical issues will also be addressed in this chapter. 1. 5. 4 Chapter 4 This chapter will present the findings of the research. Due to the different methods used to research the questions, some of the findings will be set out in text, and some will be presented in tables. The data will be analysed preparation for the following chapter, which sets out the conclusions. in 1. 5. 5. Chapter 5 Chapter 5 will set out conclusions about the research objectives through linking the research findings, with the findings of chapter 2. The chapter will discuss limitations of the research and set out opportunities for additional research that will further enlighten the problem area. 1. 5. 6 Chapter 6 Based on the conclusions of chapter 5, this chapter includes recommendations for a new performance appraisal system. 15 1. 6 Summary This opening chapter has introduced the reader to the organisation Passenger Focus, and cited its recent transformation. The chapter has revealed the need for Passenger Focus to develop a performance culture, and within that, a robust performance appraisal system. The research question and objectives have been set out, together with the methodology to be used to tackle the objectives. 16 2. Literature review 2. 1 Introduction This chapter reviews literature relevant to the research objectives. It builds a theoretical foundation upon which the research is based. It commences with an examination of what performance is, and why it is measured. The chapter then considers how performance appraisal fits into the parent discipline of performance management. A literature review covering appraisal systems and their application follows, and this includes reference to the system in place at Passenger Focus. The above secondary data will then lead to the building of the conceptual model that will be tested through the research. 2. 2 Performance defined The Oxford English dictionary defines performance as the â€Å"accomplishment, execution, carrying out, and working out of anything ordered or undertaken†. Armstrong and Baron (2005) argue that performance is a matter not only of what people achieve, but how they achieve it. Bates and Holton (1995) suggest that performance is a multidimensional construct, the measurement of which depends on a variety of factors. Brumbach (1988) offers the most precise definition. â€Å"Performance means both behaviours and results. Behaviours are also outcomes in their own right and can be judged apart from results†. From the definition, and interpretations above, it can be argued that performance is not just about outputs, it is also concerned with actions and behaviours demonstrated to achieve given targets. This issue will feature strongly through the research. Much has been written on the need to manage performance. The Audit Commission acknowledged this, suggesting in 1995 that performance management had become something of an industry in its own right, dominated by â€Å"industry experts† and management consultancies (Audit Commission 1995). Performance management is now considered an essential part of normal management (Rose and Lawton 1999) and is increasingly accepted as an integral part of public sector management (Wisniewski and Olafson 2004). However, Hale and Whitman (2000) cite research by the Institute of Personnel Management (1992) that suggests no consistent definition emerged from over 17 1800 employers surveyed. Williams (2002) also indicates that performance management is difficult to define. This suggests a lack of understanding of performance measure issues from those who are subject to the processes, and this will be explored later. During research for this project, over 30 definitions of performance management were uncovered. Most adopted a common strand along the lines of the definition provided by Armstrong (2000) who writes â€Å"performance management is a strategic and integrated process that delivers sustained success to organisations by improving the performance of people who work in them, and by developing the capabilities of individuals and teams†. The author, as a practitioner of Performance Management, offers the following, adapted from by Walters (1995) Performance Management is about the arrangements organisations make to get the right things done successfully. The essence of Performance Management is the organisation of work to achieve optimum results and this involves attention to both process and people. Further research by Armstrong (2000) suggests that when it is used well, it will contribute to organisation success, and as such, is a vital management function. Radnor and McGuire (2004) also argued this point, but their research revealed, through a case study at Bradford Health Authority, that effective performance management in the public sector could be considered to be closer to fiction than fact. Of all the literature reviewed on the wider subject of performance management, Radnor and McGuire (2004) are amongst the minority in conducting in-depth attitudinal surveys that aid their findings. 2. 