ACKNOWLEDGEMENT:
We would like to thank Allah Almighty for giving us the health and strength for
accomplishing this project successfully.
We are extremely grateful to Wali for giving us the opportunity to strengthen our researching skills further by working on such a challenging topic. In researching and putting together the library research and survey analysis for developing an alternative to performance appraisal, we have actually achieved what had to be conducted to create a balance between actual and theoretical appraisal. We would also like to thank him for constantly encouraging and giving us a path where we could find the true performance evaluation system.
We would also like to add; that we have made this report to the best of our abilities and have equally participated and contributed to achieve our mission.
Thank You.
Bushra Ubaidullah Bhurgri
Farhana Zia
Gulnaz Merchant
Saira Moin
TABLE OF CONTENTS
Backdrop -1-
Course of action -2-
Improper approach of managers -3-
Inadequate skills of managers -3-
The Dilemma -5-
ENGRO Performance Appraisal -6-
Alternative-PerformMax Commitment -10-
Plausible Suggestions -10-
Conclusion -13-
Recommendation -14-
Executive Summary:
The rationale is to come up with an alternative to performance appraisal process.
For this purpose, our plan involved conducting a library research as well as a survey of an organization’s appraisal system, find flaws and craft an alternative to this system.
Specifically, our research involves the survey of ENGRO Chemicals of how they evaluate employee’s performance. This consists of two-tier levels. At one side there is the actual performance appraisal system in which objectives are set and evaluated. At the other there is a potential ranking system in which ranking of employees is done and performance related pay is set.
We found that the infrastructure of ENGRO suffers from many performance appraisal fallacies. The employees must try extra hard to build a relationship not just with their own managers but also with the managers of other departments. The appraisal system uses performance related pay, forced ranking, check mark rating systems and creates an unhealthy atmosphere of competitiveness.
After thorough analysis we came up with PerformMax Commitment appraisal system which not only focuses on a better relationship between manager and employees but also enhances the overall productivity of the entire organization; aligned with one’s self interest. Our proposed system is an ongoing process that emphasizes on one’s development rather than just compensation. Moreover, both the manager and employee play active roles in this PerformMax Commitment by sharing responsibilities effectively and efficiently using a healthy approach.
Backdrop – Performance Appraisal:
Performance Appraisal, a major element of Performance Management System has three basic functions:
To provide adequate Feedback to each person on her / his performance;
To serve as a basis for modifying or changing behavior toward more effective working habits; and
To provide data to managers with which they may judge future job assignments and compensation.
The performance appraisal concept is central to effective management. Much hard and imaginative work has gone into developing and refining it. Yet the working systems of performance appraisal do not serve any of these functions well. So the questions arise:
Are appraisals working as they are meant to – here and elsewhere? or not? Is there any alternative available? How about just not doing the wrong thing at all?
That is a Performance without Appraisal or an Alternative to Performance Appraisal. This is a question we aim to address in this report.
We also studied what performance appraisals are meant to do and what things are inherently wrong with most performance appraisal systems and what they do in reality.
You can find numerous articles and materials available on net but the most important factor in successfully achieving our goal is to learn, unlearn and relearn appraisal system by analyzing through different articles on web, journals, guest lectures, movies, and even by defining a new model with the help of Almighty Allah and our fellows.
The Course of Action:
The appraisal process itself is often poorly constructed. Problems surface in four ways:
• The hit-or-miss approach:
Many appraisers rarely, if ever, prepare for an appraisal. They “play it by ear.”
• Confusion about objectives:
Often, managers are confused about what can be accomplished in the appraisal. They don’t realize it is more than a recital of deficiencies. It is actually an opportunity to instruct, to teach workers how to overcome their inadequacies.
• Job description:
Employees don’t acquire properly written job description at the time of assigning jobs. Also managers are unable to communicate well.
• The only-once-a-year outlook:
Many managers think of appraisal as something that happens once a year. Instead it is a process that goes on all year long. This is a system we look for; a day-in and a day-out activity.
• Over reliance on forms:
Many companies carry on a never-ending search for the “perfect” appraisal form, which, when properly filled out, will boost everyone’s productivity. This is an exercise in futility. In the end, effective appraisals depend on people, not paper. Forms may help as a tool, but they’re no substitute for managers who know how to appraise.
