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Learning objectives
• Discuss the relationship between strategy, performance management and performance appraisal.
• Understand the objectives of performance appraisal.
• Identify the sources of error in performance appraisal.
• Discuss the major types of performance appraisal systems.
• Understand the importance of goal setting in performance improvement.
• Appreciate the impact of EEO on performance appraisal.
Chapter outline
This chapter is divided into six sections. The first three sections introduce the topic of performance appraisal
and its relationship to business strategy and various HRM activities. The third section then offers a detailed
overview of the types of performance appraisal systems used by organisations and their associated problems.
The remaining sections in this chapter discuss the key characteristics of an effective appraisal system and the
importance of ensuring that the appraisal system satisfies all EEO requirements.
Strategy, performance management and performance appraisal
Organisations need ever-improving performance to survive and prosper in today’s competitive world:
individual and organisational performance improvement are the keys to competitive advantage. The
evaluation of organisational and employee performance permits managers to check that strategic business
objectives are valid, are being successfully communicated throughout the organisation and are being
achieved.
Performance appraisal, by providing a dynamic link to employee recruitment, selection, training and
development, career planning, compensation and benefits, safety and health and industrial relations, is a vital
tool for strategy execution. It signals to managers and employees what is really important; it provides ways
to measure what is important; it fixes accountability for behaviour and results; and it helps to improve
performance.
Performance management
Organisational interest in performance management has increased as a result of competitive pressures, the
influence of HRM and the individualisation of the employment relationship. The key elements of
performance management are:
Performance appraisal
Performance appraisal may be viewed as an overall measure of organisational effectiveness: organisational
objectives are met through the effort of individual employees. If employee performance is improved, the
organisation will lift its performance. However, it should be noted that some experts do not accept these
assumptions. Nevertheless, appraisal of employee performance remains a critical and ongoing management
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activity. This is because managers are continually observing and judging their employees. This evaluation
process may be formal or informal. Either way, it has a direct impact on the employees’ salary increases,
promotions, demotions, terminations, training and career development.
Performance appraisal objectives
Discrimination
A manager must be able to objectively discriminate between those who are contributing to the achievement
of the organisation’s strategic business objectives and those who are not. Those who are underperforming
should be given the opportunity and assistance to improve. Leaving non-performers in the organisation
sends the wrong signals to other employees who are performing well. Employees who achieve want to be
recognised and rewarded for their efforts.
REWARD — To encourage performance it must be rewarded. Employees who have contributed the most to
the achievement of the organisation’s strategic business objectives should receive the greatest
rewards.
FEEDBACK— Managers are responsible for evaluating the performance of their people and for accurately
communicating that assessment. This requires the manager to identify the employee’s
deficiencies and determine how they can be overcome; to know what specialised training and
development are needed; and to ensure that opportunities are created for any new job
experiences required. Communicating clear, specific expectations and giving both positive and
negative feedback are essential parts of the performance appraisal process.
PEER EVALUATION — Organisations employing total quality management concepts and teams are
increasingly using peer evaluations.
SELFEVALUATION — This occurs where the employee evaluates their own performance. Some
organisations use selfappraisals as a supplement to supervisor and/or peer evaluations.
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TEAM BASE EVALUATIONS — Are appraisals that are specially designed to evaluate how well a team has
performed.
Major types of performance appraisal systems
When choosing an employee performance appraisal system to introduce, managers must consider the
strategic business objectives of the organisation as well as specific performance evaluation purposes.
RANKING — compares each person’s performance, with the manager ranking all subordinates from ‘best’
to ‘worst’.
GRADING — compares the employee’s performance with the grade definitions, then the employee is placed
in the grade that best describes his or her performance.
GRAPHIC SCALES — Rating scale that evaluates employee performance using specific employee
behaviour or characteristics.
CRITICAL INCIDENTS — requires the manager to record those occurrences or critical incidents of
employee job behaviour which highlight good or bad job performance.
BEHAVIOURALLY ANCHORED RATING SCALES — a method that combines elements of the
traditional rating scale and critical incidents method.