3 Performance Management features McMaster (1994) and Williams (2002) amongst others, suggest that the key sequences of performance management are as follows; i. ii. iii. iv. Identification of strategic objectives Setting of departmental/team goals Activities identified/performance plan developed Outputs agreed 18 v. vi. vii. Monitor/review of performance through appraisal Determine development needs Allocate reward For individuals, this entails they should be able to answer the following questions – What is expected of me? How am I doing? What shall I do next? What help will I need ? (Macauley and Cook 1994) Very little of the literature researched relates this to team performance. Notable exceptions are Armstrong and Baron (1998) who lament the lack of attention paid to team performance, and Brumbach (2003) who argues strongly for the importance of team management, and suggests the above four questions could be adapted to us/we. 2. 4 Performance Management in the public sector So when and why did Performance Management emerge into the public sector? Performance management is an increasingly common phenomenon in the public sector (Adcroft and Willis 2005). All public sector organisations will be required to scrutinise the performance of the organisation and its staff. Examination of the literature review traces back first steps into performance management by the public sector to the conservative government of the late 1980’s and early 1990’s. It was under those Governments that organisational and managerial reforms were introduced, and public sector performance management became firmly established (Boland and Fowler 2000). The public sector was becoming much more market orientated, and successive conservative governments tried to improve accountability by developing standards and targets (Harrison and Goulding 1997). These increased standards led to the development of the Citizen’s Charter in 1991, and this was the trigger for the launch of many charters in the public sector. The Citizens Charter (1991) developed the idea that there should be a link between an individual’s performance and their pay. It did not, however, examine whether money does motivate people. In 1993, the Local Government Management Board (LGMB) published the first guidance to performance management aimed specifically at the public sector (LGMB 1993). Its clear message was that performance management links the strategy and service objectives of the organisation to jobs and people. It again linked the option of relating performance management to reward strategies. The guidance gave a clear 19 emphasis on the fact that organisational performance is a product of what people achieve and do (Rogers 1999). The Audit Commission published papers in the midnineties to strengthen the case for performance management in the public sector. Three key elements emerged relevant to the individual perspective of performance management; i. There should be qualitative and quantitative standards for judging individual and organisation performance ii. iii. Organisation and individual feedback on performance should be provided Training and development needs should be identified to improve individual performance. (Audit Commission 1995) This guidance indicated that performance appraisal was just as much about development (forward looking) as review of performance ( backward looking). Rose and Lawton (1999) noted how stressful it was at that time for managers to have to introduce new management practises, whilst continuing to deliver for customers, with little or no additional resources to facilitate implementation. They further argue that this was compounded by the fact that almost all systems were top down imposed, with little participation in design by participants. This key issue will be explored further. There were further drives to improve the effectiveness of public services as New Labour came to power in 1997 (Radnor and Maguire 2004). A report by Gershon in 2004 provided a further catalyst for the not-for-profit sector to adopt improved service delivery (Manville 2007). This report was the catalyst for the Rail Passengers Council (predecessor to Passenger Focus) to significantly improve its corporate and business planning and link to individual staff objectives. Subsequent literature, notably Wisniewski and Olafsson (2004) and Radnor and Macguire (2004) recognise the importance of performance measurement and management in the public sector. Most of those public sector employees are labour intensive, and so they need to capitalise on the abilities and performance of staff. Following this, the goal of performance management is to achieve human capital advantage, recognising that the individual staff member is the most important source of capital advantage (Armstrong Baron 2005). 2. 5 The Passenger Focus Performance Management Cycle The current Passenger Focus model of performance management is set out below. It is very much individual based and allows for no measurement of team performance. 