Editing Performance appraisal (section)

==Main features==
A performance appraisal is a systematic, general and periodic process that assesses an individual employee's job performance and productivity in relation to certain pre-established criteria and organizational objectives.<ref name="Manasa">{{cite journal |last1=Manasa |first1=K. V. L. |last2=Reddy |first2=Nivedita |title=Role of Training in Improving Performance |date=2009 |journal=The IUP Journal of Soft Skills |volume=3 |issue=3 & 4 |pages=72–80 |ssrn=1526983 }}</ref><ref name="Abu">{{cite journal |last1=Abu-Doleh |first1=Jamal |last2=Weir |first2=David |title=Dimensions of performance appraisal systems in Jordanian private and public organizations |journal=The International Journal of Human Resource Management |date=January 2007 |volume=18 |issue=1 |pages=75–84 |doi=10.1080/09585190601068334 }}</ref> Other aspects of individual employees are considered as well, such as [[organizational citizenship behavior]], accomplishments, potential for future improvement, strengths and weaknesses, etc.<ref name="Manasa"/>{{sfn|Howes|Muchinsky|2022|p={{page needed|date=September 2024}}}}<ref name="Broady">{{cite journal |last1=Broady-Preston |first1=Judith |last2=Steel |first2=Lucy |title=Employees, customers and internal marketing strategies in LIS |journal=Library Management |date=December 2002 |volume=23 |issue=8/9 |pages=384–393 |doi=10.1108/01435120210439861 }}</ref>

To collect PA data, there are three main methods: objective production, personnel, and judgmental evaluation.  Judgmental evaluations are the most commonly used with a large variety of evaluation methods.{{sfn|Howes|Muchinsky|2022|p={{page needed|date=September 2024}}}} Historically, PA has been conducted annually (long-cycle appraisals); however, many companies are moving towards shorter cycles (every six months, every quarter), and some have been moving into short-cycle (weekly, bi-weekly) PA.<ref name="Cederblom">{{cite journal |last1=Cederblom |first1=Douglas |title=The Performance Appraisal Interview: A Review, Implications, and Suggestions |journal=Academy of Management Review |date=April 1982 |volume=7 |issue=2 |pages=219–227 |doi=10.5465/amr.1982.4285572 }}</ref><ref name="Cappelli Tavis 2016 The performance management revolution">{{cite journal |last1=Cappelli |first1=Peter |last2=Tavis |first2=Anna |title=The performance management revolution |journal=Harvard Business Review |date=2016 |volume=94 |issue=10 |pages=58–67 |url=https://hbr.org/2016/10/the-performance-management-revolution }}</ref>  The [[interview]] could function as "providing [[feedback]] to employees, counseling and developing employees, and conveying and discussing compensation, job status, or disciplinary decisions".<ref name="Cederblom"/> PA is often included in [[performance management]] systems. PA helps the subordinate answer two key questions: first, "What are your expectations of me?" second, "How am I doing to meet your expectations?"{{sfn|Grote|2002|pp=28–29}}

Performance management systems are employed "to manage and align" all of an organization's resources in order to achieve highest possible performance{{sfn|Howes|Muchinsky|2022|p={{page needed|date=September 2024}}}} and to eliminate distractions procured from individual agents that neglect the companies goals.<ref name="Waterman Meier 1998 Principal-Agent Models"/>  "How performance is managed in an organization determines to a large extent the success or failure of the organization. Therefore, improving PA for everyone should be among the highest priorities of contemporary organizations".<ref name="Muczyk">{{cite journal |last1=Muczyk |first1=Jan P. |last2=Gable |first2=Myron |title=Managing Sales Performance through a Comprehensive Performance Appraisal System |journal=The Journal of Personal Selling and Sales Management |date=1987 |volume=7 |issue=1 |pages=41–52 |jstor=40471747 }}</ref>

Some applications of PA are compensation, performance improvement, promotions, termination, test validation, and more.<ref name="DeNisi6">{{cite journal |last1=DeNisi |first1=Angelo S. |last2=Pritchard |first2=Robert D. |title=Performance Appraisal, Performance Management and Improving Individual Performance: A Motivational Framework |journal=Management and Organization Review |date=July 2006 |volume=2 |issue=2 |pages=253–277 |doi=10.1111/j.1740-8784.2006.00042.x }}</ref> While there are many potential benefits of PA, there are also some potential drawbacks. For example, PA can help facilitate management-employee communication; however, PA may result in legal issues if not executed appropriately, as many employees tend to be unsatisfied with the PA process, as well as, the misuse of PA's can incur apathy towards organizational goals and values.{{sfn|Howes|Muchinsky|2022|p={{page needed|date=September 2024}}}}<ref name="Schraeder">{{cite journal |id={{ProQuest|219158187}} |last1=Schraeder |first1=Mike |last2=Becton |first2=J Bret |last3=Portis |first3=Ron |title=A Critical Examination of Performance Appraisals: An Organization's Friend or Foe? |journal=The Journal for Quality and Participation |volume=30 |issue=1 |date=Spring 2007 |pages=20–25, 47 }}</ref><ref name="Sudarsan">{{cite journal |last1=Sudarsan |first1=A |date=2009 |title=Performance appraisal systems: A survey of organizational views |journal=The Icfai University Journal of Organizational Behavior |volume=3 |issue=1 |pages=54–69 }}</ref> PAs created in and determined as useful in the United States are not necessarily able to be transferable cross-culturally.{{sfn|Hofstede|2001|p={{page needed|date=September 2024}}}}

=== Use of Performance Appraisal Results ===

Performance appraisals (PAs) have wide-ranging uses in organizations across sectors and are intended to serve various purposes including:

'''''Performance improvement'''''