• Mindset of Employee and Managers:
The system doesn’t put more value on performance appraisal. Everyone thinks that it is a waste of time and hence there is no effort in producing better and effective performance rather there is more focus on things getting done.
Improper Approach of Managers:
Many managers go into the appraisal with mistaken notions about how they should behave. Three mistakes are common:
• Self-imposed censorship:
In an effort to be “kind,” some managers censor themselves. They distort or tone down talk of deficient performance. Their intentions are good, but the results aren’t. By playing games, they deprive workers of insights that could lead to better performance.
• Disrespect:
Few managers would admit they don’t respect their staff, but a surprisingly large number behave as if they don’t. Either they refuse to take the appraisal seriously (“What difference does it make? This guy will never change.”), or they fail to engage the employee in serious discussion (“Why bother? It’ll only prolong the ordeal.”). The message is: “You’re not worth more of an effort.”
• Misuse of power:
For some managers, an appraisal is a chance to “show whose boss.” Starting out with fixed and usually disparaging ideas, they devote the appraisal to “laying it on the line.” The employee, of course, feels beaten down, resentful and unmotivated.
Inadequate Skills of Managers:
Many managers don’t possess the skills to motivate employees through an appraisal. They:
• Fail to prepare data:
Performance appraisal too often degenerates into wheel-spinning because no one ever bothers to collect hard facts. Since neither can document claims, the appraisal becomes a mishmash of impressionistic ramblings and irresolvable disputes.
• Fail to get the worker’s views first:
It happens with disheartening frequency; the boss speaks first, then asks, “What do you think?” and the staffer cagily replies, “I go along with that.” This is no way to get at the facts.
• Fail to probe:
To appraise performance effectively, a manager must know how the employee performed and why. This nearly always requires diligent probing. Many managers don’t know how to do this.
• Fail to involve the workers:
Many managers think, “What’s to discuss? Staff’s performance is over and done with. All that’s left is to tally the score, and job in the appraisal is to let them know the score.” They may know the score, but that doesn’t mean they are planning to improve it. Exclusion and commitment rarely go together.
• Offer unsolicited advice:
Most appraisals require the manager to give advice only when it’s solicited. But workers usually don’t solicit it, so the manager must “guide” the appraisal to the point where the employee asks for advice. Since most managers don’t know how to do this, the advice they give often falls on deaf ears.
• Fail to devise goals and action plans:
When employees leave an appraisal wondering, “So what?” it may be because they didn’t receive improvement goals. Employees should get the answers not only to “How have I been doing?” and “Why?” but also to “How can I improve?” Only goal setting and action planning can answer this third question.
The Dilemma:
To understand what’s flawed, it’s necessary to acknowledge that performance appraisals are innately problematic. In fact, there are three intrinsic problems:
• Appraisals are confrontational and stir emotions
All too frequently, appraisals turn into encounters between two “sides.” For appraisee, it’s “me” versus “them,” with “them” getting an opportunity to track “me” over the coals. For the appraiser, it’s the moment of truth when the worker finds out how he or she “messed up,” and that better performance is expected. In this tense atmosphere, everyone forgets that appraisals should educate. Since both participants expect a disagreement, emotions on both “sides” run high. Whatever the emotions, they reinforce the image of the appraisal as a “necessary evil.”
• Appraisals are judgmental
Many appraisers dislike appraising because they’re called upon to act as judges and counselors. They dislike both roles. The judge’s role requires “distancing,” which many managers find embarrassing; the counselor’s role requires knowledge and experience that many managers lack.
• Appraisals are complex
Effective performance appraisals are difficult to do. They require a full understanding of the employee’s job and of his/her performance. They demand psychological insight and interactive skills. Even the best appraisers rarely say an appraisal is “simple” or “easy.”
• Appraisals make salary decisions
Since employees know that appraisals will decide the salary and promotion, they tend to focus less on improvement and more on being defensive and looking for excuses to hide some shortcomings. Due to this reason, the main purpose of performance appraisal, which is “Performance Improvement”, is lost and the system fails completely.