20 Armstrong and Baron (1998) and Brumback (203) lament the lack of attention paid to the management of team performance and this will be explored further in this research. The sequence is as follows and is similar to the normal model as outlined above; i. ii. iii. iv. v. Identify strategic objectives Develop team plans Develop individual targets and outputs Performance appraisal Personal Development Plans/Rewards The theory appears reasonable, but application will be tested in detail throughout this research. The Passenger Focus model is generally â€Å"owned† by its HR Department and no formal training is given, apart from a briefing note circulated to managers. Williams (2002) recommends training being incorporated into the cycle to ensure consistency of application. . 6 Performance appraisal Performance Appraisal is increasingly considered one of the most important human resource practices (Boswell and Boudreau 2002). The following section will show how appraisal, although only one part of the wider system described above, is central to the effectiveness of Performance Management ( Piggot-Irvine 2003). The Oxford English Dictionary defines ap praise as â€Å"estimate the value or quality of†. Linking this to performance, Bird (2003) suggest performance appraisal is the assessment of what we produce and how. A workshop facilitated by the author prior to the commencement of this research, defined performance appraisal as measurement of what we do and how. Previous research by the author into the effectiveness of performance management within the predecessor to Passenger Focus (Rail Passengers Council) revealed that a reasonable system was in place but did not appear to be delivering. Corporately, the organisation was seen to be ineffective, hence the transformation, yet 98% of all staff were rated as good or excellent. This adds weight to the view of Brumbach (2003) who suggests that the appraisal system can be seen as a dishonest annual ritual. There is much research which suggests that appraisal is not practiced well, or welcomed in some cases. Roberts and Pregitzer (2007) suggest that performance appraisal is a yearly right of passage that triggers dread and apprehension in the most experienced, battle hardened managers. More in depth research by DeNisi (1996) suggests that due to the subjective nature of appraisals, it is not surprising there has been much written on 21 ias, inaccuracy and inherent unfairness of most systems. St-Onge, Morin, Bellehumeur and Dupuis (2009) draw together a number of surveys showing worldwide dissatisfaction with appraisal, in particular citing research of 50,000 respondents that reveals only 13% of employees and 6% of Executives consider their firm’s appraisal process useful. Brown (2001) cites major problems in Towers Perrin Performance Appraisal practices . He cites lack of training for managers particularly important. Hartle (1997) cites study by the Local Government Management Board in 1990, concerning appraisal. Key findings were; †¢ †¢ †¢ †¢ †¢ Managers do not take the process seriously Inadequate effort from all involved Bad communications and training hinder effectiveness The systems are too individualistic, remote and divisive, and Ratings can be inconsistent and unfair Wilson and Western (2001) take this further, suggesting current appraisal procedures excite most staff to a level comparable to a trip to the dentist. The above critique appears harsh, and the research to follow will test these assumptions within Passenger Focus. Despite the criticism and distrust, performance appraisal seems embedded into the public and private sector. It is here to stay. Managers and employees continue to accept performance appraisal systems whilst accepting they are fraught with inaccuracies ( St-Onge, Morin, Bellehumeur Dupuis 2009). The following section looks at the components of performance appraisal. 2. 6. 1 The purpose of performance appraisal A starting point for a detailed literature review on performance appraisal should be what are the aims? Thinking on the benefits of appraisal systems has moved on. Early literature, best demonstrated by Stewart and Stewart (1987), cites the benefits of appraisal systems, but these were mainly from the organisation perspective. Boice and Kleiner (1997) suggest the overall purpose of performance appraisal is to let an employee know how his or her performance compares with the manager’s expectations. Again, this is a one dimensional view. Fletcher (2006) takes a more balanced view, suggesting that for performance appraisal to be constructive and useful, there needs to be something in it for appraiser and appraisee. Youngcourt, Leiva and Jones (2007) suggest that the common purpose of performance appraisal tends to be aimed at the measurement of individuals, and consider that this focus is insufficient. 