Employee performance improvement is considered a central purpose of PAs that contributes to enhancing organizational effectiveness.<ref>{{cite journal |last1=DeNisi, A. S., & Murphy, K. R. |title=Performance appraisal and performance management: 100 years of progress? |journal=Journal of Applied Psychology |date=2017 |volume=102 |issue=3 |pages=102(3), 421–433|doi=10.1037/apl0000085 |pmid=28125265 }}</ref> Due to greater demand for transparency, accountability, and effective public service delivery.<ref name="Performance appraisal in public sec">{{cite journal |last1=Kim, S. |title=Performance appraisal in public sector: Motivating public employees through PAs |journal=International Journal of Public Administration |date=2020 |pages=43(2), 91–105}}</ref> PAs in public sector organizations help identify strengths and weaknesses, and development opportunities that algin employees' efforts with organizational and public service goals, while enabling public sector employees to adjust their performance in order to foster a more effective government workforce.<ref name="Performance management in public se">{{cite journal |last1=Christensen, T., & Laegreid, P. |title=Performance management in public sector organizations: Complexity and hybridization |journal=Public Organization Review |date=2020 |pages=20(1), 1–15}}</ref>

'''''Informing employment decisions'''''

PAs are used to inform employment decisions such as promotion, termination, and transfer of employees.<ref>{{cite journal |doi=10.1080/09585192.2011.559100 |title=Performance management effectiveness: Lessons from world-leading firms |date=2011 |last1=Biron |first1=Michal |last2=Farndale |first2=Elaine |last3=Paauwe |first3=Jaap |journal=The International Journal of Human Resource Management |volume=22 |issue=6 |pages=1294–1311 |url=https://scholarsphere.psu.edu/resources/6d887837-d41d-4ea5-b354-4d0109f78358 }}</ref> Transparent and objective PAs can help ensure fairness in these employment decisions as well as help identify high-potential employees from groups that may be more traditionally [[social exclusion|excluded]], thus, contributing to career progression and, at the same time, increasing diversity in leadership positions.<ref>{{cite journal |doi=10.1016/j.bushor.2011.06.001 |title=Why we hate performance management—And why we should love it |date=2011 |last1=Aguinis |first1=Herman |last2=Joo |first2=Harry |last3=Gottfredson |first3=Ryan K. |journal=Business Horizons |volume=54 |issue=6 |pages=503–507 }}</ref>

From a [[labor union]] perspective, PAs should be embedded within fair and [[culturally sensitive]] appraisal systems and should not reinforce managerial bias or justify unfair terminations or promotions, particularly for employees of indigenous background, women, and ethnic minorities that are often at greater risk of being unfairly evaluated due to [[unconscious bias]] or inequitable standards.<ref>{{cite journal |last1=García-Chas, R., Neira-Fontela, E., & Varela-Neira, C. |title=High-performance work systems and job satisfaction: A mediating role of trust and labour unions |journal=Human Resource Management Journal |date=2016 |pages=26(2), 238–254}}</ref>

The use of multisource feedback – incorporating evaluations from peers, subordinates, and customers to provide a holistic view – over traditional supervisory ratings may assist to improve rating accuracy by reducing leniency bias and centrality bias<ref>{{cite journal |last1=Barbieri, D., Gorbatai, A., & Kazman, R. |title=The Performance of Performance Appraisal Systems: A Theoretical Framework for Public Organizations |journal=Review of Public Personnel Administration |date=2021}}</ref> where raters may give overly positive evaluations or avoid extreme ratings, respectively.

'''''Organizational research, tools and practices'''''

Research shows that effective PAs are reliable indicators of employee competencies and future job performance.<ref>{{cite journal |last1=Wang, H., Hom, P. W., & Allen, D. G. |title=Coping with turnover: New directions for research on employee retention |journal=Academy of Management Annals |date=2021 |pages=13(1), 69–103}}</ref> In public sector organizations that serve diverse populations, inclusive PAs can contribute to better hiring practices and employee development programs.<ref name="Public and private management: What">{{cite journal |last1=Boyne, G. A. |title=Public and private management: What's the difference? |journal=Journal of Management Studies |date=2010 |pages=39(1), 97–122}}</ref> [[Labor unions]] emphasize that these systems should reflect collective efforts rather than focusing solely on individual accomplishments, as collaboration is key in creating an inclusive public workforce.<ref>{{cite journal |last1=Benson, J. |title=Performance management systems and employee relations: A critical perspective |journal=Labour Studies Journal |pages=46(2), 155–173}}</ref>

'''''Communication'''''

PAs are used as mechanisms for feedback, to clarify job expectations and organizational goals,<ref name="Performance appraisal in public sec"/> and to prevent misunderstandings that may arise, including those stemming from cultural differences.<ref name="Performance management in public se"/> Transparent appraisal systems also reduce the risk of surprise negative evaluations, a concern especially pertinent for [[social exclusion|socially excluded]] groups that may already face [[systemic bias]] in the workplace.<ref>{{cite journal |last1=Pyman, A., Holland, P. J., Teicher, J., & Walpole, K |title=Industrial relations climate, employee voice, and managerial attitudes to unions: An Australian study |journal=British Journal of Industrial Relations |date=2010 |pages=48(2), 258–282}}</ref>

Research has found that face-to-face discussions and continuous feedback help improve the performance appraisal process by enhancing clarity and mutual understanding.<ref>{{cite journal |last1=Barbieri, D., Gorbatai, A., & Kazman, R. |title=The Performance of Performance Appraisal Systems: A Theoretical Framework for Public Organizations |journal=Review of Public Personnel Administration}}</ref>

'''''Development and training'''''

PAs can assist in identifying training needs and setting professional development goals fostering both individual growth and a more skilled workforce at an organizational level.<ref>{{cite book |last1=Perry, J. L. |title=Managing human behavior in public and nonprofit organizations |date=2018 |publisher=CQ Press}}</ref>

Cognitive biases such as the [[anchoring effect]] and [[halo effect]] can impact the accuracy of appraisals used to identify training and professional development needs by relying too heavily on initial information (anchor) when making judgments; or a rater's overall positive impression of an individual, both of which can influence the assessment of performance, leading to biased judgments that influence evaluations.<ref>{{cite journal |last1=Belle, N., Cantarelli, P., & Belardinelli, P. |title=Cognitive Biases in Performance Appraisal: Experimental Evidence on Anchoring and Halo Effects With Public Sector Managers and Employees |journal=Review of Public Personnel Administration |pages=37(3), 275–294}}</ref>

'''''Documenting performance'''''

PAs serve the purpose of documenting appraisal processes and results – essential in public sector organizations, where accountability to citizens and legal regulations is required. Proper documentation ensures performance is recorded transparently, safeguarding all parties in case of disputes around wrongful termination or discrimination.<ref>{{cite journal |last1=Choi, S., Hong, S., & Lee, H. |title=The role of performance appraisals in managing employment relations |journal=Employee Relations |date=2020 |pages=42(3), 667–687}}</ref>

[[Labor unions]] advocate that such documentation should be accessible to employees and their representatives, ensuring that vulnerable employees are protected from biased evaluations.<ref>{{cite journal |last1=García-Chas, R., Neira-Fontela, E., & Varela-Neira, C. (2016). High-performance work systems and job satisfaction: A mediating role of trust and labour unions. Human Resource Management Journal, 26(2), 238-254. |title=High-performance work systems and job satisfaction: A mediating role of trust and labour unions |journal=Human Resource Management Journal |pages=26(2), 238–254}}</ref>

'''''[[Reward system]]s'''''

PAs are often used to determine salary levels and rewards placing a greater emphasis on the need for transparency in how compensation decisions are made.<ref>{{cite journal |last1=Budd, J. W., Gollan, P. J., & Wilkinson, A. |title=New approaches to employee voice and participation in organizations |journal=Human Relations |date=2010 |pages=63(3), 303–310}}</ref>

Research has found that clear communication of performance metrics, management support, and fair reward distribution are essential for successful reward implementation.<ref>{{cite journal |last1=Audenaert, M., Vanderstraeten, A., & Buyens, D. |title=The Role of Feedback Quality and Organizational Cynicism for Affective Commitment Through Leader–Member Exchange |journal=Review of Public Personnel Administration |date=2021 |pages=41(3), 593–615}}</ref>

'''''Job evaluation and selection'''''

Performance appraisals also assist in formulating job criteria and selecting individuals suited for specific tasks. By identifying key competencies, PAs help ensure that recruitment and selection processes are inclusive, enabling public sector organizations to meet the needs of diverse communities.<ref name="Public and private management: What"/>

'''''[[Motivation]]'''''

PAs serve as critical tools for motivating employees. In the public sector, where intrinsic motivators such as [[public service motivation]] often drive performance, PAs can enhance [[motivation]] by recognizing the contributions of employees and providing them with growth opportunities.<ref name="Performance appraisal in public sec"/> Public sector unions emphasize the importance of non-monetary rewards, such as career development or increased responsibility, which can be particularly meaningful for employees from groups that more traditionally suffer from [[social exclusion]], as these provide pathways to leadership and broader representation.<ref>{{cite journal |last1=Pyman, A., Holland, P. J., Teicher, J., & Walpole, K. |title=Industrial relations climate, employee voice, and managerial attitudes to unions: An Australian study |journal=British Journal of Industrial Relations |date=2010 |pages=48(2), 258–282}}</ref>

===Potential benefits===
There are a number of potential benefits of organizational performance management conducting formal performance appraisals (PAs). There has been a general consensus in the belief that PAs lead to positive implications of organizations.<ref name="Pettijohn">{{cite journal |last1=Pettijohn |first1=Linda S. |last2=Stephen Parker |first2=R. |last3=Pettijohn |first3=Charles E. |last4=Kent |first4=John L. |title=Performance appraisals: usage, criteria and observations |journal=Journal of Management Development |date=November 2001 |volume=20 |issue=9 |pages=754–771 |doi=10.1108/EUM0000000006159 }}</ref> Furthermore, PAs can benefit an organization's effectiveness.<ref name="Spinks">{{cite journal |last1=Spinks |first1=Nelda |last2=Wells |first2=Barron |last3=Meche |first3=Melanie |title=Appraising the appraisals: computerized performance appraisal systems |journal=Career Development International |date=April 1999 |volume=4 |issue=2 |pages=94–100 |doi=10.1108/13620439910254713 }}</ref> One way is PAs can often lead to giving individual workers feedback about their job performance.<ref name="Performance appraisal and performance management: 100 years of progress?">{{cite journal |last1=DeNisi, A. S., & Murphy, K. R. |journal=Journal of Applied Psychology |date=2017 |pages=102(3), 421–433}}</ref><ref name="Schraeder"/> From this may spawn several potential benefits such as the individual workers becoming more productive.<ref name="Jenks">{{cite journal |id={{Gale|A10830893}} {{ProQuest|206694339}} |last1=Jenks |first1=James M. |title=Do your performance appraisals boost productivity? |journal=Management Review |date=June 1991 |volume=80 |issue=6 |pages=45–48 }}</ref>

Other potential benefits include:

*Facilitation of communication: communication in organizations is considered an essential function of worker motivation.<ref name="Schraeder"/> It has been proposed that feedback from PAs aid in minimizing employees' [[perception]]s of uncertainty.<ref name="Spinks"/> Fundamentally, feedback and management-employee communication can serve as a guide in job performance.<ref name="Schraeder"/>
*Enhancement of employee focus through promoting trust: behaviors, thoughts, or other issues may distract employees from their work, and trust issues may be among these distracting factors.<ref name="Kanfer">{{cite journal |last1=Kanfer |first1=Ruth |last2=Ackerman |first2=Phillip L. |title=Motivation and cognitive abilities: An integrative/aptitude-treatment interaction approach to skill acquisition. |journal=Journal of Applied Psychology |date=August 1989 |volume=74 |issue=4 |pages=657–690 |id={{ProQuest|614301202}} |doi=10.1037/0021-9010.74.4.657 }}</ref> Such factors that consume [[psychological energy]] can lower job performance and cause workers to lose sight of organizational goals.<ref name="Schraeder"/>  Properly constructed and utilized PAs have the ability to lower distracting factors and encourage trust within the organization.<ref name="Mayer">{{cite journal |last1=Mayer |first1=Roger C. |last2=Gavin |first2=Mark B. |title=Trust in Management and Performance: Who Minds the Shop While the Employees Watch the Boss? |journal=Academy of Management Journal |date=October 2005 |volume=48 |issue=5 |pages=874–888 |doi=10.5465/amj.2005.18803928 }}</ref>
*[[Goal setting]] and desired performance reinforcement: organizations find it efficient to match individual worker's goals and performance with organizational goals.<ref name="Schraeder"/> PAs provide room for discussion in the collaboration of these individual and organizational goals.<ref name="Kikoski">{{cite journal |last1=Kikoski |first1=John F. |title=Effective Communication in the Performance Appraisal Interview: Face-To-Face Communication for Public Managers in the Culturally Diverse Workplace |journal=Public Personnel Management |date=December 1998 |volume=27 |issue=4 |pages=491–513 |doi=10.1177/009102609802700405 }}</ref> Collaboration can also be advantageous by resulting in employee acceptance and satisfaction of appraisal results.<ref name="Cawley">{{cite journal |last1=Cawley |first1=Brian D. |last2=Keeping |first2=Lisa M. |last3=Levy |first3=Paul E. |title=Participation in the performance appraisal process and employee reactions: A meta-analytic review of field investigations. |journal=Journal of Applied Psychology |date=August 1998 |volume=83 |issue=4 |pages=615–633 |id={{ProQuest|614338480}} |doi=10.1037/0021-9010.83.4.615 }}</ref>
*Performance improvement: well constructed PAs can be valuable tools for communication with employees as pertaining to how their job performance stands with organizational expectations.<ref name="Spinks"/> "At the organizational level, numerous studies have reported positive relationships between human resource management (HRM) practices"<ref name="Schraeder"/> and performance improvement at both the individual and organizational levels.
*Determination of training needs: "Employee training and development are crucial components in helping an organization achieve strategic initiatives".<ref name="Schraeder"/><ref name="Twomey">{{cite journal |last1=Twomey |first1=Daniel F. |last2=Harris |first2=Drew L. |title=From strategy to corporate outcomes: Aligning human resource management systems with entrepreneurial intent |journal=International Journal of Commerce and Management |date=March 2000 |volume=10 |issue=3/4 |pages=43–55 |id={{Gale|A78789240}} |doi=10.1108/eb047408 }}</ref> It has been argued that for PAs to truly be effective, post-appraisal opportunities for training and development in problem areas, as determined by the appraisal, must be offered.<ref name="Selden">{{cite journal |last1=Selden |first1=Sally Coleman |last2=Ingraham |first2=Patricia Wallace |last3=Jacobson |first3=Willow |title=Human Resource Practices in State Government: Findings from a National Survey |journal=Public Administration Review |date=September 2001 |volume=61 |issue=5 |pages=598–607 |doi=10.1111/0033-3352.00130 }}</ref> PAs can be especially instrumental for identifying training needs of new employees.<ref name="Broady"/> Finally, PAs can help in the establishment and supervision of employees' career goals.<ref name="Spinks"/>

===Potential complications===

Despite all the potential advantages of formal performance appraisals (PAs), there are also potential drawbacks. It has been noted that determining the relationship between individual job performance and organizational performance can be a difficult task.<ref name="Twomey"/> The ones conducting performance appraisals, such as line managers also often face complexities.<ref name="Tyskbo 2020 Line management involvement"/> Generally, there are two overarching problems from which several complications spawn. One of the problems with formal PAs is there can be detrimental effects to the organization(s) involved if the appraisals are not used appropriately.  The second problem with formal PAs is they can be ineffective if the PA system does not correspond with the [[organizational culture]] and system.<ref name="Schraeder"/>

Potential complications that may arise:
*Detrimental impact to performance improvement: It has been proposed that the use of PA systems in organizations adversely affects organizations' pursuits of quality performance.<ref name="Soltani">{{cite journal |last1=Soltani |first1=Ebrahim |title=Conflict between theory and practice: TQM and performance appraisal |journal=International Journal of Quality & Reliability Management |date=October 2005 |volume=22 |issue=8 |pages=796–818 |doi=10.1108/02656710510617238 }}</ref> It is believed by some scholars and practitioners that the use of PAs is unnecessary if there is [[total quality management]].<ref name="Kikoski"/>
*Subjective evaluations: Subjectivity is related to judgement based on a supervisor's subjective impressions and opinions, which can be expressed through the use of subjective performance measures, ''ex post'' flexibility in the weighting of objective performance measures, or ''ex post'' discretional adjustment, all of which are based on factors other than performance measures specified ''ex ante''. Traditional performance appraisals are often based upon a manager's or supervisor's perceptions of an employee's performance and employees are evaluated subjectively rather than objectively. Therefore, the review may be influenced by many non-performance factors such as employee 'likeability', personal prejudices, ease of management, and previous mistakes or successes. Reviews should instead be based on data-supported, measurable behaviors and results within the performers control.<ref>{{cite report |last1=Daniels |first1=Aubrey C. |authorlink1=Aubrey Daniels |title=Designing a Compensation Program That Motivates and Produces a Profit-Driven Workplace |url=https://www.aubreydaniels.com/media-center/organizational-solutions/articles/designing-a-compensation-program }}{{self-published inline|date=September 2024}}</ref>
*Negative perceptions: "Quite often, individuals have negative perceptions of PAs".<ref name="Pettijohn"/> Receiving, or the anticipation of receiving, a PA can be uncomfortable and distressful<ref name="Spinks"/> and potentially cause "tension between supervisors and subordinates".<ref name="Jenks"/> If the person being appraised does not trust their employer, appraiser or believe that they will benefit from the process it may become a "tick box" exercise.<ref>{{cite journal |last1=McGivern |first1=Gerry |last2=Ferlie |first2=Ewan |title=Playing tick-box games: Interrelating defences in professional appraisal |journal=Human Relations |date=September 2007 |volume=60 |issue=9 |pages=1361–1385 |doi=10.1177/0018726707082851 }}</ref>
*Central tendency: This is where the evaluator fails to make extreme ratings to either direction-low or high but remains at the intermediate. The evaluator fails to use extremes of the scale and uses the central points e.g. rating all employees as average.<ref>{{Cite web |last=Team |first=MBA Skool |title=Central Tendency – Meaning & Definition |url=https://www.mbaskool.com/business-concepts/human-resources-hr-terms/15102-central-tendency.html |access-date=2022-10-05 |website=MBA Skool |language=en-gb}}</ref>
*Inflationary pressure: This is where there is low differentiation with the upper range of the rating choices defining outstanding performance as 90 or above good as 90 or above, average or above 70 or above and inadequate performance as anything below 70 leaves one wonder for a promotion.<ref>{{Cite web |date=12 July 2022 |title=What Is Inflation Rating Performance Appraisal? |url=https://questionanswer.io/what-is-inflation-rating-performance-appraisal/ |website=QuestionAnswer.io |archive-url=https://web.archive.org/web/20221005153942/https://questionanswer.io/what-is-inflation-rating-performance-appraisal/ |archive-date=5 October 2022 }}{{self-published inline|date=September 2024}}</ref> 
*Errors: Performance appraisals should provide accurate and relevant ratings of an employee's performance as compared to pre-established criteria/goals (i.e. organizational expectations).<ref name="Amsterdam">{{cite journal |last1=Amsterdam |first1=Christina E. |last2=Johnson |first2=Robert L. |last3=Monrad |first3=Diane M. |last4=Tonnsen |first4=Sandra L. |title=A Collaborative Approach to the Development and Validation of a Principal Evaluation System: A Case Study |journal=Journal of Personnel Evaluation in Education |date=September 2003 |volume=17 |issue=3 |pages=221–242 |doi=10.1007/s11092-005-2981-y }}</ref> Nevertheless, supervisors will sometimes rate employees more favorably than that of their true performance in order to please the employees and avoid conflict.<ref name="Schraeder"/>  "Inflated ratings are a common malady associated with formal" PA.<ref name="Martin">{{cite journal |last1=Martin |first1=David C. |last2=Bartol |first2=Kathryn M. |title=Performance Appraisal: Maintaining System Effectiveness |journal=Public Personnel Management |date=June 1998 |volume=27 |issue=2 |pages=223–230 |doi=10.1177/009102609802700208 }}</ref>
*Legal issues: When PAs are not carried out appropriately, legal issues could result that place the organization at risk.<ref name="Jenks"/> PAs are used in organizational disciplinary programs<ref name="Spinks"/> as well as for promotional decisions within the organization.<ref name="Schraeder"/> The improper application and utilization of PAs can affect employees negatively and lead to legal action against the organization.
*Performance goals: Performance goals and PA systems are often used in association. Negative outcomes concerning the organizations can result when goals are overly challenging or overemphasized to the extent of affecting ethics, legal requirements, or quality.<ref name="Schweitzer">{{cite journal |last1=Schweitzer |first1=Maurice E. |last2=Ordóñez |first2=Lisa |last3=Douma |first3=Bambi |title=Goal Setting as a Motivator of Unethical Behavior |journal=The Academy of Management Journal |date=2004 |volume=47 |issue=3 |pages=422–432 |jstor=20159591 }}</ref> Moreover, challenging performance goals can impede an employee's abilities to acquire necessary knowledge and skills.<ref name="Kanfer"/> Especially in the early stages of training, it would be more beneficial to instruct employees on outcome goals than on performance goals.<ref name="Schraeder"/>
*Derail merit pay or performance-based pay: Some researchers contend that the deficit in merit pay and performance-based pay is linked to the fundamental issues stemming from PA systems.<ref name="Selden"/>

===Improvements===

Although performance appraisals can be biased, there are certain steps that can be taken to improve the evaluations and reduce the margin of errors through the following:

:* ''Training'' – Bringing awareness to the potential for bias by training the Evaluators to be aware of the difference of skills and abilities between employees and how to subjectively consider these traits.
:* ''Providing feedback to raters'' – Trained raters provide managers who evaluated their subordinates with feedback, including information on ratings from other managers. This has the potential to reduce leniency errors.
:* ''Subordinate participation'' – By allowing employee participation in the evaluation process, there is employee-supervisor reciprocity in the discussion for any discrepancies between self ratings and supervisor ratings, thus, increasing job satisfaction and motivation.{{sfn|Schultz|Schultz|2010|p=153}}
:* Use multiple raters to avoid the likely bias with using only one rater.
:* Conduct post appraisal interviews. interview employees after appraisal to get their comments, views and opinions on the whole exercise and general performance.
:* Use selective rating. Use people as raters on areas where they have job knowledge since no single person is knowledgeable in all areas.
:* Reward accurate appraisers. It is good practice to reward performance and hence it means those who appraise accurately have performed and should be rewarded.<ref>{{Cite web |title=Improving Performance Evaluations {{!}} Office of Financial Management |url=https://ofm.wa.gov/state-human-resources/workforce-data-planning/research-resources/best-practices-and-benchmarks/improving-performance-evaluations |access-date=2022-10-05 |website=ofm.wa.gov}}</ref>

===Effectiveness===
Leadership development coach Jack Zenger urges companies to find alternatives to annual performance reviews, and says that research supports the following:<ref>{{cite web |title=What Solid Research Actually Says About Performance Appraisals |website=[[Forbes]] |archive-url=https://web.archive.org/web/20230507230138/https://www.forbes.com/sites/jackzenger/2017/10/12/what-solid-research-actually-says-about-performance-appraisals/ |archive-date=2023-05-07 |url-status=live |url=https://www.forbes.com/sites/jackzenger/2017/10/12/what-solid-research-actually-says-about-performance-appraisals/#50bb3b812b59}}</ref>
* Frequent discussions with employees are better than annual reviews
* Talking about future goals is more productive than past performance, especially with clear targets, deadlines, and the participation of the employee
* Negative feedback can cause defensiveness and worsen productivity
* Positive feedback does little to improve productivity, though does improve the interpersonal relationship with the person giving the feedback
* Neither managers nor employees like performance reviews
* Higher-level employees receive performance reviews less frequently
* Annual reviews are often justified on the grounds they are needed for salary changes, but they are not actually necessary, and empirically they would make little difference for most employees

===Seniority and Labor Contracts===

Labor union contracts often include seniority provisions, specifying that promotions, layoffs, and benefits are determined based on the length of service rather than performance. Historically, these provisions aimed to prevent favoritism, cronyism, and corruption, promoting a sense of solidarity among workers. Seniority serves as job security, protecting long-serving employees from arbitrary layoffs or demotions. It is commonly seen in sectors like manufacturing, education, and public services, offering employees a predictable path to career advancement and rewards.

====The Last-In, First-Out (LIFO) Rule====
A common application of seniority is the Last-In, First-Out (LIFO) rule, which dictates that employees with the shortest tenure are laid off first during downsizing. This system provides stability for longer-serving employees and is considered fair in workforce reductions. However, critics argue that LIFO can hinder productivity by retaining employees based solely on tenure, regardless of their current performance or skills. For example, in technology-driven industries, newer employees may possess valuable skills or innovative approaches that senior workers might lack. As such, organizations sometimes face difficulties maintaining a competitive edge when LIFO rules limit their ability to retain high-performing but less-tenured staff. Nevertheless, the LIFO rule remains a vital aspect of many union agreements, particularly in traditional industries where seniority is highly valued.<ref name="Sampson 1990 Efficient union labour contracts">{{cite journal |last1=Sampson |first1=Anthony A. |title=Efficient union labour contracts under seniority employment rules |journal=Economics Letters |date=March 1990 |volume=32 |issue=3 |pages=299–305 |doi=10.1016/0165-1765(90)90116-I }}</ref><ref name="Fairweather 1952 Seniority Provisions">{{cite journal |last1=Fairweather |first1=Owen |title=Seniority Provisions in Labor Contracts Social and Economic Consequences |journal=DePaul Law Review |date=April 1952 |volume=1 |issue=2 |pages=191 |url=https://via.library.depaul.edu/law-review/vol1/iss2/2/ }}</ref>

====Seniority's Impact on Wages and Promotions====
Seniority significantly influences wage structures and promotions, often resulting in a wage premium for employees with longer tenures. Union-negotiated contracts may include regular wage increases based solely on years of service. This approach can enhance job satisfaction and loyalty, as employees feel rewarded for their long-term commitment. However, this system may also lead to inefficiencies if individual performance and skills are overlooked. High-performing employees with shorter tenures might feel demotivated if they see senior colleagues receiving higher wages and opportunities simply due to their length of service. This structure can also impose financial burdens on organizations during economic downturns, as they must continue paying higher wages to senior employees regardless of business performance. To address these issues, some companies have implemented hybrid wage systems that combine seniority with performance-based incentives, allowing them to recognize both experience and merit.<ref>{{cite journal |last1=Dustmann |first1=Christian |last2=Meghir |first2=Costas |title=Wages, Experience and Seniority |journal=The Review of Economic Studies |date=January 2005 |volume=72 |issue=1 |pages=77–108 |doi=10.1111/0034-6527.00325 |url=http://discovery.ucl.ac.uk/3908/1/3908.pdf }}</ref><ref name="Shy Stenbacka 2018 Dynamic labor market competition">{{cite journal |last1=Shy |first1=Oz |last2=Stenbacka |first2=Rune |title=Dynamic labor market competition and wage seniority |journal=International Journal of Industrial Organization |date=November 2018 |volume=61 |pages=130–154 |doi=10.1016/j.ijindorg.2018.08.009 }}</ref><ref>{{cite journal |last1=Böckerman |first1=Petri |last2=Skedinger |first2=Per |last3=Uusitalo |first3=Roope |title=Seniority rules, worker mobility and wages: Evidence from multi-country linked employer-employee data |journal=Labour Economics |date=April 2018 |volume=51 |pages=48–62 |doi=10.1016/j.labeco.2017.11.006 |hdl=10419/129663 |hdl-access=free }}</ref>

====Balancing Seniority and Performance====
While seniority offers job security and a sense of fairness, it also presents challenges in modern workplaces. To address this, many labor contracts have adopted flexible seniority systems, where an employee’s abilities, skills, and job performance are also considered alongside their tenure. For example, companies might use performance reviews to guide decisions related to promotions, salary increases, and even layoffs. This approach allows employers to respect seniority while ensuring that productivity and contributions to the organization are fairly acknowledged.

Union rules may also include probationary periods and warnings as mechanisms to balance seniority with performance. Employers are often required to warn poorly performing employees and give them a probationary period to improve before considering dismissal. During disputes, records from performance reviews and probation periods often play a crucial role in arbitration, helping to determine whether a firing was justified. This structured process ensures that performance issues are managed fairly without undermining the seniority system's core principles.<ref name="Sampson 1990 Efficient union labour contracts"/><ref name="Fairweather 1952 Seniority Provisions"/>

====Recent Trends and Debates====
In recent years, some organizations have increasingly questioned traditional seniority-based approaches, arguing that they can stifle innovation and adaptability, especially in fast-paced markets like technology and healthcare. This has led to a push for more performance-oriented contracts that still incorporate elements of seniority to ensure a balanced approach. Mixed evaluation systems, combining seniority with performance metrics, [[human resource metrics]], skills assessments, and peer feedback, are becoming more popular. These systems aim to balance the stability provided by seniority with the need for a dynamic, merit-based workforce. The ongoing debate reflects the complexities of modern labor relations and the need for adaptive strategies that can meet diverse business needs.<ref>{{cite report |last1=Aumayr-Pintar |first1=Christine |last2=Bechter |first2=Barbara |title=Seniority-based entitlements: Extent, policy debates and research |url=https://www.eurofound.europa.eu/en/publications/2019/seniority-based-entitlements-extent-policy-debates-and-research |work=Eurofound |date=17 April 2019 }}</ref><ref name="Shy Stenbacka 2018 Dynamic labor market competition"/>

====Finding the Balance in Seniority Systems====
Seniority in labor contracts remains a complex issue. It offers job security and guards against favoritism but also poses challenges in balancing merit and productivity. Modern labor contracts increasingly seek a middle ground, integrating seniority provisions with performance-based assessments to create a fair and efficient work environment. By valuing both experience and performance, organizations can foster a culture that recognizes long-term loyalty while also rewarding high achievers. This balanced approach is key to building a workforce that is both stable and dynamic, capable of meeting the demands of a rapidly changing economy. The evolving nature of workplaces makes finding this balance more important than ever.<ref name="Fairweather 1952 Seniority Provisions"/><ref name="Sampson 1990 Efficient union labour contracts"/>

===Resistance from managers===

Managers who have had unsatisfactory experiences with inadequate or poorly designed appraisal programs may be skeptical about their usefulness. Academic literature has also been unable to appropriately define exclusive measure of PA effectiveness.<ref name="Barbieri et al 2023 Performance of Performance Appraisal Systems">{{cite journal |last1=Barbieri |first1=Marta |last2=Micacchi |first2=Lorenza |last3=Vidè |first3=Francesco |last4=Valotti |first4=Giovanni |title=The Performance of Performance Appraisal Systems: A Theoretical Framework for Public Organizations |journal=Review of Public Personnel Administration |date=March 2023 |volume=43 |issue=1 |pages=104–129 |doi=10.1177/0734371X211043560 }}</ref> The skepticism is also reflected in the decline in the use of traditional PA processes in the U.S. corporate sector.<ref name="Cappelli Tavis 2016 The performance management revolution"/> It is estimate of a third of the U.S. private companies have now switched to a more informal and frequent engagement between managers and employees to enhance performance.<ref name="Cappelli Tavis 2016 The performance management revolution"/> The shift is attributed to a greater focus on talent development, business agility, and a preference for teamwork over individual responsibility.<ref name="Cappelli Tavis 2016 The performance management revolution"/>

The government and public sector organizations continue to use PA worldwide.<ref name="Belle et al 2017 Cognitive Biases in Performance"/> In the 2005 Merit Performance Survey (MPS) conducted by the United States (U.S.) [[United States Merit Systems Protection Board|Merit Systems Protection Board]] (MSPB), 16.41% of federal supervisors reported that they had rated their employees' PAs either higher or lower than the employees should have received.<ref name="Lin Kellough 2019 Performance Appraisal Problems">{{cite journal |last1=Lin |first1=Yu-Chun |last2=Kellough |first2=J. Edward |title=Performance Appraisal Problems in the Public Sector: Examining Supervisors' Perceptions |journal=Public Personnel Management |date=June 2019 |volume=48 |issue=2 |pages=179–202 |doi=10.1177/0091026018801045 }}</ref> Among nine potential problems identified in the 2005 MPS on structure and operation of the U.S. federal government appraisal system; inflated ratings, flawed standards, and lack of support were ranked as the top three problems, respectively.<ref name="Lin Kellough 2019 Performance Appraisal Problems"/>

==== Inflated Ratings ====
Occurs when employees receive higher-than-expected performance ratings due to systematic bias by raters when conducting PA.<ref name="Lin Kellough 2019 Performance Appraisal Problems"/> This consequently affect the effectiveness of PA evaluations due to the impact of [[halo effect]] and [[anchoring effect]] on PA rating.<ref name="Belle et al 2017 Cognitive Biases in Performance"/> Research shows that managers tend to give better ratings to subordinates they favor, influenced by both direct bias and indirect bias.<ref>{{cite journal |last1=Davis |first1=Paul J. |title=Seven biggest problems with performance appraisals: and seven development approaches to rectify them |journal=Development and Learning in Organizations|date=30 December 2011 |volume=26 |issue=1 |pages=11–14 |doi=10.1108/14777281211189119 }}</ref> Inflated ratings are more common when PAs are conducted for judgmental and administrative purposes, such as promotions, pay increases, or job retention, rather than for developmental reasons.<ref name="Lin Kellough 2019 Performance Appraisal Problems"/>

Research studies have identified various factors contributing to inflated ratings. First, raters may be lenient to avoid administrative burdens, such as compiling documentation to justify low ratings.<ref name="Lin Kellough 2019 Performance Appraisal Problems"/> This could be because managers view PAs as time-consuming and routine tasks.<ref>{{cite journal |last1=Schleicher |first1=Deidra J. |last2=Baumann |first2=Heidi M. |last3=Sullivan |first3=David W. |last4=Yim |first4=Junhyok |title=Evaluating the effectiveness of performance management: A 30-year integrative conceptual review |journal=Journal of Applied Psychology |date=July 2019 |volume=104 |issue=7 |pages=851–887 |doi=10.1037/apl0000368 |pmid=30676036 }}</ref> Second, raters may hesitate to give harsh ratings to avoid damaging work relationships and creating an unproductive environment.<ref name="Lin Kellough 2019 Performance Appraisal Problems"/>

Recent HRM studies also suggest raters’ experiences cognitive bias influenced by contextual factors, such as institutional, political, and cultural influences,<ref name="Wang et al 2019 Contextualizing performance">{{cite journal |last1=Wang |first1=Meng |last2=Zhu |first2=Cherrie Jiuhua |last3=Mayson |first3=Susan |last4=Chen |first4=Weizhen |title=Contextualizing performance appraisal practices in Chinese public sector organizations: the importance of context and areas for future study |journal=The International Journal of Human Resource Management |date=9 March 2019 |volume=30 |issue=5 |pages=902–919 |doi=10.1080/09585192.2017.1292537 }}</ref> as well as environmental factors.<ref name="Sanner et al 2022 Do Desperate Times">{{cite journal |last1=Sanner |first1=Bret |last2=Evans |first2=Karoline |last3=Fernandez |first3=Delia |title=Do Desperate Times Call for Desperate Measures? The Effect of Crises on Performance Appraisals |journal=Human Performance |date=8 August 2022 |volume=35 |issue=3–4 |pages=218–240 |doi=10.1080/08959285.2022.2108034 }}</ref> For instance, an environmental, such as, a national crisis can impair raters to rely on heuristic thinking rather than making an objective and cognitive evaluation of subordinates PA, as described by [[Dual process theory|dual-process theory]].<ref name="Sanner et al 2022 Do Desperate Times"/>

Third, the perceived importance of accurate PA ratings may be positively influenced by motivational factors, such as felt accountability, incentive structures, and public service motivation.<ref name="Park 2014 Motivation of Public Managers">{{cite journal |last1=Park |first1=Seejeen |title=Motivation of Public Managers as Raters in Performance Appraisal: Developing a Model of Rater Motivation |journal=Public Personnel Management |date=December 2014 |volume=43 |issue=4 |pages=387–414 |doi=10.1177/0091026014530675 }}</ref> Finally, close relationships between raters and subordinates can also lead to inflated ratings. For example, a line manager who regularly engages with subordinates may develop strong interpersonal relationships, which can impair objective evaluation.

'''Flawed performance standards or measures''' are attributed to the use of subjective criteria or ambiguous measures by raters during PAs. One cause of this issue is the difficulty in defining objective performance standards due to the complexity of job tasks or outcomes.<ref name="Lin Kellough 2019 Performance Appraisal Problems"/> This challenge may be influenced by how organizations structure their employees' duties. Factors such as job autonomy, teamwork, and job rotation affect the setting of performance standards, and in some cases, subjective criteria may be necessary due to the nature of the job.<ref name="Bayo-Moriones et al 2020 Performance appraisal">{{cite journal |last1=Bayo-Moriones |first1=Alberto |last2=Galdon-Sanchez |first2=Jose E. |last3=Martinez-de-Morentin |first3=Sara |title=Performance appraisal: dimensions and determinants |journal=The International Journal of Human Resource Management |date=21 August 2020 |volume=31 |issue=15 |pages=1984–2015 |doi=10.1080/09585192.2018.1500387 |url=http://www2.unavarra.es/gesadj/depEconomia/repec/DocumentosTrab/DT1207.PDF }}</ref> For example, empirical findings suggest that subordinates with a high degree of job autonomy may have a positive relationship with the inclusion of subjective measures in their PA, due to the variation of day-to-day job tasks need to meet performance targets and provided there is frequent level monitoring by their line managers.<ref name="Bayo-Moriones et al 2020 Performance appraisal"/>

Clear performance standards are shaped by well-defined organizational goals.<ref>{{cite journal |last1=Rubin |first1=Ellen V. |last2=Edwards |first2=Amani |title=The performance of performance appraisal systems: understanding the linkage between appraisal structure and appraisal discrimination complaints |journal=The International Journal of Human Resource Management |date=21 August 2020 |volume=31 |issue=15 |pages=1938–1957 |doi=10.1080/09585192.2018.1424015 }}</ref> The absence of clear goals and targets can disrupt goal alignment, which affects the effectiveness of PAs in monitoring and managing how employees' work contributes to organizational priorities.<ref name="Ayers 2015 Aligning Individual">{{cite journal |last1=Ayers |first1=Rebecca S. |title=Aligning Individual and Organizational Performance: Goal Alignment in Federal Government Agency Performance Appraisal Programs |journal=Public Personnel Management |date=June 2015 |volume=44 |issue=2 |pages=169–191 |doi=10.1177/0091026015575178 }}</ref> Organizational goals provide employees with a clear line of sight, helping them understand how their duties contribute to organizational performance.<ref name="Ayers 2015 Aligning Individual"/> A study suggests that PAs help moderate the relationship between employee alignment and organizational performance.<ref name="Ayers 2015 Aligning Individual"/> Government departments and public service organizations often face challenges in developing clear organizational goals, which makes it further challenging for managers evaluate the performance of subordinates based on individual performance goals that are not clearly aligned to organizational goals.<ref name="Barbieri et al 2023 Performance of Performance Appraisal Systems"/>

'''Lack of support from higher management''' can undermine raters' confidence and their ability to conduct employee PA effectively, which can compromise the independence and integrity of PA decision-making.<ref name="Lin Kellough 2019 Performance Appraisal Problems"/> Employees often rely on higher management to validate the organization's decisions.<ref name="Lin Kellough 2019 Performance Appraisal Problems"/> When higher management emphasizes the importance of PAs by providing endorsements, resources, training, and time for participation, it can motivate raters to be more accountable and thorough in conducting accurate appraisals.<ref name="Park 2014 Motivation of Public Managers"/> However, political and institutional factors, such as, political ideologies, norms, and organizational culture can influence the effective implementation of PA outcomes.<ref name="Wang et al 2019 Contextualizing performance"/>