Performance Appraisal

by

Caitlin Sockbeson

• LAST REVIEWED: 24 May 2018
• LAST MODIFIED: 24 May 2018
• DOI: 10.1093/obo/9780199828340-0213

Introduction

Performance appraisal, the process by which employees are evaluated for their performance at work, is ubiquitous in organizations. Appraisals may take place annually or more often and may be conducted by supervisors exclusively or by peers, subordinates, customers, or others. Appraisals are often communicated to employees in performance reviews and usually require assigning performance rating(s). In recent years, many scholars have advocated a move toward performance management, where appraisal and performance evaluation are seen as ongoing processes rather than once- or twice-a-year occurrences. Performance management tends to be a more integrated system of monitoring and intervention to consistently maintain and improve performance, with more regular, informal feedback. Appraisals often serve multiple purposes, including employee development, the assignment of rewards, and record-keeping, sometimes for legal purposes. Appraisals are often dreaded by both the appraiser and the appraisee and are often ineffective. Appraisals may be flawed due to cognitive biases and heuristics or more purposeful rating inflation or deflation by the appraiser, depending upon various motives or the purpose of the appraisal. In recent years, some have called for the elimination of performance appraisals entirely, though generally suggested alternatives are still some form of appraisal. Decisions about training, organizational rewards, and whether to retain or fire employees still have to be made, after all, and to make those decisions, managers must know how employees are performing. Research and interest in performance appraisals in psychology and organizational studies began in the 1920s, with research really picking up in the 1970s through the early 2000s. Initial studies focused on different rating formats and ways to increase accuracy and eliminate error. Research then shifted away from increasing psychometric properties through different formats and rater training, however, to a greater focus on the cognitive processes and social context of the appraisal process—how raters appraise employees and what may impact ratings and effectiveness. Many researchers today emphasize that despite the varied uses of performance ratings, the main purpose of appraisal is to improve performance throughout the organization. Thus, understanding how raters appraise others and their motivation for potentially distorting ratings (rather than assuming that any distortion is purely an error) is important, as is acknowledging the reactions and perceptions of the employee being appraised. Perceived fairness in the appraisal process is quite important as employees need to be able to accept their evaluations and be motivated to act on them if performance appraisal is going to be effective. These considerations are likely to be more important than which specific rating method is used.

General Overviews and Models of Performance Appraisal

The following articles and book chapters provide general overviews and models of performance appraisal and performance management. Ilgen and Feldman 1983 is a classic article that changed the focus of performance appraisal research, explicitly emphasizing context, cognitions of the appraiser, and behaviors of the appraisee. Building on this work, Levy and Williams 2004 reviews the impact of the social context on appraisal, and Murphy and DeNisi 2008 provides a model of performance appraisal that considers context, motivation, and cognition. Recent works, like Aguinis 2009 and Den Hartog, et al. 2004, focus on the broader topic of performance management, a more integrated process of assessment with formal and informal feedback on an ongoing basis to maintain and improve performance at all levels. Two recent, thorough reviews cover both performance appraisal and performance management: DeNisi and Sonesh 2011 and DeNisi and Murphy 2017. DeNisi and Smith 2014 argues that the tie between performance appraisal and ultimate improvement of firm performance is not strongly evidenced in the current body of research.

• Aguinis, H. 2009. An expanded view of performance management. In Performance management: Putting research into practice. Edited by J. W. Smither and M. London, 1–43. San Francisco: Wiley.

  DOI: 10.1002/9781444308747.ch1

  Expanding beyond industrial and organizational psychology research on performance appraisal, this chapter draws ideas from communication, business, social psychology, and other fields to look at the performance management process. It explicitly considers context, goals and performance at multiple levels, and the link between appraising performance and making decisions within organizations (e.g., distribution of bonuses). The chapter provides six purposes for performance management as well as six steps in the process.

• Den Hartog, D. N., P. Boselie, and J. Paauwe. 2004. Performance management: A model and research agenda. Applied Psychology: An International Review 53:556–569.

  DOI: 10.1111/j.1464-0597.2004.00188.x

  This paper draws on strategic human resource management and industrial and organizational psychology research to propose a multilevel model of performance management with the ultimate goal of improving firm performance. The model includes employee perceptions as well as a unique “reverse causality” element where firm success impacts the system and employee behavior and reactions.

• DeNisi, A. S., and K. R. Murphy. 2017. Performance appraisal and performance management: 100 years of progress? Journal of Applied Psychology 102.3: 421–433.

  DOI: 10.1037/apl0000085

  A thorough overview, this article identifies trends in the research (e.g., early studies focused on scale formats, later work focused more on reactions, rating evaluations, and rating sources) as well as summarizing what we know and what still needs further exploration (like context, the effects of culture, and how to tie individual performance to firm performance). The work specifically focuses on articles from the Journal of Applied Psychology.

• DeNisi, A., and C. E. Smith. 2014. Performance appraisal, performance management, and firm-level performance: A review, a proposed model, and new directions for future research. Academy of Management Annals 8.1: 127–179.

  DOI: 10.1080/19416520.2014.873178

  This review of performance appraisal and management research focuses on how performance appraisal can affect not only individual-level performance but ultimately firm-level performance. The authors argue that the link between improving individual performance through performance appraisal/management and firm-level performance improvement has not been clearly established. A model of bundled human resources practices (including appraisals) aligned with strategic goals is proposed to make firm-level impacts more likely.

• DeNisi, A. S., and S. Sonesh. 2011. The appraisal and management of performance at work. In APA handbook of industrial and organizational psychology. Vol. 2. Edited by S. Zedeck, 255–280. Washington DC: American Psychological Association.

  This handbook chapter thoroughly reviews the performance appraisal literature through the early 2000s, beginning with the early focus on accuracy, through the cognitive approach to performance appraisal in the 1980s, through the focus on appraisal fairness. The authors focus on appraisal as part of a performance management system and emphasize the importance of objective and perceived accuracy, employee reactions, and rater motivation.

• Ilgen, D. R., and J. M. Feldman. 1983. Performance appraisal: A process focus. Research in Organizational Behavior 5:141–197.

  This is a classic article that considered the context, the cognitions of the appraiser, and the behavior of the appraisee. Each of these affect the accuracy, reliability, and level of bias in appraisal. The model considers the appraiser’s attention and memory and their ability or motivation to search for and recall that information; employee behavior, both automatic and controlled; and the expectations and function of the system.

• Levy, P. E., and J. R. Williams. 2004. The social context of performance appraisal: A review and framework for the future. Journal of Management 30.6: 881–905.

  DOI: 10.1016/j.jm.2004.06.005

  This article reviews over three hundred papers to examine and create a model of the role of the social context in performance appraisal. The article concludes that ratee reactions are an important consideration in appraisal effectiveness, feedback culture impacts appraisal outcomes, and the impact of contextual variables like technology or economic conditions are still not well-understood.

• Murphy, K. R., and A. S. DeNisi. 2008. A model of the appraisal process. In Performance management systems: A global perspective. Edited by A. Varma, P. S. Budhwar, and A. S. DeNisi, 81–94. London: Routledge.

  This chapter provides a model of the performance appraisal process that integrates contextual, cognitive, and motivational factors. The model is provided with the goal of being able to compare performance appraisal systems across organizations, industries, cultures, and countries. Distal and proximal factors are included, as well as variables that could affect judgment and rating distortion.