22 From the organisation perspective, successful performance management is key to achievement of corporate goals. It is argued above that performance appraisal is the central component of performance management, and so it must be that for an organisation, the purpose of performance appraisal is attainment of corporate goals. Caruth and Humphreys (2008) add to this viewpoint by suggesting it is a business imperative that the performance appraisal system includes characteristics to meet the organisational needs and all of its stakeholders (including management and staff). Bach (2000) suggests that one of the underlying purposes of performance appraisal schemes is to elicit corporate compliance. This may not be a major issue for Passenger Focus, as demonstrated by the table below. This is an extract from the Passenger Focus Employee Opinion Survey 2007 which examined employee engagement. Figure 2. 1 Commitment to goals Extract from Passenger Focus Employee Opinion Survey 2007 Q76. I feel committed to the organisations goals 83% (Difference from national benchmark +8%) Key Positive neutral negative 10% 7% Source: Passenger Focus 2007 Employee Opinion Survey However, most of the literature reviewed for this research concentrates on the purpose of Performance Appraisal from the individual perspective, particularly focussing on measurement of individual performance, identifying training and allocating rewards. Weightman (1996) focuses on the individual when citing the purposes of performance appraisal, suggesting it can be used for many reasons, including; reward, discipline, coaching, counselling, raising morale, measuring achievement of targets and outputs, identifying development opportunities , improving upward and downward communication, reinforcing management control and selecting people for promotion or redundancy. Fletcher (1993) cites a study where 80% of respondents were dissatisfied with their appraisal scheme, in particular with multiplicity of objectives. Randell (1994) also highlights a multiplicity of purposes including; evaluation, auditing, succession planning, training, controlling and motivation. Rees and Porter (2003) cite that a common problem is that schemes have too many objectives. They add that there can be conflict between objectives, but do not expand on this point. Based on the observations 23 of others, perhaps it is the conflict between control and development that is evident. What is consistent with all literature is that objectives of performance appraisal are a combination of backward looking/forward planning. The above covers a large range of objectives, and begs the question if appraisal is trying to achieve too much. The research will determine whether that range of objectives is relevant from the employee perspective. Again, from the individual perspective, Simmons (2002) draws together a range of sources, arguing that a robust, performance enhancing and equitable performance appraisal system, which gains the commitment of professionals, is a key factor in achieving a good return on an organisations â€Å"intellectual capital†. Murphy and Cleveland (1995) amongst many others, suggest a key purpose of performance appraisal is to determine pay and other financial compensation. The issue of outcomes of performance appraisal, such as pay, will be addressed later in this literature review and in the research. Role ambiguity is addressed by Pettijohn et al (2001) who suggest that performance appraisal can reduce role ambiguity. The most obvious reason for appraising an individual is to secure its improvement (Harrison Goulding 1997) and it follows that securing performance improvement for all individuals, will enhance wider organisation performance. Common to almost all purposes of performance appraisal is the concept of improving performance and developing people. Overall, some commentators focus on organisational goals as the key purpose, many focus on individual performance improvement. In a new organisation such as Passenger Focus, it is suggested that a scheme that meets both organisation and individual needs is critical. From the above, the following table lists the recognised purposes of performance appraisal. Table 2. 1 Purpose of Performance Appraisal Purpose of Performance Appraisal 1. Achievement of Organisation Goals 2. Setting of individual objectives 3. Evaluation of individual performance against objectives 4. Improvement of Performance 5. Allocation of Rewards 24 This is reasonably consistent with the aims of the Passenger Focus Performance Appraisal Guidelines (appendix 1) which states; The performance review process provides a focus for continuous improvement. The approach is designed to provide the following benefits: †¢ †¢ an open review of performance at regular intervals a focus for agreement about setting clear performance objectives which are linked to the corporate and business plan †¢ †¢ a review of development needs and the setting of development action plans a link to the annual salary review 2. 6. 