The Process of an Employee Performance Appraisal. Its aims, functions and methods

Academic Paper, 2020

11 Pages, Grade: 1,4


1 Introduction and Problem Statement

„You never get a second chance to make a first impression“ or „to err is human” are well known proverbs which imply that humans are not able to process information in an objective way (Werth & Mayer, page 6, 2008).

Nobody is beyond jumping to conclusions, thus often adjudicating wrongly. Whenever people meet, regardless of private or professional context, they use to assess, to adjudicate or to condemn. In order to make the evaluation of another person less difficult, people use to lapse into clichés and stereotypes. In spite of all efforts to evaluate the employee's performance in a fair, objective and factual way, performance appraisals always represent a subjective act, which is affected by numerous factors. Employee performance appraisals are supposed to clarify whether the respective employee is able to meet the employer's demands. In case an employee is hired on the basis of misjudgement or rating errors, or if someone is employed for an inappropriate position, this can result in considerable costs (increased requirements during the familiarisation phase, loss of sales and profits or even loss of clients), i.e. consequential costs (searching for a new employee, re-establishing a good reputation). Inappropriate employees will not provide the expected benefit. Moreover, if the worse comes the worse, they could even damage the employer's organisation/company.

However, the recording of the employees' strengths and weaknesses does not only serve as a record of results, professional conduct and potentials in order to provide the best possible employment, but also as the basis for the definition of an adequate salary (Crisand & Raab, 2011). Performance appraisals can result in - positive or negative - personnel measures. Hence, the employee performance appraisal represents an essential leadership task of any executive.

This term paper is about the process of employee performance appraisals. To this purpose, the author starts with the disambiguation of essential terms and definitions, as well as with the explanation of employee performance appraisal aims and functions.

Subsequently, the process of an employee performance appraisal is discussed, as well as the different appraisal methods. Finally, potential sources of error and possible biases are analysed.

2 Definition of essential Terms

2.1. Employee performance appraisal

As Wichert understands it, an employee performance appraisal is „the well-planned and systematic evaluation of an organisation's employees by their supervisors, often executed periodically (as a rule annually). As to the evaluation, it is about the employee's performance, and/or professional behaviour, and/or personality, and as its purpose he states:

- employee performance appraisal
- career management
- employee selection
- human resources development

According to Weber (page 204), it is about formalised and periodical assessment of an employee's contribution to the aims of the organisation, the quality and the subsequent application of the analysed data representing the challenge upon the employee performance appraisal.

2.2. Performance rating

„By means of a performance rating, the supervisor is supposed to assess whether or not and to what extent the employee has met the established requirements as to his/her place of employment, i.e. as to the objectives agreed upon. Taking into consideration that not only quantitative, but also qualitative indicators are used in order to measure performance on the job, success has to be rated or evaluated by means of a point or grading system. Although an authoritative procedure is to be applied to a formalised performance rating by any supervisor, each of them will evaluate the performance of his or her employees in a different, individual way (Zechmeister, Deutsche Handwerks Zeitung).

Thus, it becomes apparent that it is difficult or even impossible to establish an objective performance rating.

Performance rating always means the evaluation of the performance already rendered, i.e. the as-is performance.

3 Performance Appraisal: Functions

An employee performance appraisal is supposed to illustrate the employee's potentials and performances within the company/organisation. There are different functions of an employee performance appraisal:

3.1. Diagnosis

The rating is effected on the basis of qualitative and quantitative criteria. Performance rendered and proven potentials are carved out, and the corresponding strengths and weaknesses are derived therefrom. Furthermore, if employee performance appraisals are carried out periodically, a development trend becomes visible (Stock-Homburg, page 290 et seqq., 2008; Crisand & Raab, page 16, 2011).

3.2. Coordination

Uniform qualitative and quantitative assessment criteria are indispensable in order to establish (uniform) standards of performance. By the one-time establishment of transparent performance expectations, it is not necessary to redefine them over and over again, thus facilitating a standard employee performance appraisal (Stock-Homburg, page 290 et seqq., 2008).

3.3. Controlling and Monitoring

The regularly recurring employee performance appraisal is supposed to deliver substantial insight into the employee's stage of development as well as into his/her activities. Furthermore, owing to the uniform criteria as to the standard performance appraisal stated under point 3.2, comparisons with other employees are facilitated (Stock-Homburg, page 290 et seqq., 2008).

3.4. Basis for Decision-Making

The evaluation of appraisals is of vital importance for human resource management activities, e.g. team leadership, aquisiton and redundancy of employees or salaries (Domsch & Gerpott, page 1432 et seqq., 2004).

3.5. Motivation

Furthermore, an employee performance appraisal may fulfil the motivational function, the employee periodically receiving a substantial feedback as to performance and professional behaviour. Thus, the employee is supposed to recognise that a positive behaviour is going to be appreciated. Simultaneously, negative aspects are identified, thus facilitating improvement and performance enhancement (Domsch & Gerpott, page 1433, 2004; Stock Homburg, page 290 et seqq., 2008).

4 Performance Appraisal: Aims, Contents, Extent and Form

4.1. Employee Performance Appraisal: Aims

The rating is effected on the basis of qualitative and quantitative criteria. Performance provided and proven potentials are carved out, and the corresponding strengths and weaknesses are derived therefrom. Furthermore, if employee performance appraisals are carried out periodically, a development trend becomes visible (Stock-Homburg, page 290 et seqq., 2008; Crisand & Raab, page 16, 2011).