Performance Appraisal System
ENGRO Chemicals Pakistan Ltd
Overview:
The performance appraisal system at ENGRO Chemicals works at a two-tier level. At one side there is the actual performance appraisal system in which objectives are set and evaluated. At the other there is a potential ranking system in which ranking of employees is done and performance related pay is set. The potential ranking system looks at not just the results of performance appraisal but is also subjective from the executive board’s point of view and encompasses factors such as whether an employee has leadership ability, whether they can absorb pressure, how flexible one is, how creative and assertive one is among other qualities. The actual performance appraisal system includes many levels. First and foremost each employee is asked to set annual objectives for the coming year. These objectives are functional, developmental, and also encompass people objectives as well as any personal objectives the employees would like to develop within themselves in the next year. For example these may include objectives such as developing a certain skill that would help the employee in career growth. At ENGRO this is referred to as PS1 and each employee is required to set this along with the section head and the unit manager of a department. At the end of the year, the employee is asked to objectively assess themselves on each of these objectives that they had set for themselves. The criteria which the employee is given for assessment are: exceeds requirements, meets requirements, partially meets requirements and does not meet requirements. The employee’s immediate supervisor is asked to do the same for the employee. Once each has filled in the assessment, both meet in a discussion where in they must mutually decide the final assessment. It is essential here for the employee and the supervisor to give specific examples that confirm the assessment. This part is encompassed in the Performance Counseling Sheet. Once an employee and his supervisor have met and filled in the Performance Counseling Sheet, the Potential Ranking system sets in. Each year each employee is given a ranking according to his performance. Rankings are done in 1/3s, therefore top 1/3, middle 1/3, and bottom 1/3. In order to decide ranking, the immediate supervisor and the department manager meet and force rank all employees on a variety of criteria, both objective and subjective. Once all employees are force ranked within their departments, all department managers meet together to force rank all the employees at a divisional and final ranking. In this meeting the performance of each employee is assessed by all department managers so as to place them accordingly within the ranks. Due to this specific performance ranking system, ENGRO encourages its employees to interact with individuals not just within their department but also to build a repo with other departments. ENGRO also encourages an informal mentor program through its corporate culture. Here supervisors are encouraged to mentor trainees from their department at all levels, both personal and professional. This is done to help them to adjust to the corporate environment as well as a means of support; eventually networks such as these are helpful in career growth within the company.
BUSINESS OBJECTIVES AND KEY TASKS FOR THE YEAR 20__
(Please consult Figure 1 in Appendix)
This sheet is the first part of the performance appraisal system. Here general topics are listed according to the nature of business at ENGRO and employees must fill out objectives according to customers they interact with. Since ENGRO is a manufacturing based company the objectives fall under the categories of: Safety, Environment and Quality; Training and Self Development; Continuous Improvement; Reliability and Service Factor Improvement. ENGRO has defined all their work to fit into these categories and therefore employees are encouraged to set objectives according to these goals of improvement. Each employee must define the customers that he interacts with within these categories and set objectives accordingly. Customers can be within the company such as other departments or individuals or outside the company with suppliers etc. Each employee has an understanding of who his customers are and sets his objectives accordingly. The employee must also define the target for each objective as well as how important the priority for each is.
PERSONNEL DEVELOPMENT REPORT
(Please consult Figure 2 in Appendix)
This particular report is developmental in nature. Here the employee must evaluate where he stands and where he wants to go and requires a through analysis of himself. The first part asks for the employee to list his strengths, these can be ability based, performance based or skills based and are intended to improve or enhance performance in the related field. The next section evaluates development needs, or in other words weaknesses, which need to be developed and focused on throughout the upcoming period in order for the employee to achieve his objectives and move towards career development. Business education and training details with an in-depth analysis of an employee’s achievements, those that he has already accomplished in the previous year as well as those key achievements he looks to achieve in the next period. The key here is to analyze the accomplishments of the previous year and use these as a basis for his coming achievements. A good employee must know where to draw the line between what he can achieve and where he is being impractical and setting too many goals. Eventually both this form and the business objectives form are evaluated at the end of the review period, and any achievements that the employee is unable to accomplish reflect on a bad appraisal and ranking for the year. However the employee must also ensure that his objectives are hefty enough for the period of one year (i.e he sets enough objectives that he doesn’t go over his head accomplishing it, and not too little that it reflects badly on him). Career development is an essential part of ENGRO’s corporate culture, as an organization it invests in its employees’ growth and encourages leadership development in its employees. In case scenario, the current president of ENGRO Chemicals is a product of ENGRO itself, and all executive positions are filled in by employees that have started their careers early on at ENGRO. This is also a reason for defining career growth in this form. This helps to define how ambitious an employee is and where he would like to see himself in the future.
PERFORMANCE COUNCELING AND PERFORMANCE PLANNING AND ASSESSMENT
(Please refer to Figure 3 and 4 in Appendix)
Once the Business Objectives and the Development report are filled in at the start of the performance appraisal period, it is the employees responsibility to ensure that he is up to mark on the objectives that he and his supervisor have set together for the next year. At the end of the performance appraisal period, which runs from January to January, the employee must assess the level to which he has performed. This is done in the Performance Counseling and Performance Planning and Assessment Sheet. The criteria used at ENGRO to assess performance are at four levels: employees exceed requirements, meet requirements, partially meet requirements, or do not meet requirements. The Performance Planning and Assessment Sheet is a replica of the Business Objectives Sheet. Here the employee fills in all the objectives he had previously set. However it is essential for the employee to give qualitative examples of what he has accomplished as well as any hindrances in achieving the task. For example, if an employee feels that he has exceeded requirements he must quantify what was expected of him and how he has exceeded expectations. Once an employee has filled in his version, he meets with his supervisor and both mutually decide on the final assessment of each objective. The Performance Counseling Sheet assesses the employee on areas other than objectives, for example on leadership, time pressure, communication skills etc. Here once again the employee must quantify each topic and provide hard facts and examples for his assessment. The topics defined in this sheet are the qualities that are looked at when department managers set ranking at divisional levels.
DEVELOPMENT SUMMARY:
(Please consult Figure 5 in Appendix)
The development summary is the final report of the whole performance appraisal system and gives and overview of how the performance appraisal system was carried out at the end of the year. This sheet also explicit the ranking of each employee and is filled out by supervisors and managers for those that work under them.
FLAWS IN THE SYSTEM:
After an in-depth analysis of the performance appraisal system at ENGRO Chemicals as well as discussions with various employees we feel that like any other performance appraisal system this too has its flaws. ENGRO encourages interaction among its employees and expects them to build a network within the company. This means that employees must try extra hard to build a relationship not just with their own managers but also with the managers of other employees. At the final ranking employees that are ranked highly are either those that have not only performed well but are also social or therefore other managers are aware of them. However this system also works positively. For example if an employee doesn’t get along well with his supervisor or manager, but is performing up to mark and others within the organization know that he is, during ranking and performance review other managers with fight for his case and ensure a proper ranking. Some other flaws in the system are the use of performance related pay and forced ranking which create an atmosphere of competitiveness. Number; letter grades and check mark rating systems are an inefficient way of assessing and improving performance. Overall we have found that the system works well if there are people with influence who are willing to push your case and develop your career within the organization. When this isn’t the case, it can prove to be detrimental to the employees’ future within the organization.
Alternative to Performance Appraisal:
The alternative to performance appraisal we come across after doing deep analysis of library research and survey results, we are able to design an alternative to performance appraisal and name it as “PerformMax Commitment”. Why because we know that employee performance appraisal work share some common characteristics. They tell workers how they’ve performed and can improve; then motivate them to do so. The process generates an understanding and commitment, which, together, should result in increased employee productivity.
The link between appraisals and productivity, then, depends on the effectiveness of the appraisals. Yet most of these encounters fall short of expectations.
In effect, the participants in our survey said one thing consistently: “We’re willing to work hard to achieve our objectives, but we’re not sure how to go about it.” How to go about it is what performance appraisal should teach; in many cases, it evidently fails to do so.
Plausible Suggestions:
All these problems can be overcome, or at least counterbalanced, if, besides having a workable appraisal system that we are basically looking for. An alternative performance appraisal model which spends a considerable time before evaluating the appraisees; consider the following factors:
• Define Individual and team goals: Individual goals must be included in a performance appraisal system that encompass career, personal and professional levels. The team and individual goals set are aligned with organization goals. Also the objectives must be set in accordance with the skills set.
• Personal Agenda: Managers encourage subordinates to speak their ambitions and dreams openly and formulate efforts to help employees achieve them.
• Open lines of Communication: Unless and until the environment is such that employee feels welcomed in sharing his opinions/problems/suggestions, there can never be a successful performance appraisal. Employee feels that his say would be heard and respected if not acted upon. Employees usually don’t defend themselves in appraisals because they know that it is not going to change anything. If this is the situation then it is going to affect the mindset about Performance Appraisal. Management must take measures in encouraging employee to talk back and find out ways to make the performance appraisal seem more useful and beneficial for employees.
• Learning Organization: Organization provides platform for employee growth. This will help keep the motivation level up and turnover low. An employee, if not satisfied with PA, can always count on his growth as an individual and as an effective worker provided by the management. Management conducts workshops and training for managers to help make performance appraisal system more useful and fair.
• Boost Self Esteem: A healthy self-esteem will lower an individual’s fear of identifying weaknesses and trying something new. An effective manager will try boosting the self esteem of those working under him; which would result in increased productivity and a lot more improvement. People produce better results when they feel good about themselves.
• Appraisal: a year round activity: Appraisal is a process that goes on all year long. It starts from the beginning of the job description maintaining the checks and balances and entails each aspect of the skills and job performance.
• Shared responsibility: The appraisal constructed on the basis of shared responsibility. Employees come prepared during the performance conversation, with both his/her weak areas and those in which has shown recent improvement. When employee gets to participate in the meeting, it takes the burden off the managers and in this way both are interested to have the performance improvement meeting.
• Measuring performance through performance graphs: Our proposed appraisal contains an automated database that measures key growth of employees’ performance back by managers’ support and encouragement. The process contains graphs :
Employee Growth
Manager Role
Organization context
Agree
• Qualitative benefits: In shape of rewards and recognitions. The Performmax commitment comprises of gain sharing, profit sharing, group based appraisal and small group incentive methods which are given in the form of monetary and non-monetary rewards.
• Performance Related Pay (PRP): PRP must not be considered an important tool in accessing performance in the system. It is optional that giving staff a one per cent pay rise boosts employee job performance by roughly two per cent, but offering that same money in the form of a bonus that is strongly linked to a job well done can improve job performance. They are several problems with the PRP includes (1) There may be disputes about how performance is measured and whether an employee has done enough to be rewarded. (2) Rewarding employees individually does very little to encourage teamwork (3) It may encourage unhealthy rivalry between managers. (4) There is much doubt about whether performance-related pay actually does anything to motivate employees. This may be because the performance element is usually only a small percentage of total pay.
• Total Quality Management (TQM): TQM stresses improvements in work process rather then an individual employee’s performance. The system is an interlocking process and focuses more on organizational context, culture and norms rather then employee performance; is the object of management.
CONCLUSION:
Based on our research study we conclude that most performance appraisals are less effective than they could be, and the reasons lie both in the nature of appraisal and in the circumstances surrounding it. But problems can be overcome. If appraisal becomes a year-round activity, if each session follows a systematic format, and if each is adapted to the employee’s characteristics, improved productivity can be expected to follow. Yet the appraiser must know how to make it happen — for in the end, any performance appraisal system is only as good as the person who conducts the appraisals.
We also conclude that number; letter grades and check mark rating systems are an inefficient way of assessing and improving performance. They may be good for managers and HR department during compilation and disseminating of bonuses and increments. However, they do little to help the employee assess how to improve performance or what they have done right.
RECOMMENDATIONS:
Our PerformMax Commitment is an innovative appraisal system that links employee evaluations with the organization’s mission and strategic plan. The organization goals and values are reviewed by the employees and skills are identified that the staff would need to fulfill – leadership, organizational knowledge, technical know how, strategic thinking and so on.
Change is a major factor which must be accepted eagerly and worked upon in order to meet the upcoming challenges and agreed by both the managers and employees. The process has to be reviewed on a continuous basis to eliminate any surprise and astonishing factors during this year round activity.
A healthy self-esteem will lower an individual’s fear of identifying weaknesses and trying something new so, continuous training and development programs ought to be conducted in order to achieve targets in a mutually defined timeline.
There is a famous quote: “SUCCESS isn’t the opposite of failure. A runner may come in last, but if he beats his record, he succeeds.” We have definitely taken a step ahead so we are on the path of Success, aren’t we ??? 