2 Performance appraisal systems As with most organisations, Passenger Focus has a formal Performance Appraisal system embedded within the performance and planning cycle. There should always be a definitive written and communicated procedure for performance appraisal (Allan 1994). Documentation for the scheme is contained within appendices 1 and 2 , and throughout this section, its robustness will be analysed. It was formulated in line with development of the Corporate Plan and Annual Plan. Developing an appraisal system that accurately reflects employee performance is a difficult task (Boice and Kleiner 1997). Caruth and Humphreys (2006) suggest that a successful performance appraisal system is one that has resulted from hard work, careful thinking, planning and integrated with the strategy and needs of the organisation. This will be examined through the empirical research. A wide range of methods are used to conduct performance appraisals, from the simplest of ranking schemes, to complex competency and/or behavioural anchored ratings schemes (Snape, Redman Bamber 1994). The nature of an organisations appraisal scheme is often a reflection on its resources and expertise (Redman Wilkinson 2001). In comparison with other performance appraisal schemes, the Passenger Focus scheme can be considered simplistic. This is likely due to the immaturity of the organisation and a total of two staff in the HR function. There is a danger that highly defined chemes can be too bureaucratic, with the result that completion of paperwork, or ticking boxes, becomes the main driver (Rogers 1999). Harrison and Goulding (1997) consider it vital that employees are involved in the design of the system , for practical, operational and psychological reasons. 25 Passenger Focus has not involved staff in development of the system but has a chance to engage with staff in updating a ny system. 2. 6. 2. 1 Who appraises? All Passenger Focus staff, including the Chief Executive, are appraised, making it an inclusive system. This also includes all part time staff. Bach (2000) trumpets the development in the expansion of performance appraisal to cover a larger proportion of the workforce. The Passenger Focus guidelines do not clarify who conducts appraisals, but is accepted that it the line manager. In all cases in Passenger Focus, the line manager is the appraiser (apart from the Chief Executive who is appraised by the Chairman). The rationale is that the line manager is best placed to carry out appraisals because of the amount of contact and greater experience ( Fletcher 1999). 2. 6. 2. 2 Other sources of feedback Research on the effectiveness of 360 degree appraisal is contradictory. The predecessor of Passenger Focus, the Rail Passengers Council, experimented with 360 degree appraisal, but it is not now part of the formal system. Mabey ( 2001) concluded that the amount of empirical research on the impact of 360 degree appraisal is small, despite increasing popularity. Williams (2002) raises concerns about 360 degree feedback, citing that it brings with it ethical, logical, political and resource problems, and has the potential to do more harm than good. Research by CIPD in 2005 revealed that, of 506 organisations surveyed, only 14% were using 360 degree appraisal. Backing up Mabey’s theory, of those using it, only 20% considered it effective. That means that only 14 organisations were using 360 degree appraisal and getting something out of it. Armstrong and Baron (1998) cite research by various organisations where widened feedback on behaviour of individuals against a list of core competencies has enhanced development plans. Kline and Sulsky (2009) suggested that it has been known for some time that performance feedback from multiple sources has been shown to lead to more reliable ratings and better performance improvements. However, in the same research they cite Love ( 1991) stating that peer ratings are highly unreliable. 2. 6. 2. 3 Self appraisal Self appraisal is not used at Passenger Focus. Survey evidence gathered by Williams (2002) suggests that use of it is increasing slowly. There is little empirical evidence to suggest it is having any impact, and this is an area worthy of further investigation in 26 organisations where it does take place. Atwater ( 1998) identified some of the potential benefits of self appraisal, below, but fell short of evaluating their worth. i. ii. iii. iv. v. Increases employees perception of fairness of the process Reduces potential for individual bias by providing further rating Provides a useful tool to increase communication in the process Helps clarify differences of opinion regarding performance requirements Increases commitment to development plans and new goals. Rees and Porter (2003) suggest self appraisal can have a part in structured feedback, as people can be their own harshest critic. 2. 6. 2. 4 Frequency of performance review and feedback Whilst Performance Management is a continuous process, appraisals are periodic activities (Rao 2004). Most organisations have at least an annual review. Sahl (1990) suggests that frequent reviews are required to ensure progress is being made on developmental objectives. The Passenger Focus system requires a formal annual review with a less formal six monthly review. This is backed up by monthly informal one to one sessions between manager and staff member. The Passenger Focus Employee Opinion Survey of 2007 revealed a reasonable level of satisfaction with feedback on performance. Figure 2. 