Performance Appraisals within Organisations

Performance management refers to the overall efficiency of the Organization; Team performance as well as individual efficiency is created by understanding and managing employee performance within a framework of planned goals, standards and other competitive requirements. Performance appraisal develops individual performance, improves organisational performance and analyses the effectiveness of business planning. (Sparrow.P, 2009)
When working with expatriates and host country nationals, maintaining and developing an effective performance appraisal system is crucial. Organizations should retain the right people then develop and promote them in order to motivate the employees. Performance appraisal systems provide important information to distinguish between the different performances levels of employees and provide adequate feedback for the development of the employees.
Performance criteria
The Job description and job specification are two important evaluators since the specific goals and tasks are clearly defined. Goals can be translated into performance appraisal criteria, so measurability and specificity issues are essential aspects and therefore the need for hard, soft and contextual goals are often used as the basis for performance appraisal criteria.
Hard goals- criteria that are quantifiable, objective and directly measured for e.g. Market share, Return on Investment, profits, etc. Hard goals are appropriate to compare performance across employees and departments.
Soft goals- criteria based on relationships or traits, such as interpersonal skills or leadership style. In order to have an accurate performance appraisal of the employees it is essential to have soft goals especially when hard criteria are not available.
Contextual goals- consideration factors that may result from the situation in which the employees are performing. These factors are indomitable by foreign operations and external conditions associated with it. For e.g. Multinational organizations use arbitrary transfer pricing in order to minimise foreign exchange risks and tax expenditures. (Dowling and Welch, 2005)
Our company will be using hard, soft, and contextual goals since hard criteria is supplemented by frequent visits by parent country staff and executives also relying on financial measurements mentioned above to evaluate how well a manager operates a foreign subsidiary. We will be using soft criteria to complement these hard goals and to take areas that are hard to quantify. Using all of the three criteria’s for our appraisal system will help our company to build upon the strengths and to reduce their disadvantages.

Get Help With Your Essay
If you need assistance with writing your essay, our professional essay writing service is here to help!
Essay Writing Service

Who should conduct the Performance appraisal?
Some of the popular practices of appraising employees are by self evaluation, peer evaluation, subordinate evaluation and team appraisals. It is essential for the expatriate to measure his or her own performance (self evaluation) as means of up-keeping their own levels of motivation. This allows them to identify their performance levels and help them assess the adequacy of the reward systems available. Self evaluation should be done along with the subordinate evaluation and peer evaluation to have a well- balanced performance appraisal measurement.
When assigned with foreign assignments, performance evaluation of the expatriate managers can be done by host country managers or Parent country managers. In most of the instances, expatriate managers will be evaluated by both Host country and parent country managers in order to avoid any bias evaluations. If the expatriate appraisal is only done by the Host country managers, then contextual criteria can be taken into account when assessing an expatriate’s job performance but host country managers will have cultural- bound biases that may prevent them to put the expatriates performance into a broader organisational context. Parent country managers may not take contextual criteria into account but they can definitely place the expatriate’s performance into a broader organizational framework. Parent country managers will be biased by the lack of expertise and experience of working overseas. Therefore to avoid any misconceptions we are recommending that the expatriate performance appraisal should be done by both the host country manager and the host country manager and the average result of both of the managers can be taken into account.
Main Appraisal system
Using performance appraisal techniques are important due to the fact that individual performance is linked to organisational goals. While achieving the organisational goals, the performance appraisal system is designed to enhance the potential of employees in terms of personal development which may contribute to employee satisfaction and increased involvement in the organisation.
Organisations use different types of performance appraisal techniques. Our company will be using the Management by objectives approach as our main appraisal system, depending on the organisational context and the cost of such a technique.
