Performance appraisal

Introduction

The performance appraisal is an opportunity for the employee and the employer to engage in a dialogue about the employee’s performance, development and the support required from the manager (CIPD, 2009). The performance appraisal is done for a number of reasons including measuring and managing performance, evaluating knowledge and skills, validating decisions of pay, promotions and status etc. (Nieto, 2006, p. 144). However, the main objective of performance appraisal is to ensure that the employee’s skills, knowledge and interests are utilized to the fullest (Arthur, 2005b, p. 170).

A number of different performance appraisal methods and approaches have been developed by management and organization theorists in the past century. ‘A partial list of such approaches include scientific management, participative management, quality of work life programs, Management by objectives (MBO), quality circles, total quality management (TQM), business process engineering, and the balanced scored card approach, among others’ (Anderson, 2001, p. 346).

Of the above approaches, TQM based approach to performance appraisal is sometimes suggested by experts as the recommended approach. In the essay below, the points in support of the expert’s views will be discussed.

TQM based approach to performance appraisal

Before discussing the benefits and advantages of taking a TQM based approach to performance appraisal, it is important to understand what a TQM based approach is and what does it consist of.

Total Quality Management (TQM) based approach can be simply described as the approach where ‘the internal or external customer of the product or service becomes the focus for determining standards and measuring performance’. The TQM based approach focuses on the input, throughput and outcomes in regards to customer needs and expectations (Anderson, 2001, p. 345). In simple words, performance appraisals focussed on the tenets of TQM such as increasing the productivity of the organisation, continuous improvement and team work is said to be TQM based approach to performance appraisal. Some of the features of TQM based approach to performance appraisal are use of 360 degree feedback, measuring results objectively, normal distribution methods etc.

The TQM based approach to performance appraisal has many benefits and advantages over other approaches. Grote (1996, p. 351) identified them as follows:

a. Helps employees to improve their performance: The TQM based approach to performance appraisal focuses on helping the individuals to know how well they are doing and recognizes things that can improve their contributions to the organization.

b. Identifies and eliminates perceived barriers to high quality: The TQM based approach determines the problems and causes that impede individual efforts towards quality. Thus, all those problems can be eliminated.

Example 14: A good example in this case would be that of Motorola where implementing a TQM based approach resulted in an 80% reduction in defects (Anderson, 2001, p. 366).

c. Encourages all employees to incorporate TQM tenets: The approach also encourages employees to incorporate the TQM tenets such as increasing productivity and continuous improvement into their business-as-usual tasks.

Example 15: State of Wisconsin adopted the TQM approach in their activities. This helped them to decrease the turnaround times for refunds. Therefore, not only organizations but also governments can benefit by using TQM approach to performance appraisal (Anderson, 2001, p. 366).

d. Downplays results; highlight competencies: In the TQM based approach, the emphasis is less on results achieved and more on performance factors and competencies.

e. Quality improvement: Improvement of overall quality is one of the benefits of taking a TQM based approach to performance appraisal. The individual are graded or rated on the basis of the quality of the work they do. Therefore, the focus is more on quality and this leads to an improvement in quality.

Example 16: Xerox provides a good example substantiating this point. A TQM based approach resulted in a 38% decrease in customer complaints at Xerox showing significant improving the overall quality of the goods and services (Anderson, 2001, p. 366).

f. Encourages team performance: The TQM based approach also promotes team work. Individuals are rated on their activities that increase harmony, collaboration and cooperation. Therefore, team performance is also enhanced by this approach.

g. Normal distribution methods: Unlike other approaches, TQM based approach tends to avoid forced distribution methods and conform to normal distribution methods. This helps in avoiding a “bell shaped curve” which places an artificial limit to performance. Therefore, TQM based approach helps in ‘unlocking productivity and quality gains by raising the absolute level of system performance, by raising the average itself’ (Sashkin & Kiser, 1993, p. 94).

h. Cost savings: TQM approach also helps to save costs by increasing productivity of the employees working for the organization. The following are the good examples of cost savings achieved by using TQM approach:

Example 17: University of Michigan Hospital achieved substantial cost savings by adopting the TQM approach within the organization to all primary activities including performance appraisal (Anderson, 2001, p. 366).

Example 18: US Navy significantly reduced their purchasing costs by using the Total Quality Management approach to their activities (Anderson, 2001, p. 366).

Example 19: TQM based approach to Performance Appraisal at OMX Securities

OMX Securities, a financial services firm that employs nearly 200 employees recently adopted a TQM based approach to Performance Appraisal. The Performance Appraisal form of the firm consists of three sections. Section I measures the employee performance based on the accomplishment of contractual obligations, section II measures employee performance on the job role specific to his/her job and section III measures performance of the employee against the SMART specific objective set for him to achieve by his/her line manager. The employee is rated on all the three sections using a rating scale. The performance of the employee as assessed by the appraisal form is directly linked to pay rises. Finally, the appraisal form ends with a Personal Development Plan so that the employee can be trained in the deficient competencies highlighted in the performance appraisal.

Source: Appendix I – OMX Securities Performance Appraisal form.

Conclusion

Therefore, it is concluded that taking a TQM based approach to performance appraisal is highly recommended because it improves the performance of the employees and enhances the overall quality of the products and services by identifying the obstacles that impede efforts towards superior quality. It also lays emphasis on developing competencies and skills rather than on achieved results unlike most other approaches to performance appraisal. Moreover, it also encourages team work and removes limits to performance improvement by avoiding forced distribution methods.

However, in order to make implementation of TQM approach successful, a long term commitment is essential (Lemak et al, 1997). Also it is important to consider factors such as organizational readiness to implement TQM, individual factors such as ability, motivation and values, and methodological problems associated with TQM as these factors can moderate the success of TQM approach. (Anderson, 2001, p. 368). The following are classic examples of failure of TQM approach where the above factors were ignored.

Example 20: AT &T which adopted the TQM approach to performance appraisal and other activities had to lay off more than 1000 workers at its plant(Anderson, 2001, p. 366).

Example 21: Another example is that of People’s Express which went bankrupt within a year of adopting TQM approach to its activities (Anderson, 2001, p. 366).

Thus, it is agreed that taking a TQM based approach to performance appraisal is highly productive and useful if implemented taking the above factors into consideration, as seen in the case of Motorola and Xerox earlier.

References

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