Aligning Performance Appraisals and Compensation Plans
During the past few weeks, we have learned that there are various methods of conducting employee performance appraisals (e.g., trait, behavioral, ranking, MBO, etc.). Your task for this assignment is to pick one of those methods, explain it, and discuss how it could be effectively used to impact employee compensation.
Your response should consider the potential impact the performance evaluation method could have on at least three different organizational stakeholder groups. Also, your assignment must include your thoughts on what organizations can do to prevent ethical and legal challenges that might from arise from linking the method of performance appraisal you chose to employee compensation.
Your assignment should be approximately 5-7 pages in length (not including cover page and reference list) and include ample scholarly and professional sources to support your key ideas.
ANSWER
Employee Performance Appraisal
Performance appraisal is an efficient assessment of the performance of workforces and comprehending the capabilities of an individual for continued development. Performance appraisal is essential for all firms to enhance their outcomes and increase employee productivity (Idowu, 2017). The objectives of a performance appraisal are different from one company to another, depending on the company and industry size. There are different employee performance appraisal methods used to nurture employees and improve their productivity. Each employee performance appraisal technique has its approach and weakness, which might work well for one organization and fail in another. Therefore, this paper will focus on the rating scales method as one of the employee performance appraisal methods. This will focus on how effectively it can be used to impact employee compensation and the ethical and legal challenges that might arise from linking the rating scales method to employee compensation.
Rating Scales Method
The rating scale is a performance appraisal technique that lists the desired behaviours and traits for each role and then rates employees based on each trait on a numbered scale. The rating scale offers an effective degree of structure for employee performance appraisal since each employee’s behaviour or trait is rated on a bipolar scale (Pradhan and Jena, 2017). Through this approach, the evaluators assess the behaviour or traits and record their judgments about performance on a scale. Different scale categories are defined by needs improvement, meets expectations or outstanding. All these systems offer a general rating that allows for the use of more than a single performance criterion. Rating scales are the most common among the employee performance appraisal methods due to their simplicity and effectiveness in evaluating many employees. Some of the significant factors chosen for performance evaluation include personal and job-related characteristics. For instance, the job-related characteristics include the quantity and quality of work, while the personal characteristics include interpersonal skills and behaviours such as adaptability. The evaluator fills the form by showing the grade of each aspect and averages the points in every factor. The points are multiplied with a factor showing the weight assumed for every trait. The ultimate score is the sum of every trait. Some companies allow the rater to remark on the employee evaluation for every factor. This is required or encouraged when the rater has a great rating, either lowest or highest. For instance, when the needs improvement of an employee is rated one on the form, the rater offers written proof for the low evaluation. This allows for correcting deficiencies and discouraging hastily and arbitrarily made evaluations.
The rating scale method allows employees to work efficiently and improve their low scores. As an evaluation system, the rating scale offers constructive feedback on employee performance, where employees can assess their performance (Groen, Wouters and Wilderom, 2017). This creates a meaningful dialogue between the managers and the employees. The rating scale methods indicate the employee’s level of achievement or performance, which allows employees to focus on their performance. Employees clearly understand their outcomes and responsibilities, have a renewed sense of accountability and are driven and motivated by their individual goals. Employees gain better clarity on their role and expectations of the organization, the impact they create, and the expected performance levels. Considerably, when an employee views this alignment in a transparent goals-based framework, they become motivated and engaged with the larger organizational purpose, which leads to better employee performance. The rating scales review employees, thus identifying the accomplishments and challenges of employees, which are discussed with the managers. These dialogues offer insights for an employee regarding their areas of improvement and strength that pave the way for employee growth and development. Ideally, this self-awareness ensures that employees increase their accountability and personal commitment to agree on and improve their performance issues.
Performance appraisal is important to managing employees’ work efficiently. When work is performed, the supervisor appraises the performance. Considerably, an employee’s immediate supervisor has been in a better position to observe an employee’s job performance and supervise a particular unit or group of employees. The supervisors assess how well the employee achieve their job responsibilities and what things need to be improved to enhance their performance. The rating scale offers records that supervisors can use to evaluate individual personnel’s past and present performance and how they can improve their performance and contribute to the general organizational performance. The supervisors can understand the strengths and weaknesses of an employee, thus helping them remain focused. The reviews on the rating scales allow supervisors to discover the improvements in future performance through the strengths and weaknesses of employees. The rating scale focuses on the behaviour and traits of employees, which allows the supervisor to identify and agree upon the specific training and development needs.
After selecting and recruiting employees, the most effective tool HR managers have to evaluate employees’ performance and obtain results is the performance appraisal (Morgeson, Brannick and Levine, 2019). Performance appraisal is significant to the success of a company and employees since it helps determine whether the workers are being more productive. The rating scale forms a list of competencies, job behaviours, skills and results ranging from low to exceeded expectations. The performance reviews on the rating scales enable the HR manager to define the responsibilities and roles of the workers. They also help them reflect, consolidate, plan, and review the general workforce performance. Ideally, the HR managers can acquire quantitative data regarding the worker’s attributes concerning their job descriptions. Therefore, regarding the employee rating, the HR manager can examine the employee performance level, which influences how they give promotions and salary adjustments. The rating scale offers an overall score, making it relatively easy for the human resource manager to differentiate between employees and their levels of achievement. The human resource manager also offers frequent feedback through the rating scale, which helps employees periodically check their performance and focus on improvement. The rating scale offers results on performance that the supervisors and human resource managers can use to discuss employees’ performance concerning the absence or presence of certain work skills and the need for training linking the needs clearly to the performance outcomes. Therefore, the human resource managers get a clear picture of the training needs from the consolidated appraisal data.
Employee compensation
Rating scales are used in employee appraisal since they indicate the level of achievement or performance. They give quantitative results that are effective in differentiating between employees. Therefore, the management relies on the rating scores to determine the employee compensation. For instance, the management may rely on a rating scale to direct the annual pay increase depending on their overall rating score and performance. This is considered merit pay or performance pay. Ideally, merit pay or performance pay is a method of compensation that rewards the highest performing employees with additional pay. This allows the management to differentiate the pay given to the high performing workers.
Merit pay and pay for performance approaches create ethical and legal challenges in employee compensation due to biasness, unclear standards, and leniency (Gläser, van Gils and Van Quaquebeke, 2017). The performance appraisal rating scales tend to discriminate the employee against their status based on gender, age, sexual preference and ability. Another major ethical problem arises when evaluating the behaviours and traits. The evaluator tends to focus on employees’ qualities, whereby those with similar characteristics to the evaluator are rated higher. Hallo effect is also evident in determining the overall score of the employee. The hallo effect is a cognitive bias that leads to the evaluator having a single trait that overshadows other traits, actions and behaviours. Ideally, compensation based on performance ratings creates problems such as poor employee relationships, poor morale, undesirable competition, favouritism, fear, and poor employee morale. This is because the performance ratings create competitive and divisive attitudes rather than cooperation among the workers. Performance pay is linked to pay fair fairness, transparency and accountability, which raise ethical and legal concerns.
Conclusion
Performance appraisal is generally conducted by measuring the pay for employees, comparing it with the plans and targets, and analyzing the factors behind the work performed. Therefore, performance appraisal allows an organization to measure employees’ job performance per fixed benchmarks related to efficiency in task completion, technical knowledge, teamwork, leadership, and supervision. The rating scale method of performance appraisal relies on quantitative data regarding different behaviours, traits and actions to determine the employee performance levels. This impacts the employee’s level of performance, continuous improvement by the management and understanding of employees’ strengths and weaknesses by the supervisor and the human resource management, which can be used to improve the employee’s efficiency. However, relying on performance ratings in employee compensation leads to ethical and legal issues such as fairness, hallo effect, biasness and undesirable competition. Therefore, organizations that rely on rating scales should focus on eliminating the ethical and legal issues linked with merit pay.
References
Gläser, D., van Gils, S., & Van Quaquebeke, N. (2017). Pay-for-Performance and interpersonal deviance. Journal of Personnel psychology.
Groen, B. A., Wouters, M. J., & Wilderom, C. P. (2017). Employee participation, performance metrics, and job performance: A survey study based on self-determination theory. Management accounting research, 36, 51-66.
Idowu, A. (2017). Effectiveness of performance appraisal system and its effect on employee motivation. Nile Journal of Business and Economics, 3(5), 15-39.
Mone, E. M., & London, M. (2018). Employee engagement through effective performance management: A practical guide for managers. Routledge.
Morgeson, F. P., Brannick, M. T., & Levine, E. L. (2019). Job and work analysis: Methods, research, and applications for human resource management. Sage Publications.
Pradhan, R. K., & Jena, L. K. (2017). Employee performance at workplace: Conceptual model and empirical validation. Business Perspectives and Research, 5(1), 69-85.