Management by objectives
Management by objectives (MBO) is an appraisal technique where the manager and the subordinate mutually identify common goals in order to define the subordinate’s major areas of responsibility in terms of the expected results, and use these measurements in assessing the subordinate’s performance. (Stone, 2005)
Objectives will be set by our top level and corporate level executives, these objectives will be passed along to all the employees who will then perform in order to achieve these common objectives. Employees will be put into different groups according to the jobs that they have to perform and then a team leader will be selected according to her or his knowledge, skills and leadership skills in order to assist every team member. Motivational strategies may be followed in order to energize the team members. Any problems or issues regarding the job will be communicated to the team leaders and their corporate level managers. Most importantly performance evaluation will be made based on the performance of each team, the best team to reach their target objectives will be rewarded on a monthly basis or once in three months depending on the length of the task. This technique will help poor performances to improve team efficiency in order to increase the overall productivity for Arpico Super Centre.
Performance Feedback
Performance Feedback regarding the expatriates and the host country nationals should be given on a timely and accurate manner so that they will be told whether they are performing up to the required standards in an accurate manner and the areas that they need to focus in order to improve.
Since our company will be newly based in Melbourne, performance evaluation will be given to the expatriates and the HCN’s every six months, so that the employees will be given proper recognition for their individual and team performance for the tasks that they have successfully completed. Effective feedback can motivate them to improve in their work in order to achieve greater results. Also our company will be evaluating the Expatriates and the host country nationals in a cultural sensitive manner in order to avoid any discriminating factors.
A proper compensation plan is of paramount importance. It plays a crucial role in attracting, retaining and motivating international employees. The formulation of such an elaborate compensation plan is by no means an easy task. However, it is the lack of such an extensive plan which leads to premature return of expatriates and also the decline in managers taking up international roles. (Dowling & Welch, 2005).
Legal formalities and cultural consideration will always have a foot hold in forming and shaping such compensation plans. Therefore it is the responsibility of the HR team of eclipse consultants of such plans in order to strike a balance between the requirements of the host country and parent company.
Key components of the international compensation program
Base salary
Base salary is the foundation block for international compensation whether the employer is an expatriate or a third country national. In the domestic context base salary denotes the amount of cash compensation serving as a benchmark for other compensation packages such as bonuses and benefits. (Dowling and Welch, 1999)
For the expatriates the base salary is the primary component of a package allowance many of which are related to Foreign Service premiums, housing allowances and cost of living allowances etc. The salaries of expatriates will be given according to the salary structure in Srilanka. The expatriate’s salaries will be paid in the host country currency.
Allowances are given to the expatriates as payments for the extra costs that they will have to incur these compensations are made to them in order for the expatriates to live in a similar manner overseas as they did in the parent country. (MNC’s approach, 2008)
The allowances that we will be giving our senior managerial expatriates are, cost of living, housing allowances tax differentials and relocation allowances in order to help them to adjust in Australia.
Cost of living allowances involves a payment to compensate for differences in expenditure between Srilanka and Australia. Payments for utilities, income tax or discretionary items come under the cost of living allowances. This allowance will be standardized as 25% of the expatriate’s base salary.
We will be giving housing allowances as much as 10 to 35% of the expatriates total compensation package, for the senior executives so that they can rent houses in Melbourne since housing rents are expensive. These housing allowances are given so that the expatriates will be entitled to maintain their home- country living standards.
Other benefits
Other compensational benefits include bonuses such as overseas premiums and home leave reimbursements. Premiums, cash payments are given for taking up an overseas job and relocating in another country, therefore we will be giving adjustment allowance and hard ship allowance of a range from 10 to 20 percent since overseas premiums are established as a percentage of the base salary. In addition expatriates will be given medical coverage and will be paid for periodic trips back to Srilanka annually and will be given a one month’s leave.
Approaches to Compensation
There are mainly two approaches to compensation such as the going market approach and the balance sheet approach. The going market approach is where the base salary for international transfer is linked to the salary structure in the host country. This approach is based on the local market rates. (ORC, 2009).
We will be using the balance sheet approach links the base salary for the PCN’s and TCNs to the salary structure of the relevant home country. Allowances are provided for the expatriates to maintain a paradigm of living in a similar way when they were residing in Srilanka.