2 Manager feedback Extract from Passenger Focus Employee Opinion Survey 2007 Q14. My manager gives me regular feedback on my performance 63% (Difference from national benchmark +10%) Key positive neutral negative 21% 16% Source: Passenger Focus 2007 Employee Opinion Survey 2. 6. 2. 5 Training and guidelines An important element of developing an effective performance system is training for those individuals involved as raters (Boice and Kleiner 1997). Evans (1991) suggests that training should incorporate coaching and counselling, conflict resolution, setting performance standards, linking the system to pay (if applicable) and providing 27 employee feedback. Williams (2002) also recommends training being incorporated into any system to ensure it is used consistently and effectively. Brown (2001) cites major problems in Towers Perrin Performance Appraisal practices and suggests lack of training for managers is particularly important. Pigott-Irvine (2003) cites research that suggests training for conducting appraisal should encompass all elements, such as values, purpose, objective setting, observation skills, interviewing and report writing. Rees and Porter (2003) also cite the need for training of use of the scheme to be included, covering the key skills appraisers need. Training for employees should also be considered (Williams 2002). Farr (1993) notes the need for the requirement of training to be given to employees to receive feedback in a non-defensive manner. Bretz, Milkovich and Read (1992) also suggest that a lack of training of appraisees may cause discrepancies between expected and actual performance of the process, and associated satisfaction. Overall, training should increase the effectiveness of the Performance Appraisal system and lead to greater organisational success (Cook and Crossman 2004). There is no formal training process for Passenger Focus appraisers or appraisees, and this is considered a major weakness. 2. 6. 2. 6 The Performance Appraisal Interview The appraisal interview should be conducted in an open and non threatening manner to help reduce anxiety or doubt appraisees may have (Harrison Goulding 1997). Trust between appraiser and appraisee is an important factor. Performance appraisal could be seen as another form of management control (Bach 1998). This is even more important when there seems a reluctance or inability to collate objective information to inform the appraisal process (Pigott-Irvine 2003). There is no requirement or mention within the Passenger Focus system to collate and prepare evidence of performance. Preparation is also considered important. Finding time to undertake appraisal can be challenging, particularly in a new organisation such as Passenger Focus, where the pace of work is frantic. However, where appraisal is working well, it is often because management have accorded it appropriate priority (Pigott-Irvine 2003). The Passenger Focus guidance is lacking in what could be covered in an appraisal interview. This literature review reveals a whole host of issues that could/should be covered in the interview. Redman and Wilkinson ( 2001) cited research of the practice of Performance Appraisal at an NHS Trust hospital. The purpose of setting out this table below is to show the range of issues discussed and uncovered in the research. 28 Table 2. 2 Range of issues covered in appraisals Issue Achievement of work objectives Future work objectives Personality or behaviour Skills and competencies Training and Development Needs Career aspirations Pay or benefits Job difficulties How you might improve your performance How your supervisor might help you improve your performance Personal or domestic circumstances Source: Redman and Wilkinson 2001 2. . 2. 7 What is appraised Definitions of Performance Management earlier cite the need to align individual and organisational goals. It is only when the purposes of the organisation are agreed, and activities and products are defined and measured, can there be efficient use of resources ( Flynn and Strehl 1996). A survey by CIPD in 2005 revealed that 84% o f respondents considered quantifiable measures of performance are essential to successful performance management. Armstrong and Baron (1998) describe how many organisations now use SMART criteria (specific, measurable, agreed, realistic and time related) for performance measurement. It is not always done well. Rogers (1999) highlights that setting objectives and targets remain the core activity of performance appraisal, but in practice is poorly conducted, with little regard for ensuring that organisation and individual objectives are aligned as closely as possible. The Passenger Focus guidelines attached as appendix 1 gives passing reference to setting clear performance objectives, which are linked to the corporate and business plan, but the guidance stops there. Of more concern is that no-one, apart from appraiser and appraisee, is reviewing the appropriateness and achievability of goals set. Setting goals which are unrealistic and not relevant may reduce a staff member’s individual 29 commitment. Clarity of role is also important, and could be examined through the process. If people do not know what is expected of them, there is a good chance that their behaviour will not conform to expectations (Youngcourt, Leiva Jones 2007). Simmons ( 2002) cited research on appraisal in universities which suggested that their appraisal was not particularly successful in increasing clarity of job responsibilities. The Passenger Focus system does not include for the measurement of competencies. Many organisations are moving towards inclusion of competency measurement. Competencies are important factors which contribute to high levels of individual performance and therefore organisational effectiveness (Armstrong 1999) and so there must be a strong link to the competencies staff have and their ability to achieve their set goals. Specifications for employee competencies that are required could be usefully integrated into appraisal schemes (Rees and Porter 2003). Fletcher (1993) in an overview of appraisal methods, noted an increasing number of organisations using competency based appraisal combined with a results-oriented appraisal, which he concluded was a positive way forward. Redman and Wilkinson (2001) suggest that the appraisal of competencies has a number of benefits, most importantly, being able to direct employees towards areas where there is scope for behaviour. The author has experienced competency measurement in a number of organisations worked for, and some of these competencies measured are set out in the table below. Table 2. 3 Examples of competencies measured Competency area Business thinking Competency Business awareness Problem solving Working with colleagues Team working Building relationships Developing self and others Inspiring people Building confidence Persuading and influencing Communicating and presenting Achieving Goals Delivering results Improving performance 2. 6. 2. Ratings systems and fairness 30 The rating system for Passenger Focus staff is simplistic. Staff are deemed to have either exceeded objectives (rating 1) met objectives (rating 2) or missed objectives (rating 3). The table below sets out the definitions. Table 2. 4 Passenger Focus Appraisal Ratings guidance Rating Description Objectives Exceeded Rating 1 Definition To score an overall ‘Objectives Exceeded’ rating it is likely that there is signifi cant evidence of consistently high performance across all the areas of work covered by the objectives. Sometimes this may be easy to quantify. For example if an objective was achieved much earlier than timescale at a reduced cost and with an enhanced result. It is also likely that an ‘exceeded’ rating will also mean that the individual achieved despite significant difficulties. For example, there may have been unforeseen difficulties that the individual overcame in order to maintain progress. To score an overall ‘Objectives Met’ rating it is likely that evidence of achievement covers all the work areas for which objectives were set. This would reflect meeting all objectives. In some situations an objective may have ceased to apply owing to circumstances beyond the individual’s control. In such instances you should consider evidence of other performance achievements during the year which ought to be included in the review. The ‘Objectives Missed’ rating is likely to apply when there is evidence of under performance across the work areas for which objectives were set, provided the individual can be held personally accountable for the lack of result. Care is needed here. For example, in the management of projects with high levels of complexity, it is necessary to identify the elements for which the individual is accountable, especially if the project has a mix of interrelated activities and involves many people. Objectives Met Rating 2 Objectives Missed Rating 3 Fairness of the system is considered important. Research by Cook and Crossman (2004) suggested that the perceived fairness of the system itself contributes to overall perception of fairness. The issue of accuracy in performance assessment is a problematic one (Atwater and Yammarino 1997). Many studies on performance appraisal focus on the fairness/appropriateness of ratings systems. Earlier research by Henderson (1984) suggested that almost all employees are extremely wary of performance ratings. Later work by Harrison and Goulding (1997) revealed results of research into ratings within libraries. Their work suggested that subjectivity can be a problem where appraisers and appraisees are colleagues. They further suggest that managers may be uncomfortable with criticising staff they work closely with, and a 31 tendency towards centralised ratings could apply. Giving criticism in a constructive way can be a very delicate subject (Rees Porter 2003). Bascal (1999) argues that managers tend to avoid confrontation by scoring generously. More recent research (including by Armstrong Mulis 1998, and Brumbach 2003) suggest that the ratings system can be perceived as a dishonest annual ritual. Employees themselves generally do not want to hear bad news, especially about themselves (Ashford 1999). 2. 6. 3 Outcomes of the system 2. 6. 3. 1 Improving Performance Rogers (1999) suggests that one of the key components of performance appraisal is solving problems – i. . improving performance. He also suggests that whilst many managers may have the skills to identify the need to improve performance, they may need much more support than is currently made available to sort them. Poor performance can arise from a host of reasons, including inadequate leadership, bad management or defective work systems (Armstrong 2000). Pigott-Irvine (2003) cited res earch that suggested the need to distance appraisal and disciplinary processes. This is also argued by Armstrong (2000) who suggests that capability issues should be taken outside of the appraisal process. This appears sensible, but unrealistic to some extent. A key feature of the appraisal system is achievement of goals, and a lack of achievement must at least give managers an early warning that something is not right. 2. 6. 3. 2 Appraisal outcome and reward The current Passenger Focus performance appraisal system is not linked to pay, although previous versions have. Performance Related Pay is best described as the explicit link of financial reward to individual, group or company performance (Armstrong Murlis 1991). There is much research on the subject of appraisal leading to pay. Research by Simmons (2002) uncovered strong opposition from respondents in HE and FE sectors against linking appraisal to pay, citing divisive criteria and the impact on teams performance in particular. Marsden and French (1998) undertook research at the Inland Revenue on the impact of an appraisal scheme linked to performance related pay. They found that the scheme had the general effect of reducing motivation and teamwork. A new system of performance appraisal introduced at Rother Homes was considered a major success (Langridge 2004) and one key element was separation of pay and bonuses from the appraisal system. 2 Research into the link between performance appraisal and financial reward was undertaken in 1995. That piece of work concluded; There is no evidence to suggest that pay itself rewards motivation – moreover poor implementation of PRP can cause resentment and demotivate staff (Audit Commission 1995) . In drawing together research from this field, Rogers (1999) ident ified a long list of criteria which were critical to successfully linking appraisal to financial reward. These included; †¢ †¢ †¢ †¢ †¢ †¢ Rewards are clearly lined and proportionate to effort and results Clear, fair and understood criteria are used to judge performance Clear and meaningful targets are set Employees and managers can easily monitor performance against targets The reward scheme is properly designed, implemented and maintained The scheme is designed to ensure individuals cannot receive inflated awards unrelated to their performance †¢ Employees are involved in the development and operation of the scheme (Source; Rogers 1999) Most of the literature review reveals weaknesses right across the practice of performance appraisal. It is suggested, then, that unless organisations invests significantly in this area, linking it to financial reward may be best avoided. There are other rewards, non financial, that are valued by employees. Williams (2002) suggests these include; †¢ †¢ †¢ †¢ †¢ Formal commendations and awards Favourable mention in company publications Freedom concerning job duties and/or hours Increased responsibility More involvement in setting goals Picking up this theme, Yukl (1994) suggests that research into what rewards people want should be undertaken and incorporated into the performance appraisal system. This will be explored further through the empirical research. 2. 6. 3. 3 Personal Development and Training 33 All commentators on performance appraisal agree that identifying and implementing development plans is a key outcome of the performance appraisal process. Performance is measured, and then from that appraiser and appraisee agree a plan to improve performance. Appraisal will focus on both short term issues and also long term career needs (Shelley 1999). Research by Wilson and Western ( 2000) suggest that appraisers take the lead in determining the training and development to take place. If this is the case, it is of concern, as personal development requirements may take a poor second place to immediate on the job training. Rees and Porter (2003) suggest that care needs to be taken in establishing realistic priorities and to recognise the potential conflict between individual aspirations and organisational needs. 2. 6. 3. 4 Motivation and Job Satisfaction There is much research on how raters may distort final evaluation scores through their own motivation. Poon 2004). Some research has uncovered examples of managers deliberately distorting staff performance ratings for polit