Quality Results from Performance Appraisals

By Teckchandani, Atul; Pichler, Shaun | Industrial Management, July/August 2015 | Go to article overview

Quality Results from Performance Appraisals


Teckchandani, Atul, Pichler, Shaun, Industrial Management


According to performance management expert Dick Grote, performance appraisals serve a "vital and irreplaceable function" because every- employee wants to know, first, what is expected of me? And second, to what extent am I meeting these expectations?

Put another way, the goal of performance appraisals is to give feedback to improve employee performance and to align employee performance with organizational goals. A survey by Ed Lawler and colleagues at the Center for Effective Organizations found that almost every' organization uses performanee appraisals,yet only 6 percent perceive appraisals as being effective, Performance appraisal is thought of as the "Achilles heel" of managing employees, and research shows that employee performance actually decreases after a performance review about 60 percent of the time.

A significant amount of work has been dedicated to how to improve performance appraisals. Books, articles and even much of the academic literature generally have focused on how to prevent rating errors, such as the "recency'effect" whereby managers tend to be more aware of and put greater emphasis on more recent performance incidents in a review cycle. The literature also focuses on best practices for giving employees feedback, such as giving feedback in a neutral location and using praise and criticism effectively.

While these are helpful tips, they do not provide much in the way' of a model for managers to use in temas of how to improve the way employees respond to a performance appraisal. Moreover, there is little evidence connecting some so-called best practices, such as using the sandwich method of feedback, with employee performance.

Recent research, including some of our own work, suggests that the key to improving employee performance is paying attention to the way employees react to the performance appraisal review. More specifically, this means focusing on the extent to which employees feel that they were treated fairly, that the feedback given was useful and motivating, and that they were satisfied with their review. A focus on the way employees react to appraisals is part of what is known as a "qualitative approach" to performance appraisal.

One of our recent studies, published in the journal Human Resource Management, quantitatively reviewed findings from studies representing thousands of employees across different organizations and industries. Results indicated that employee participation in the performance appraisal review and gening favorable ratings help improve how employees react to performance appraisals. However, neither of these factors was as important as the quality of the relationship between manager and employee. In fact, relationship quality was almost twice as important as the employee's performance rating.

Determinants of relationship quality

For performance appraisals to be effective,employees need to feel like they; have a high-quality' relationship with you, their manager. Specifically, employees need to feel that you are supportive and trustworthy, as shown in Figure i. While this relationshipbuilding approach can improve the effectiveness of performance appraisals, it is important to note that it takes place outside the traditional performance appraisal process.

Moreover, building relationships may not be as straightforward as you may think. For instance, we are not suggesting that all you need to do is be nice to your entire staff. Being nice is definitely helpful management guru Bob Sutton's best-selling book The No Asshole Rule advocates for creating a workplace where managers who are "jerks" or bullies are actively screened out of the workplace.

But what we are saying goes beyond being nice and not being a jerk in an important way: When you use an approach that involves building highquality relationships, characterized by trust and support, with all of your employees, they will react more favorably to the performance appraisal review. …

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