In the balance sheet approach the base salary is divided in to four main categories such as the income taxes, goods and services, housing and reserve (savings and investments and pension contributions). (ORC, 2009). It has to be noted that when the costs associated with the Australian assignment exceeds the equivalent costs in Srilanka, these costs are met by both the firm and the expatriate to ensure that the Srilankan purchasing power is achieved.

Methods of Employee Performance Appraisals

Organisations and managers are now using a number of appraisal methods in order to assess employee performance, and these methods both have benefits and negatives. An employee performance appraisal is a critique and a review of an employee’s performance during the year, or another specified time period (Woods, 2003). Performance appraisals are one of the most important processes for successful businesses, and are one of the key metrics a human resource department within an organisation will be judged on (Kressler, 2003). Performance evaluations and appraisals have been conducted since the times of Aristotle, and the measurement of an employee’s performance can allow a company to take rational decisions on an individual employee level, when reflecting on their performance (Virginia Tech, 2010). Employee performance appraisals provide a structure for managers and employees to meet and discuss performance with each other (Lotich, 2014). Jafari et al., (2009) assert that performance appraisal is one of the most important processes that the human resource department has to implement.

Get Help With Your Essay
If you need assistance with writing your essay, our professional essay writing service is here to help!
Essay Writing Service

Indeed, “there is little disagreement that if well done, performance measurements and feedback can play a valuable role in effecting the grand compromise between the needs of the individual and the needs of the organisation” (Virginia tech, 2010). Companies need to understand the purpose of appraising performance. This is to motivate an employee to increase their performance levels by attempting to help the employee understand why they are not performing effectively. It is also to identify how they can perform better (Kokemuller, 2012). This essay will look at a range of different employee performance appraisal methods, ranging from rating scales to team and self-evaluations. Both the benefits and the limitations of these will be looked at, in order to assess how effective they are as performance appraisal methods. Finally, the conclusion will discuss if there is one effective method that organisations should use, or if this is not the case.
Rating Scales
One method of appraisal is rating scales, and this is one of the more common forms of performance appraisal found within organisations (Jafari et al., 2009). Two of these which are commonly used are the graphic rating scale as well as the behavioural rating scale. Using the graphical rating scale, the employees are assigned a score based upon different criteria which are important to job success (Kokemuller, 2012). The behavioural scale focuses on the actual behaviours an employee displays. The benefits of rating scales is the fact that they are easy to use and to understand. Many managers and employees are also familiar with this technique, and they offer a simple way to communicate areas of strengths and weaknesses to the employee (Kokemuller, 2012). The graphical rating scale is not very time consuming at all, and they are easy to develop and administer as well as allowing for a range of quantitative analysis. Negatives of rating scales is the assumption that they are tied to a raise or a bonus for the employee, and this can contribute towards score inflation. Managers can also have a negative bias towards employees when utilising this method too (Kokemuller, 2012).
Narrative Techniques
Another technique is the narrative technique, which is similar to the critical independent method. When compared to the rating scales technique, these offer a more detailed analysis of job performance (Kokemuller, 2012). In these, an essay assessment is written of the performance for the narrative technique, with a log kept for the critical independent method. This log is based on the critical incidents which occur over the year, or the period of time the performance appraisal focuses on, and looks to the actual performance as opposed to behaviours like the essay technique (Jafari et al., 2009). A benefit of these techniques is the amount of detail, and how thorough they can be in analysing the behaviour of employees (Kokemuller, 2012). Maintaining a detailed set of notes throughout the year enables a manager to give a well-rounded and an accurate account of employee performance (Root, 2011). As well as this, there can be a focus on praising positive behaviours, as well as addressing areas where correction is needed. However, this thoroughness and scope for wide ranging discussion does leave the analysis up for open interpretation without a scoring and rating system, and therefore the employee may interpret the evaluation in a too positive or too negative light (Kokemuller, 2012). This method can be used in conjunction with other methods, such as the graphical scale, to enable something more quantitative with a qualitative rating too (Jafari et al., 2009).