4.2. Employee Performance Appraisal: Contents

For companies and organisations, employee performance appraisals are of prime importance. They are carried out periodically, with the objective to facilitate the executive management's leadership activities, to enhance the team performance and to manage its development in accordance with the company's / organisation's strategy. As to the effectiveness of the employee performance appraisal, Knebel (page 28, 2004) refers to its diagnostic task, its findings being of significant relevance for numerous decisions. As follows, there are some examples as to this issue:

- selection and on-the-job training of employees
- education and further qualification of employees
- remuneration Salaries
- selection of the adequate job and working area
- giving credits and personnel development
- potential assessment
- improvement of leadership behaviour and teamwork

4.3. Employee Performance Appraisal: Extent

Employee performance appraisals can take place periodically (as a rule: once a year), as well as on special occasions, e.g. if there is a vacancy to be filled (Crisand & Raab, page 88, 2011).

Subsequently to an employee performance appraisal, its results are to be reviewed with the employee in question, which means that the employee is to receive a feedback on the professional performance to date, as well as on the achievement of objectives during the past period. Subsequently, principal and employee are supposed to jointly target the new objectives for the next appraisal period (Crisand & Raab, page 41, 2011).

According to § 82 of the (German) Works Constitution Act, each appraisee has a legal claim to the explanation of the appraisal: “(2) The employee has the possibility to demand the explanation of the salary calculation in question, the structure and the elucidation of his performance appraisal as well as his professional development possibilities within the organisation. Page 2: He is entitled to consult a works council member...”

4.4. Employee Performance Appraisal: Type

4.4.1. Self-Assessment

Self-assessments are supposed to provide an increased inclusion of the employee upon his appraisal. The employee to be evaluated is obliged to intensely deal with the appraisal factors. In doing so, he is supposed to

- raise his awareness of performance
- improve his understanding of the performance rendered
- develop individual responsibility
- increase self-motivation
- strengthen the acceptance of the appraisal results o enhance the objectivity as to the own performance (Crisand & Raab, page 13, 2011).

4.4.2. Employee Performance Appraisal

The employee performance appraisal is also referred to as appraisal of subordinates, appraisal of inferiors or top-down appraisal. According to Mentzel, Grotzfelt & Haub (page 170, 2012), it represents the classical type of employee evaluation.

Being optimally familiar with their direct-line subordinates' behaviour and potentials, supervisors evaluate them by using a rating sheet. Furthermore, as a rule, they are well- informed about the employees' occupational aptitude, upcoming on-the-job trainings and further education measures as well as about possible merit bonuses. Thus, supervisors are required to evaluate both, the objectively rendered performance and the quality of cooperation with colleagues, the latter on the basis of the supervisor's own observation.

There are different competence and performance dimensions to be evaluated, e.g.:

- quality of work
- quantity of work
- teamwork
- achievement of goals
- self-reliance
- ability to work under pressure

An employee performance appraisal represents a top-down rating (Mentzel, Grotzfeld & Haub, page 170, 2012).

4.4.3. Appraisal by Subordinates

The appraisal by subordinates is referred to as bottom-up appraisal. This type of evaluation requires the employee to assess his superiors' leadership behaviour, i.e. to rate him as, for instance, to the following dimensions:

- delegation
- information transfer
- decision-making
- management by motivation

Data entry is typically done anonymously, using standardised questionnaire techniques in order to get fair-minded statements from the subordinates and to avoid their fear of possible penalty (Mentzel, Grotzfeld & Haub, page. 170, 2012).

In doing so, superiors may get a feedback by their subordinates, as well as indicators as to necessary change of leadership behaviour. In this way, possible erroneous trends can be realised in time, thus enabling managers to take early countermeasures. Commonly, those appraisals are used by superiors as a basis for upcoming salary adjustment negotiations (Crisand & Raab, page 14, 2011).

4.4.4. Appraisal by Colleagues

This type of appraisal is also referred to as coequal or lateral rating. In this case, colleagues on a hierarchical par with others are required to evaluate each other on the basis of a rating sheet, and that as to the following dimension:

- professional work behaviour
- performance results, performance motivation
- personality attributes (Mentzel, Grotzfeld & Haub, page 170, 2012).

Information received thanks to the appraisal by colleagues are to be used as an assessment basis for the rated employee's qualification and performance. This type of appraisal represents another way of promoting the team development and strengthening the team spirit (Crisand & Raab, page 13, 2011).

5 Performance Appraisal: Methods

The core issue of each employee appraisal system are the appraisal methods employed. Systematic methods are applied for the purpose of generating and processing information, determining rules and approaches and, finally, to the purpose of making partial and final results intersubjectively comprehensible (Henze, page 146, 1980).

5.1. Grading Methods

The most important and, in professional practice, the most popular methods are grading methods. By using this type of method, managers assign performance values for each dimension of work or capacity to be evaluated. In doing so, a rating scale is created, which shows a performance range from a minimum to a maximum degree. The performance appraiser is asked to rank the performance he observed within a graphic rating scale (Gaugler, page 63, 1978).


Excerpt out of 11 pages


The Process of an Employee Performance Appraisal. Its aims, functions and methods
Mendel University
Catalog Number
ISBN (eBook)
Arbeitsanalyse, Anwendungsbereiche, Ziele, MessmethodenAuswertung, Evaluation
Quote paper
Mandy Witt (Author), 2020, The Process of an Employee Performance Appraisal. Its aims, functions and methods, Munich, GRIN Verlag,


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