BEHAVIOUR OBSERVATION SCALES — A behaviour observation scale (BOS) uses critical incidents to
develop a list of the desired behaviours needed to successfully perform a specific job.
ESSAY DESCRIPTION — A manager may be asked to describe, in his or her own words, the employee’s
performance (covering the quantity and quality of work performed, job knowhow, human
relations skills, strengths and weaknesses and so on).
MANAGEMENT BY OBJECTIVES (MBO) — Management by objectives is a technique whereby the
manager and the subordinate mutually identify common goals, define the subordinate’s major
areas of responsibility in terms of expected results, and use these as measures in assessing the
subordinate’s performance.
ASSESSMENT CENTRES — The primary purpose of an assessment centre is typically to identify
promotable or highpotential employees. Assessment centres are rarely used for performance
appraisal purposes because they are costly and time consuming.
WORKPLACE SURVEILLANCE — The introduction of workplace surveillance equipment to monitor
employee performance and behaviour is rapidly becoming matter of considerable controversy.
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Characteristics of a dynamic performance appraisal program
Dynamic performance appraisal programs are characterised by three key qualities:
• goal establishment
• performance feedback
• performance improvement.
Importance of goal setting in performance improvement
Employee motivation and performance are improved if the employee clearly understands and is challenged
by what is to be achieved. ‘If performance appraisal is to have a developmental purpose,’ says Kearney, ‘it
must concentrate on the process of getting results. That process must be examined in terms of the job related
behaviours over which the individual has control.’
The absence of any of these factors will have a negative impact on the quality of the performance appraisal
interview and on its ultimate value. The performance appraisal interview should be a positive experience for
the manager and the employee. The appraisal interview is often the weakest part of the whole appraisal
process. Instead of generating an improvement in performance, it produces a demotivated and angry
employee and results in performance decline.
• Review the employee’s job description to ensure that it is still accurate and that nothing has been
overlooked.
• Read the employee’s last performance appraisal report to refresh his or her memory on key points
and to identify areas of improvement and areas still requiring emphasis.
• Check the employee’s actual performance against the mutually agreed goals.
• Consult with other managers who have contact with the employee in the performance of the job.
• Alert the employee well in advance about the forthcoming performance review discussion so he or
she can undertake the necessary preparation.
• List all key points to be discussed in the interview.
• Ensure that there is sufficient time available for the appraisal discussion and that there are no
interruptions.
Performance appraisal and EEO
Performance appraisals must satisfy EEO requirements. For example, ‘Transfer or promotion must be based
on a fair assessment of an employee’s potential, ability and work record. Ideally the work record should
reflect an objective assessment of the employee’s performance’.
Summary
Appraising and managing performance involves evaluating performance, communicating that evaluation to
the employee and establishing a plan for improvement. Performance appraisal is a dynamic process with the
emphasis on self-development, the establishment of performance standards and the giving and receiving of
feedback. Performance appraisal is a management program; it is not just an HR department responsibility. It
is also an important motivator and employee development tool. Finally, the HR manager, in searching for
performance improvement, has a responsibility to ensure that management understands that an
organisation’s strategic business objectives are better achieved through satisfying individual goals, and that
the process of performance appraisal strongly affects how employees feel about the organisation and
themselves.
Terms to identify
Assessment centre performance appraisal record
behaviour observation scales (BOS) performance management
behaviourally anchored rating scales (BARS) performance review discussion
central tendency prejudice
critical incidents ranking
essay description rater errors
goal setting recency effect
grading relationship effect
graphic scales self-evaluation
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REVIEW QUESTIONS
Questions in bold print are recommended as exam questions
1. How often should performance reviews be conducted?
There is no ideal frequency for performance reviews. Normally, formal reviews are conducted every 12
months. Some performance goals lend themselves to a longer time frame, and some to a shorter time frame.
2. Should salary increases and promotions be discussed during an appraisal interview?
There is some argument that performance review should be divorced from remuneration discussion.
Remuneration is an emotive issue, and discussion of it encourages defensiveness from employees. As a
result, proper performance review and goalsetting is affected. On the other hand, for performance to be
encouraged, it is obvious that it must be rewarded. Consequently, most organisations claim that they do just
that. Employees who have contributed the most to the achievement of the organisation's objectives must
receive the greatest rewards.
The big question is: 'If no objective measure of performance exists within the organisation, how does
management know what is being rewarded?' Embarrassingly, often what is rewarded is seniority, a servile
demeanour or some other factor that has little or nothing to do with the achievement of the organisation's
objectives. Some employees who flatter and fawn on their supervisors receive better salary increases and
promotions than their counterparts. The result can be the overrewarding of incompetence and the
underrewarding of superior performance. In reality, there is little evidence to suggest that Australian
organisations really reward performance. The key factor in determining rewards in Australian organisations
is simply membership. Membershipbased rewards include 'acrosstheboard' increases, costofliving
increases, seniority payments and so on. Performancebased rewards include piecework payments,
commissions, incentives, bonuses or other forms of merit pay plans. Performancebased rewards are 'at risk'
rewards.
Employees are not stupid. They quickly learn to exhibit the behaviour that they know will be recognised and
rewarded by management. An objective performance appraisal system thus is essential for encouraging
performanceoriented behaviour. It links employee contributions and rewards and ensures that the
organisation gets maximum value for its compensation dollar.
3. How can an organisation increase its chances of having objective appraisals?
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Reducing the sources of error in performance appraisals will increase an organisation's chances of having
objective appraisals. Research evidence indicates that managers can clearly discriminate between good and
bad performing employees. It does not follow however that their ratings will reflect their actual judgments.
This is because managers often distort their evaluations when completing performance appraisal forms.
Managers need to recognise this when considering the validity and accuracy of their organisations
performance appraisal system. Some of the main sources of error in appraisals, and which should be
minimised, are:
Management Attitude
Where management is committed to performance appraisal it will work. However, if performance appraisal
is seen by managers as something imposed on them by the human resource department, lacking the genuine
support of senior management, it simply becomes a cosmetic process to be treated with indifference.
Rater Errors
Most managers and employees are aware of the types of problems that arise in performance appraisal. 'Easy'
and 'tough' managers, and managers who play favourites, create situations that result in unfair and inaccurate
ratings.
Halo Effect
When the manager gives an employee the same rating on all factors, through generalising from one specific
factor, this causes a 'halo effect' error.
Central Tendency
This is a problem caused by a manager giving everyone an average or acceptable rating, regardless of actual
performance.
Leniency/Strictness Bias
This error occurs when managers rate their employees either consistently high or low.
Prejudice
When the manager has a negative or positive attitude towards an individual or group, this causes a
ratergenerated error.
Recency Effect
When the manager overemphasises the employee's most recent behaviour, this results in a 'recency effect'
error.
Other raterrelated errors are produced when the manager is subjected to political influences, or varies the
ratings for a specific purpose such as obtaining a salary increase or promotion for a subordinate.
Emphasis On Subjective Factors
An examination of many traditional performance appraisal systems reveals an emphasis on the measuring of
subjective traits, such as personality, loyalty and initiative. Appraisal systems such as these are vague,
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subjective and open to charges of discrimination, and they should be avoided. Research indicates, moreover,
that employees assessed under an objective appraisal system are significantly more satisfied with the way
they were evaluated.
Some examples of personal and performancebased criteria are:
4. Can performance appraisals conflict with EEO requirements?
They sure can. Today performance appraisals must satisfy equal employment opportunity (EEO)
requirements. For example, transfer or promotion must be based on a fair assessment of an employee's
potential, ability and work record. Ideally the work record should reflect an objective assessment of the
employee's performance. In addition, it is desirable for employees to include progress in EEO as part of the
performance assessment of managers.
Although Australia lags behind the USA in EEO, Australian managers ultimately will have their
performance evaluations subjected to public scrutiny. American managers, for example, have been involved
in several court cases focusing on performance appraisal and there seems little doubt that Australian EEO
authorities will refer to US legislation and court decisions for guidance.
The US Equal Employment Opportunity Commission's guidelines make it clear that performance appraisals
must be job related and nondiscriminatory. A review of US legal cases indicates the following practices
should be utilised if an organisation is to be successful in defending its appraisal system as being
nondiscriminatory:
• Job analysis must be used to develop the system.
• The performance appraisal scheme must be behaviouroriented rather than traitoriented.
• Managers must be given definite instructions and training on how to make appraisals.
• Results must be communicated to employees.
• There must be a provision for appeal in the case of disagreement.
According to some experts, without a valid system of performance management, organisations risk an
eventuality where even unintentional discrimination may consume large amounts of time and money on
employee complaints, grievances and suits. The impact on public relations, managerial confidence in
personnel decisions, and employee morale may be even more devastating. Thus, like it or not, managers
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increasingly will find their performance appraisals subject to challenge and external review. Human
resource managers must not only stress this to their management but also provide the knowhow within the
organisation that ensures performance appraisals are objective and nondiscriminatory.
5. Do you agree with the following statement? ‘Performance appraisal is simply a management
technique operating under a scientific veneer to control employees by reinforcing behavioural
norms that the organisation considers desirable.’ Explain your answer.
Appraising and managing performance are critical management responsibilities and a vital part of the
organisation’s strategic management process. However, many performance appraisal systems in practice are
short term and divorced from the organisation’s strategic business objectives. Moreover, highly unionised,
university and public sector organisations often have cultures that promote strong opposition to any form of
performance evaluation (despite ineffective control and performance monitoring systems being an important
factor in the poor performance of the public sector). Unions, for example, see performance appraisal and pay
for performance as focusing on the individual, thus creating a competitive culture, coercing higher output
and promoting management by control. While in the public sector, the cultural preference for collaboration
rather than competition means that peer competitiveness can be seen as a strong negative factor in employee
job satisfaction. One academic claims, ‘As professionals, as colleagues, as scholars, and as members of
national and international discipline and research communities, performance management is not appropriate
for us’. Similarly, a University of Western Australian academic argues that performance appraisal is an
attack on academic freedom because it could be used to monitor and control staff and prevent the pursuit of
unpopular research or public discussion of questions not supported by the university. Disagreeing, one pro
vice chancellor states, ‘Unions have carefully confused egalitarian principles, a feature of university
philosophy, to obfuscate accountability and productivity…. academics are required to teach four to 12 hours
a week for 30 weeks a year, prepare study materials and undertake research, often in excess of 60 hours a
week all year. Other academics teach four to 12 hours for only 30 weeks and have the same salary privileges
and rights as their active scholarly colleagues.’
Despite the importance of performance management, many organisations do not have any systematic method
of appraisal or use a system that lacks congruence with the organisation’s culture and strategic business
objectives. Not surprisingly, in a recent survey, more than half of the responding companies reported that
their performance appraisal system offered little or no value to the organisation. Similarly, after a review of
the literature, Newton and Findlay concluded that appraisal schemes rarely work as their formal procedures
suggest because in practice they are predominantly concerned with surveillance, accountability and control.
Thus, HR managers have a critical and challenging role in educating their organisation’s management and
staff on the significance and use of performance appraisal in employee development, performance
improvement and achievement of the organisation’s strategic business objectives.
Performance appraisals are a powerful vehicle for supervisors to monitor and direct employee behaviour and
to reinforce their formal authority and control. Disadvantages of this approach include the subjectivity of the
supervisor (particularly if there is a personality conflict or the supervisor perceives the employee as a threat),
manipulation of ratings to justify pay increases or promotions, discrimination and supervisor incompetence.
To check such problems, organisations usually subject the supervisor’s evaluation to management review
and/or provide a mechanism for employee appeal.
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6. Should performance appraisals be conducted only by HRM specialists?
This text suggests that the manager should conduct the performance appraisal. The person responsible for
ensuring that the appraisal is conducted satisfactorily is the person responsible for the employee's
performance. Some may conclude that the employee is responsible for the employee's own performance.
This is true, but selfconduct of an objective appraisal is clearly not valid. Generally then, the people who
should conduct performance appraisals are 'managers'. However, information for the appraisal can and
should come from several sources, only one of who is the manager of the employee whose performance is
being appraised. Those sources can include: the manager, the employee, customers or clients of the
employee, customers or clients of the employee's work group, peers, other managers, subordinates of the
employee, other employees, objective organisational data that cannot be traced to any particular stakeholder.
The HRM specialist has an important role in advising on the process, and monitoring it to see that it is
conducted validly. Human resource managers thus have a critical role in educating their organisation's
management and staff on the significance and use of performance appraisal in performance improvement
and the achievement of corporate objectives.
7. Should an organisation show its employees their completed performance appraisal records or should
these records be kept secret?
If only to avoid conflict with EEO principles, the appraisal record should be mutually owned by the
employee and by the organisation. Moreover, Freedom of Information (FOI) legislation in Australia ensures
that employees can have access to the appraisal record if they want it. This cannot be avoided. This chapter
stresses the mutuality of the determination of the appraisal document. It also stresses the importance of the
appraisal for the development of the employee. Because of this, it is logical that the employee has free
access to the appraisal documentation, to monitor their own development.
8. Why might a manager not want to discuss a performance appraisal with an employee?
If the appraisal is not conducted correctly, and is subject to the sources of error identified in this chapter. If
the appraisal is not favourable to the employee. If the appraisal will breach national security, or is outside
FOI (freedom of information legislation) access guidelines.
9. What are the benefits to an organisation of having a good performance appraisal system?
Performance appraisal has a dynamic link to employee recruitment, selection, training and development,
career planning, compensation and benefits, safety and health and employee relations. It can be a vital tool
for strategy execution by signalling what is really important, providing ways to measure what is important,
fixing accountability for behaviour and results and helping to improve performance. In total, performance
appraisal is a measure of organisational effectiveness. It is through the effort of individual employees that
organisation objectives are met. If employee performance is improved, the organisation in turn will lift its
performance. Appraisal of employee performance is thus a critical and ongoing human resource
management activity.
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Employees who achieve want to be recognised and rewarded for their efforts. To motivate performance,
outstanding performers must be identified and rewarded accordingly. Performance appraisal can achieve
this.
Discrimination on the basis of performance is an organisational necessity. It is part of the managerial role
that cannot be avoided. If an organisation is to survive and grow, and retain and motivate its top performers,
effective performance appraisal is a must.
Performance appraisal helps to ensure that employees are rewarded properly.
Another benefit to the organisation is that of employee development. Performance improvement comes about
by building on strengths and overcoming weaknesses. It is the manager's job to remove blocks to employee
performance and to help the employee to grow and develop. Performance appraisal must be a positive and
dynamic process to achieve this.
Employee communication is an essential part of the performance appraisal process, and it is a benefit to the
organisation.
10. If you were an employee, which appraisal method would you want to be evaluated by? Why?
The answer to this question is determined by personal preference, and by the type of work that one might be
doing. Students should be able to discriminate between the different types of performance appraisal
systems. They are
Ranking
This is the oldest and simplest form of rating. It compares each person's performance, with the manager
ranking all subordinates from 'best' to 'worst'.
Grading
In the grading system, specific performance levels are described, such as superior, good, acceptable,
marginal, unsatisfactory. The employee's performance is compared with the grade definitions, then the
employee is placed in the grade that best describes his performance.
Graphic Scales
This is the most common method of performance appraisal. Typically, the manager can choose one of five
degrees for each specific factor. The selection of factors to be measured can be centred on subjective factors
such as initiative and dependability, and/or on objective factors such as quality and quantity of work.
Critical Incidents
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Here the manager records actual occurrences or critical incidents of employee job behaviour which highlight
good or bad job performance. Incidents typically take the form of a story or anecdote and are recorded as
soon as possible after they occur.
Behaviourally Anchored Rating Scales (BARS)
The BARS method of performance appraisal is designed to evaluate behaviour demonstrated in performing a
job. Descriptions of what makes for good and bad performance in a particular job are collected from
supervisors and/or people familiar with the work. These examples are then grouped into various job
dimensions such as job knowledge, customer relations and safety. Next, specific examples of job behaviour
are placed by a scale, which is usually graded from one to seven.
Essay Description
Some organisations use an essay description to try to determine performance levels. For example, a manager
might be asked to describe in his or her own words the employee's performance, covering the quantity and
quality of work performed, job knowhow, human relations skills, strengths and weaknesses and so on.
Management By Objectives (MBO)
Management by objectives involves the manager and the subordinate mutually identifying common goals;
defining the subordinate's major areas of responsibility in terms of expected results, and using these as
measures in assessing the subordinate's performance.
Assessment Centres
The primary purpose on an assessment centre is typically to identify promotable or high potential
employees.
Performance appraisal should be dynamic and not static. It should be used to emphasise the growth and
development of the employee, and not just to make a judgmental decision about performance.
DIAGNOSTIC MODEL
1. Identify and discuss the factors from the diagnostic model (figure 1.11) that have significance for
performance appraisal.
Performance improvement is a national necessity. It must become an integral part of corporate strategy.
Performance appraisal is a vital part of an organisation's strategic planning and can be used as a means of
achieving corporate objectives. Many performance appraisal systems, however, are not linked to an overall
strategic plan. Worse, many organisations (particularly those which are highly unionised and/or in the public
sector) face strong resistance to the very concept of performance appraisal.
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2. Explain the impact of performance appraisal on the acquisition, development, reward, maintenance
and departure of an organisation’s human resources.
Performance appraisal has a dynamic link to employee recruitment, selection, training and development,
career planning, compensation and benefits, safety and health and employee relations. According to
Schneier, Shaw and Beatty, it can be a vital tool for strategy execution by signalling what is really important,
providing ways to measure what is important, fixing accountability for behaviour and results and helping to
improve performance
Performance appraisal objectives are
Discrimination A manager must be able to objectively discriminate between those who are contributing to
the achievement of the organisation's objectives and those who are not. In a performanceoriented
organisation, there is no room for egalitarianism. Inadequate performance cannot be tolerated. Those that are
underperforming should be given the opportunity and assistance to improve. Where the employee still
cannot make the grade, corrective action such as transfer, demotion or termination should be taken..
Reward For performance to be encouraged, it is obvious that it must be rewarded. Consequently, most
organisations claim that they do just that. Employees who have contributed the most to the achievement of
the organisation's objectives must receive the greatest rewards. If not, how are employees to be motivated to
perform?
Development The third aim of the performance appraisal (and one which is often overlooked) is that of
employee development. Performance improvement comes about by building on strengths and overcoming
weaknesses. It is the manager's job to remove blocks to employee performance and to help the employee to
grow and develop. Performance appraisal must be a positive and dynamic process to achieve this. The
research evidence is clear: the higher the level of employee participation, the greater the satisfaction with the
appraiser and the appraisal process.
3. Discuss the impact that performance appraisal may have on commitment, competence, cost
effectiveness, congruence, adaptability, performance, job satisfaction and employee motivation.
Students should examine the link between development of human resources and the outcomes like
commitment, etc.
Commitment can be gained through a mutual determination of developmental activities.
Competence can be enhanced by the determination of developmental activities at appraisal time.
Cost effectiveness and congruence are enhanced through the closer match between the person and the job.
Performance is the criterion of appraisal. If performance is the subject of attention, then performance is
most likely to be influenced.
Students should also note that these outcomes should be assessed from the organisational perspective as well
as the individual perspective. If all the individuals are more committed, competent, etc., then the whole
organisation will be committed and competent.
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Soapbox
There are seldom clear answers to these questions. The idea is to stimulate debate as much as to determine
an answer.
Ethical dilemma The sick employee
1. If you were HR manager of Techgan, how would you handle this situation? What advice would you
give to Jennifer? What would you do about James?
James needs some formal counselling to determine the cause of his lowered performance. The organisation
needs to find out what it can do to assist him in improving that level of performance.
2. What ethical issues, if any, are raised in this case?
A manager must be able to objectively discriminate between those who are contributing to the achievement
of the organisation’s strategic business objectives and those who are not. A performanceoriented
organisation has no room for egalitarianism: inadequate performance cannot be tolerated. Those who are
underperforming should be given the opportunity and assistance to improve. If an employee still cannot
make the grade, corrective action such as transfer, demotion or termination should be taken. Ian Gow, former
Ten Network Chief, says, ‘You don’t do anybody any favours by tolerating failure or incompetence. All you
really do is put a lot of other people’s jobs at risk’. Leaving nonperformers in the organisation sends the
wrong signals to other employees who are performing well. Leniency leading to inaccurate performance
appraisals is a longstanding problem. A recent survey, for example, indicated that 20 per cent of academics
had not published anything in five years despite having the same research time and sabbaticals as their more
productive colleagues. The Commander of the New South Wales Police Service’s Professional
Responsibility Branch states, ‘One of the problems that the Police Service has always had is that we have
never been able to get rid of those officers who are simply lazy, have poor attitudes or are simply
incompetent’. ‘The only way to make a business live up to its potential,’ according to one expert, ‘is to get
tough.’ Former legendary Port Adelaide Football Club coach, Foster Williams, graphically illustrated this
when he said, ‘Any club worth its salt will clear out its no hopers from the doorman to the head trainer to the
captain. Keeping no hopers in these positions is a mark of a nonsuccessful club. You have to weed out the
people who breed an atmosphere of nonprofessionalism. They are there for the bloody joke, the social life,
the prestige. They are not there to win’. Yet in a recent survey, 61 per cent of Australian employees felt their
companies were too lenient with poorly performing employees. According to the National Commission of
Audit, for example, the extraordinary complexity of the Public Service personnel system protects
inefficiency because the delays in proceedings, the manipulation of rights of appeal and the frequent
recourse to generous redundancy payouts make it difficult to dismiss inefficient public servants. Thus, the
rigidities and lack of accountability in dealing with underperforming staff is one of the toughest issues
facing public sector managers.
Discrimination on the basis of performance is an organisational necessity. It is part of the managerial role
that cannot be avoided. If an organisation is to survive and grow, and retain and motivate its top performers,
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effective performance management is a must. However, employees are not stupid. They quickly learn to
exhibit the behaviour that they know will be recognised and rewarded by management. An objective
performance appraisal system in which high performers receive higher rewards and low performers receive
lower rewards is essential for encouraging performanceoriented behaviour and a performanceoriented
culture. Linking employee contributions and rewards also ensures that the organisation gets maximum value
for its compensation dollar.
Case study The quiet industrial relations manager
This would be a good case for examination purposes.
1. What has brought about this situation? How could it have been avoided?
Mary should have counselled John for his apparent lowered performance. Rating him low after the event
does not improve future performance. Also, Mary needed data from a range of sources before determining
whether or not to pass John over for performance increases and merit increases. The poor communication
has come from Mary. She should have communicated the decision to John before announcing it on the
notice board.
2. If you were Mary, how would you have handled the situation? If you were Anna, what would you
have done?
Mary should have acted in accordance with the advice in question 1. Anna is very much the meat in the
sandwich. The problems are very much of Mary’s making. However, Anna needs now to do some goal
setting, and look to the future.
3. What key elements in the appraisal process are missing in this case? What is the impact of their
absence?
Missing are:
reward
development
selfevaluation
peer evaluation
subordinate evaluation
elimination of rater bias
goal/objective setting
Impact:
ineffective appraisal
lack of performance management
poor employee attitude and performance
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