Comparison Methods
Comparison methods is a multi-person method, which is a common appraisal technique. This approach, and the forced distribution method, compare the employee’s performance to the fellow workers within the organisation (Kokemuller, 2012). This allows the manager to communicate to an employee where they are performing well, and where they are not performing well in comparison to the other employees. The benefits of this are that this can motivate performance in competitive workplaces and among employees who have a competitive nature (Kokemuller, 2012). However this comparative methods could cause infighting, lack of teamwork and a lack of harmony among employees within the business, and this could lead to a deterioration in performance (Kokemuller, 2012). This method could be used in conjunction with the graphical scale, as the graphical scale would allow easy comparison between employees (Root, 2010).
360 Feedback
The development of an employee is dependent on the progress made within the specific department that they work in, as well as how effective they are when working with the rest of the company (Root, 2010). 360 degree feedback is a popular performance appraisal technique in modern organisations. In this method, the employee is evaluated by a wide range of people. This can range from co-workers, to supervisors as well as customers and those working under them (Kokemuller, 2012). One advantage of this is that the employee can see how a wide range of stakeholders view their performance in the key relationships that are critical to the employee’s job role. Different perspectives are also a positive in the appraisal process, and this is much more comprehensive than having just one person assessing the employee’s performance (Kokemuller, 2012). Hakala (2012) notes that 360 degree feedback is the most comprehensive, but also the most expensive performance appraisal measure and is normally only reserved for key employees within the organisation. Indeed, 360 degree feedback can be seen to be very good for gaining a broader perspective, having multi source feedback and for greater self-development. It is able to measure a range of different objectives effectively that other aspects may not, such as interpersonal skills and customer satisfaction (HRwale, 2015). There is also the 720 degree method, which Shaout and Yousif (2014) cite that it is 360 degree but practiced twice. It includes getting feedback from further external sources such as suppliers, family and communities of which the organisation is intertwined with. 360 degree feedback is expensive and time consuming for organisations to implement, as it is much more comprehensive, and requires much more time invested in it to implement as opposed to the other methods previously discussed.
Self Evaluation and Team Evaluations
Another form of effective performance appraisal has been seen to be self-evaluation and team evaluation. The benefits of these are that they are easy to administer, involving forms that can be filled in and used to rate yourself or those in your team based on a number of different criteria (Root, 2011). These forms can also be used in conjunction with other methods in an attempt to see if their colleagues and self-performance evaluations are of a similar view to the managers. Indeed, Root (2010) mentions that this is particularly useful when teamed with a performance review. Fellow workers may possibly have a better perspective of the jobs that are performed by their peers, and also have a better insight into what working them is liked (Root, 2012). However, there is obviously the possibility that a bias may exist when self-evaluation, or evaluating colleagues who may be friends, or who may be disliked despite having stellar performance in their job roles. This evaluation by peers or by the team can help to open up conversation between the manager, the employee, and the team which can be extremely beneficial to the overall development for the employee (Root, 2010). This is because there can often be discrepancies between what the management, and what the employee consider to be important performance factors (Hakala, 2008).
Management By Objectives
The final technique of performance appraisal is management by objectives. Here, employees are assessed on how they can accomplish a specific set of objectives that the company have asserted are critical for the successful completion of the organisations corporate objectives (Jafari et al., 2009). Their performance can be graded against the objectives which are specified by the management (Shaout and Yousif, M, 2014). This is a process which converts objectives or organisations to objectives for the individual employees. This requires: setting goals, periodic reviews, plans of action as well as self-control (Jafari et al., 2009). So, the process would begin with statements of action such as “reduce defected parts in the manufacturing process to 5%”, throughout the process there would be a close monitoring and reviewing of the objectives previously identified to keep the employee focused on their goals (Hakala, 2008). Therefore at the end of year performance appraisal, the progress the employee has made towards their goals is assessed, with new goals set for the next year. This process can be seen to be more useful for managerial positions, as their key goals may be more closely aligned with corporate strategy, and thus easier to identify. Likewise, the negatives may not be applicable to all jobs. Another negative would be the fact that focusing on specific objectives in the performance review may lead the employee to neglect any objectives which are not so heavily scrutinised, or not tied to the allocation of merit pay (HRwale, 2010).
