Employee Performance Appraisals in the Public Sector: Uses/Advantages, Limitations and Comparison With the Private Sector, Research Paper Example

Abstract

The purpose of this report is to evaluate the significance of employee performance appraisal processes. Employee performance management focuses on an employee’s work performance as being satisfactory or unsatisfactory, and this is tied to the employee’s job expectations and responsibilities, as well as bonuses, raises and promotions. Employees need to understand what is required of them. This is important because when they understand what is expected, they are better able to perform their work assignments. When an employee’s work performance is unsatisfactory, it is then necessary to identify underlying issues and determine next steps to attempt to resolve the issues and giving the employee an opportunity to improve. The performance appraisal process is used to facilitate this. Managers and supervisors are able to measure employee work performance and help them make improvements in work performance, while keeping with corporate objectives. However, there are times when this process has limitations which often result in litigious activities. Therefore, there are advantages and disadvantages to the employee performance appraisal system. This report examines current controversies and challenges regarding this issue and includes a review of literature. In addition, regulatory compliance laws and comparative perspectives on the issue are examined in the public and private sectors, as well as best practices regarding how performance organizations handle employee performance management initiatives.

Employee performance appraisals in the public sector: uses/advantages,

limitations and comparison with the private sector

The performance appraisal process is a significant part of the human resources management function. According to (DelPo, 2007), this process is important for cohesive employer-employee relationships, and it also provides legal protection for an organization. A successful organization fosters unity between employees, supervisors, and managers, and regular communication, including relevant feedback. This is essential for ensuring the organization is running smoothly. The performance appraisal process helps facilitate this by serving as a motivator for improving organizational performance in all areas.

The purpose of employee performance appraisals has many facets; however, its most basic purpose is evaluation. When an employee’s work performance is acceptable (satisfactory or outstanding), acknowledgement and recognition is in order. This necessitates clearly communicated job expectations and responsibilities, so that employees understand what is required of them. When employees know what is expected of them, they perform their work assignments with more enthusiasm. In contrast, when an employee’s work performance is unacceptable (unsatisfactory or inferior), it necessitates communication between managers or supervisors and the employee. This is important for identifying issues and determining next steps to resolve the issues and giving the employee an opportunity for improvement.

The performance appraisal process is an effective evaluation tool for managers and supervisors for gauging employee work performance and making improvements in work performance, while maintaining or enhancing areas that need no improvement. This is facilitated with managers, supervisors and employees working together to foster adequate communication at it relates to performance requirements. Successful performance appraisal processes depend on well the processes are integrated with the people (Hays, Kearney, & Coggburn, 2008).

As it relates to legal protection for an organization, according to DelPo (2007), employee performance appraisals serve as a line of defense, in the event of a lawsuit brought against the company by a disgruntled employee whose employment status was terminated due to work-related difficulties. A well-organized and properly documented performance evaluation paper trail is an effective resource in a court of law, in this instance. A sound employee evaluation process is necessary for dealing with employee problems and allowing employees an opportunity to correct problems, and if problems are not corrected, the system allows for legal disciplinary action including termination, if necessary. Even with the organization’s best of intentions and adherence to human resource protocol, any employee who feels unfairly treated or disagrees with management decisions, in the case of termination, is likely to file a formal complaint or a lawsuit against the company. Performance evaluation processes allow for transparency with workplace rules and consequences if those rules are broken; therefore, reducing the possibility of employee lawsuits against the company (DelPo, 2007).

Performance Appraisal Process Defined

As mentioned, the performance appraisal process is a way of forming a relationship between employees, managers and supervisors. An effective appraisal system includes focused observation, accurate documentation, and adequate communication. It allows managers and supervisors the opportunity of knowing how individual employees are performing, and documenting the status of employee performance as it occurs. In addition, an efficient performance appraisal process depends on open lines of communication between supervisors and employees, so that employees know how they are progressing and how they may make adjustments if their performance ratings decline. This may happen when employees encounter obstacles to professional growth and performance, and it is the responsibility of the supervisors to identify these obstacles and remove them as they arise (DelPo, 2007).

According to Grima (2000), both public and private organizations have performance management mechanisms in place to manage employee performance. In addition, it is noted that an effective performance appraisal process includes rating employees on task-oriented traits such as those outlined in pre-defined goals and targets. This method of measurement and evaluation is participative, meaning the employee is intricately involved with the supervisor in setting goals and rating performance against the attainment of those goals. The process is also developmental, which means the rating aspect of the process serves as a tool for performance improvement and professional growth (Grima, 2000).

Figure 1* (Process of Performance Appraisal, 2012) illustrates a performance appraisal process that is commonly used in organizations.

Types of Performance Appraisals

According to Hays, Kearney, & Coggburn (2008), there are various types of performance appraisal processes that companies choose from to best fit their needs, such as the 360-Degree appraisal process. This appraisal type includes supervisor, manager, peer, subordinate ratings, as well as employee self-ratings. This is a popular way to evaluate employees because it incorporates feedback from all angles within the organization, and it is seen as a more balanced way of completing performance appraisals. Two other performance appraisal types are competency-based appraisals that deal with evaluating employees based on their attitudes and personality traits, and star appraisals that focus on pay-for-performance, reward-based evaluations (Hays, Kearney, & Coggburn, 2008).

According to Dresang (2007), another type of common appraisal is a goal achievement employee evaluation. With this approach, employees enter into a type of contract with the employer based on pre-agreed upon goals and achievement markers with timeframes. This is referred to as Management by Objectives (MBO) and it purports that employees are unable to work toward the objectives of the company if they are not clear on their own personal objectives. Therefore, this approach encourages employees to set attainable goals that are in line with corporate objectives.

Advantages of Performance Appraisals

DelPo (2007) points out there are many advantages for using performance evaluations. For example, performance evaluations provide stability in an organization, particularly when employees change departments and managers. When this occurs, the new manager relies on the information in the employee’s performance appraisal file for assessing an employee’s ability, motivation and progress, as the manager may not have personally observed the employee in the workplace. Efficient and effective organizational managers accurately and consistently document employee performance, so that it is easier for new managers to take over for previous managers in managing the employee’s professional growth. This initiative helps employees feel like management cares about their well-being and it also makes them feel more like part of the team. When employees feel positive about their management team, they are happier, they perform better, and they are more loyal to the organization and to their managers. According to DelPo (2007), an effective performance appraisal system also has a sound reward policy in place that rewards good employees, encourages productive employees to strive for higher levels of excellence, and assists errant employees in getting back on track. An effective performance management system also serves as a vehicle for moving unmanageable or unproductive employees to more suitable departments or out of the organization completely.
Other advantages of using performance appraisals include:

• determining how each employee’s role aligns with overall organizational goals and objectives,
• examining each employee’s strengths and weaknesses and potential for growth within the organization,
• identifying good employees and rewarding them to foster loyalty and motivation for continued excellence,
• keeping employee morale positive,
• reducing complaints and litigation risks by ensuring all employees are treated the same,
• identifying problem employees and attempting to transform them into productive employees or begin the professional disciplinary process which includes termination, if necessary.

As mentioned, efficient employee performance appraisal processes help employees feel good about working for an organization and this motivates them to perform better as individuals which, in turn, leads to better departmental performance, which increases organizational success and company growth, as illustrated in Figure 2 below (DelPo, 2007, p. 10)*.

Figure 2*

Performance Appraisal and Company Growth*

Limitations of Performance Appraisals

Although performance appraisals are integral to the success of any human resource management program, there are some disadvantages that are worth noting. Lyster & Arthur (2007), suggest some degree of subjectivity is inevitable even within the most objective performance evaluation process, and this is true for both the employee and the manager. Possible areas of subjectivity include working conditions, job difficulty or challenges, priority conflicts, inadequate resources, and teamwork issues. In addition, emotions on the part of the supervisor or the employee may affect the evaluation process as well as the outcome of the review. There are times when human nature takes over in the evaluation process. A manager and an employee may not exactly get along, their personalities may clash, or they may simply not like each other. Or, there are times when managers play favorites and treat some employees unfairly. This causes a barrier to objective employee appraisals.

There are times when employees feel they are working for a manager who is unfair or has certain biases toward them, and maybe even prejudices. In other instances, managers may not be aware of errors in their performance appraisal process and this can negatively affect the employee and the review results. These are process errors.

According to Lyster & Arthur (2007), the best way to resolve process errors is by implementing performance appraisal system controls. A system control process is a way of administering internal evaluating and auditing to identify process errors and correct them. A successful appraisal control system includes mandatory performance appraisal training for managers, supervisors and employees, internal audits on managers’ and supervisors’ evaluation processes, and an appeals process for employees with disagreements or grievances. It is also necessary for employee grienvances to be handled with care, professionalism and fairness. To ensure this, it is best that the grievance process is handled by an outside third party, to eliminate any biases in this area. This way, employees are treated in a fair and equitable way and do not have the fear of internal process error when it comes to their grievances. In addition, this process is only effective if the company disciplines managers and supervisors found to be in violation of employee rights or rules of the organization, as it pertains to performance evaluation integrity and accuracy.

According to Dresang (2007), employee performance evaluations are limited because they create too much discomfort for the individual, and evaluations should be team-focused. The notion here suggests that problems with work processes are a product of system failures and not individual personnel, which creates competition among the employees rather than cooperation. Dresang proposes that team management is preferable to individual employee management.

In addition to internal limitations of the performance appraisal process, there are outside limitations such as controveries and challenges relevant to the field of Human Resource Management (HRM), particularly in the public sector.

Controversies and Challenges of Employee Performance Management in HRM

Productivity is at the core of a company’s bottom line; consequently, how well its workforce performs is a key to overall company success. In human resources management, employee performance monitoring is necessary for identifying, measuring and evaluating the performance of both productive and non-productive workers. This poses various challenges, and a recent method for evaluating employee performance is the basis for current controversies in this area of HRM.

According to Johnson (2004), a controversy of HRM which is growing in popularity, is the forced ranking, or forced distribution, system that many companies are using as a way to measure employee performance standards. Forced ranking is a management technique used to segregate low performers from high performers in a company, and it is also used to determine which performers receive rewards (such as higher raises, bonuses and promotions), and which ones receive negative consequences (such as lower raises, demotion or termination). The system is designed to identify the highest level workers while weeding out the deadbeat workers in a company.

The biggest controversy associated with the forced ranking or forced distribution system of workforce management is the concept of ranking employees on a bell curve system and placing employees in categories based on a performance curve. This is a ranking system that is part of the employee appraisal process that includes placing the highest performing 10 percent of employees in the top category, while placing 15 percent of the employees in the middle category, and at least 5 percent of the lowest performing employees in the bottom category (Johnson, 2004).

Figure 3 (Belludi, 2006)* below, illustrates how a typical performance curve ranks employees according to percentiles, as it relates to part of their performance appraisal processes. The highest 20 percent of employees are given rewards such as the highest percentage of raises and promotions, while the 70 percent ranked as average are given average raises, and the bottom 10 percent of employees on the curve are told to improve or lose their jobs.

In addition, ranking is an aspect of interpersonal comparisons in appraisal systems that grades employees from best to worst. In continuum, the employees between the best and worst are ranked accordingly, and forced distributions are a way of making interpersonal comparisons as well. However, the error in this is often a result of employees not being randomly selected and performance not based on success (Hays, Kearney, & Coggburn, 2008).

Figure 3

Employee Performance Curve*

Boyle (2001), states a firestorm of controversy stems from the use of this bell curve-type ranking system, where employees are ranked against each other rather than solely on their individual strengths, weaknesses and traits. Additionally, it is noted that as much as 25 percent of Fortune 500 companies use this system of ranking, especially in light of the current economy situation.

There are pros and cons to this type of ranking system. The pros state that forced distribution, or forced ranking, helps companies budget better and takes the burden of getting rid of poor performers off of the shoulders of managers who do not have the guts to confront poor performers, by giving them a tool to show employees they are under-performing. The cons of this concept state a forced ranking system potentially puts good employees in the hole, while potentially rewarding mediocre or low performing employees. Critics of this system argue that it is too subjective and this leaves room for much litigation in the form of wrongful termination lawsuits (Boyle, 2001). This is a reason why many companies have eliminated this type of employee ranking system because critics argue that work groups may be made up of all good performers or all bad performers or a mixture of the two, and this means there is really no fair way to allocate the rankings for all. Figure 4 (Jue, 2013)* shows a decline in the number of companies in recent years using forced ranking for employee performance management.

Figure 4*

According to Boyle (2001), the use of forced ranking or forced distribution is a method of performance curve measurement used for decades. The following literature review highlights the history of this method of employee evaluation, as well as details about laws and regulations of the employee performance appraisal process in general. In addition, the literature review examines comparisons of employee performance methods between the public and private sectors, and government levels within regions of the United States. A review of best practices regarding this issue is also discussed.

Dresang (2007), states that ranking employees is not in line with quality management principles and fosters competition in the work environment, and this is the opposite dynamic advocated by Total Quality Management (TQM) initiatives. TQM fosters cooperative relationships among employees, including managers and superviors. As well, it is stated that ranking gives the illusion that quality is dependent on individuals instead of systems or a company’s customer focus, and according to Dresang, this is detrimental to the company’s success.

Literature Review

According to Jue (2012), forced ranking as a performance management tool began in the 1980s, pioneered by General Electric, and has ignited much controversy since it began. Consequently, there are laws and regulations that regulate how companies deal with employee performance appraisals that protect both the employees and the companies, in the event of litigation concerning an employee’s rights or employment status.

The Legal Aspects of Performance Appraisal Systems

The authors of Performance Appraisal and the Law by Holley & Field (1975) examine the interests of public and private employers in measuring employee productivity. This is in light of the fact that employers use performance appraisals to help determine ways to improve productivity and cost efficiency through its workforce. In addition, it is noted that employee performance appraisals require compliance with regulatory standards of agencies such as the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance (OFCC). Employee performance appraisal systems must produce valid evaluations, as they are used for the basis of personnel decisions concerning employee salary increases, bonuses, layoffs, promotions, terminations, etc. This literature does a thorough job of explaining how performance appraisals are admissible in court, in the event of litigation and burden of proof cases. Additionally, the literature examines specific court cases related to employee performance appraisals and any legal consequences, based on the misuse of appraisals by employers in making personnel decisions. It is noted that possible misuse includes discriminatory activities against certain employees or other biases.

Performance Systems in Government and the Public and Private Sectors

In Legislative Influences on Performance Management Reform by Bourdeaux & Chikoto (2008), examines legislative involvement in performance management reform and its importance in the area of administrative management. The literature also examines state legislature processes in different states as it pertains to implementing state agency-level performance-based management reform initiatives. This specifically focuses on performance management regarding policy making decisions, management decisions, and budgeting decisions in public administration.

According to One Standard Fits All? The Pros and Cons of Performance Standard Adjustments by Barnow & Heinrich (2010), performance measures are widely used in the public sector. They are used to improve government agency performance and holds public administration staff accountable for the success or failure of government programs and outcomes on federal, state and local levels. In addition, government reforms reflect public demand for performance measurement in the public sector that is based on outcomes. According to Barnow & Heinrich (2010), many scholars of this concept view, “performance measurement as a strategy for eradicating perverse incentives in government and better aligning the interests of government employees with those of the public” (p. 1).

Additionally, Barnow & Heinrich (2010) state that performance measure systems in the public sector include “organizational report cards, balanced scorecards, benchmarking, program evaluations, social indicators, annual performance reports, disclosure requirements, and answer to different internal and external audiences” (p. 1). This basically means that there are adequate checks and balances in place to monitor and measure performance in this realm to ensure compliance with rules and regulatory standards.

Establishing performance standards in the public sector is required and are often checked for fairness and equity. This is the reason for adjustment initiatives in this area. Performance management systems are monitored to ensure expectations are met and take specific demographic, economic and circumstantial aspects of the employees being evaluated under consideration.

As it relates strictly to local governments, many report on their performance to improve services and influence local government program decisions. The reason for performance measurement in this sector is to enhance accountability by documenting financial conditions and reporting on service levels and the effectiveness of service delivery models. However, Ammons & Rivenbark (2008) report some local governments adopt the concept of performance measuring but they do not actually implement the processes. The systems they put in place often lay dormant and unused. Currently, only a sample of states actually use performance measures to improve decision-making. However, more local government entities are moving toward better performance measurement initiatives to evaluate and control processes, so they are implementing and using their control processes. For example, North Carolina’s local government implemented processes to improve their performance measurement initiatives by researching performance measurement systems of other municipalities. This allowed them to address concerns such as high unit costs and low worker productivity due to the underutilization of labor and equipment. Their solution was to discontinue using private contractors working in a large section of the community and extend its own operation, thus saving nearly $400,000 yearly (Ammons & Rivenbark, 2008).

According to Shingler, Van Loon, Theodor, & Bridger (2008), public agency performance measurement is based on objective criteria. However, the literature states measurement is not complete without the subjective criteria of including client perceptions of agency performance. This speaks to public confidence in government institutions and their credibility. Government agencies use performance standards results as a way to show the public they are worthy of their confidence. Public satisfication must be integrated with public agency performance for effectiveness in reporting. It is important to consider what the public thinks about how government agencies are doing their jobs, and also it is important to measure the public’s satisfaction levels with government agenies.

The use of public surveys to evaluate government performance is common. This is in light of the perception that government agencies are not fully capable of accurately and objectively evaluating their own performance in internal evaluation processes. Therefore, internal and external measurement is necessary. This is similar to private sector performance evaluation methods which include input from client satisfaction in their measurements for determining how well the company is doing in the eyes of its clients, vendors, employees and customers. It is noted that the public sector agencies can improve performance by considering the input of private citizens by seeking to improve consumer satisfaction through being aware or and implementing private citizen suggestions. One measurable factor is length of time for public agencies to process client information when they apply for agency services. This is one of the areas evaluated by consumers.

The importance of gathering subjective data and incorporating it with internal objective measurements is essential for accurate agency evaulations on their performance and gives managers a more complete view of the agency’s performance levels. As it relates to employee performance measurement, issues such as forced ranking is a recent trend which has surfaced.

Examination of Forced Ranking

In the literature, The Good, The Bad, And The ALTERNATIVE by Johnson (2004), the author focuses on forced ranking as a management tool in the workplace. The article explains the concept of forced ranking as a way for employers to reward some employees and downsize others, depending on their performance ranking by the forced ranking system. In addition, the article highlights the case of General Electric using forced ranking to clean up its management team every year, where 10 percent of the company’s managers assigned to bottom rankings were informed of their possible terminations, if their performance ratings did not improve. Other major companies followed suit with this when General Electric’s profits increased after implementing the force ranking system. Consequently, this system of measurement became a trend over the next decades.

The article also explains the concept of forced ranking as a way to weed out the weakest links in the organization through a ranking system that placed employees in tiered groups; the top, middle, and bottom. It is noted that, eventually, due to pressure of controversies arising from the use of this type of employee measurement system, corporate America began to pull back on using the system. It is stated that the use forced ranking pulls down employee morale and hinders teamwork and positive cultures, while it instigates competitiveness and legal issues in the employee population. The article suggests there are alternatives to using forced ranking as a performance management system.

The white paper, Managing the “C” Performer: An Alternative to Forced Ranking by Davis & Rogers points out there are different ways of handling employee performance management, other than using a forced ranking system. Focus is on the reasons company’s target substandard and mediocre employees and those include identifying these types of employees as lacking in productivity and effectiveness and this takes away from the company’s profitability. These low level employees are referred to as “C” performers and the article suggests alternatives to dealing with them besides through a forced ranking system. It is stated that the problem lies with managers who are reluctant to deal with the issue of low performing employees and only managing high performers. The literature evaluates the forced ranking concept.

The suggested alternative to forced ranking, according to the article, is developing a performance management system that empowers employees to speak their minds and give feedback, as well as voice concerns and offer suggestions for improvements in the workplace. Also, the suggested alternative system should offer career development opportunities for employees, hold employees accountable for results of their performance, and include a performance-based compensation process. Other alternative methods include unit and individual performance measurement for the purpose of determining merit pay, measures in place to eliminate favoritism and discrimination on the part of managers, and internal and external audit procedures to ensure fair and equitable compliance with employee performance measurement best practices.

Best Practices Concerning Employee Performance Management

According to the U.S. Office of Personnel Management, best practices in performance management are more efficient when measures are balanced. A balanced measures approach for managing organizational performance in the public and private sectors is beneficial for strategic management initiatives for achieving long-term goals. Best practices in this area consider customer perspectives, as well as those of stakeholders and employees while keeping to organizational mission and value initiatives.

Balanced measures used for best practices include (OPM, 1999):

• “establishing a results-oriented set of measures that balances business goals, customer needs and satisfaction, and employee involvement, development, and satisfaction with working conditions;
• establishing accountability at all levels of the organization, through leading by example, cascading accountability, and keeping everyone informed;
• collecting, using and analyzing performance data, which includes providing feedback;
• connecting performance management efforts to the organization’s business plan and budget;
• sharing the leadership role, which strengthens the continuity of the performance management process despite changes in top management”

Employee performance is directly impacted by using balanced measures because they keep employees in the loop so that they are informed, and communication is open about organizational performance and how their input fits into the big picture. Additionally, balance measures are a means of distributing accountability and also a way to reward employees for living up to what they are held accountable for. Employee recognition is strongly tied to balanced measures (OPM, 1999).

Conclusion

The performance appraisal process in human resources management is a necessary function that is important for effective management and productive employer-employee relationships in an organization. As mentioned, the performance appraisal process is also beneficial for legal protection for an organization. Successful organizations, in both the public and private sectors, encourage unified relations between its employees, supervisors, and managers with regular communication and feedback opportunities. In addition, the performance appraisal process improves organizational performance in all areas, which is a plus to organizational stakeholders and its consumers.

In today’s business arena, the idea of improving performance in the workplace is a large part of human resources performance management processes. Additionally, marketplace influences are increasing and many organizations are under the gun of regulatory compliance and legal pressures to streamline and improve performance evaluation processes. Organizations look to make their performance management processes more effective and efficient by implementing improved business strategies, which include revamping or improving their employee performance appraisal processes.

Human resource management professionals understand how the performance of its employees impacts the organization’s bottom line profits, and they realize the importance of performance management. However, there are obstacles, but they can be overcome.

Progressive companies that are focuses on success and growth are taking advantage of improving their performance management process by implementing innovative solutions and employing innovate strategies to ensure better process outcomes for all concerned, including the organization, its stakeholder, employees and clients.

References

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