Conclusion – Is there one best method of performance appraisals?
As has been seen in this essay, and as academics assert, there is no one size fits all approach to employee performance appraisal (Scott and Einstein, 2001). It can be seen that a range of different performance appraisal processes are effective when implemented (Root, 2010). As well as this, more and more companies are beginning to recognise that effective performance appraisal is key to successfully achieving corporate objectives (Grote, 2000). Human resource management and performance appraisals are aimed to improve corporate performance, while targeting individuals on the individual level as opposed to the business level. It is important to develop realistic and clear performance standards while reducing communication problems between the managers and their employees. Companies need to select the correct method for them based on a range of different factors, such as the need to compare employees, the cost of the method, the scope for error as well as the training needs evaluation for their specific company (Jafari et al., 2009).
If performance appraisals are not done correctly, a mixed message can be left which leaves employees feeling disappointed and confused, whereas the purpose of performance appraisals are to reinforce the good work the best performers do, and to try and improve what poor performers do (Knight, 2011). In order for the performance appraisal process to be successful, it needs to have the same quality of businesses who thrive. It needs passion, agility, speed and alignment (Bersin, 2013). Organisations need to be flexible in their processes, and arrange them to meet the targets for their specific company. Organisations also need to be aware of overcoming the negatives of performance evaluation such as having a one sided conversation, or an evaluator bias (Johnson, 2011). If these are present, they can have a negative effect upon employees, which is not intended. Therefore it is impossible to recommend one process over all of the others. As has been seen, all the processes have negatives and positives and are more applicable in different situations. 360 degree feedback is the most comprehensive of all the methods, but this is expensive and time consuming and can still fall foul of the negative aspects of performance appraisal. Companies thus need to ensure efficient performance appraisal, and align the process with their corporate objectives.
Bersin, J. (2013) [Online] Time to Scrap Performance Appraisals. Forbes. Available from:
Grote, D. (2000) [Online] Performance Appraisal Reappraised. Harvard Business Review. Available from:
Hakala, D. (2008) [Online] 16 Ways to Measure Employee Performance. HR World. Available from:
HRwale (2015) [Online] Performance Appraisal Methods. Available from:
Jafari, M. Bourouni, A. Amiri, R. (2009) A New Framework for Selection of the Best Performance Appraisal Method. European Journal of Social Sciences. 7(3). 92-100.
Johnson, R. (2011) [Online] Advantages & Disadvantages of Performance Evaluation. Available from:
Knight, R. (2011) [Online] Delivering an effective performance review. Harvard Business Review. Available from:
Kokemuller, N. (2012) [Online] The Pros & Cons of Performance Appraisal Methods. Available from:
Kressler, H. (2003) Motivate and Reward. Basingstoke: Palgrave Macmillan.
Lotich, P. (2014) [Online] Advantages and Disadvantages of Performance Appraisals. Available from:
Root, G. (2011) [Online] Basic Performance Appraisal Techniques. Available from:
Root, G. (2010) [Online] Methods of Performance Evaluation. Available from:
Scott, S. Einstein, W. (2001) Strategic performance appraisal in team-based organisations: One size does not fit all. Academy of Management Executive. 15(2) 108-116.
Shaout, A. Yousif, M. (2014) Performance Evaluation – Methods and Techniques Survey. International Journal of Computer and Information Technology. 3(5). 966-979.
Virginia tech (2010) [Online] Performance Appraisals 101. Available from:
Woods, C. (2003) [Online] Employee Performance Appraisal. Available from: