Reviewing performance

This chapter looks at the performance review process. It focuses on how employers have attempted to overcome the common problems of assessing performance and outlines best practice to ensure these difficulties are minimised.

KEY POINTS

appraisal has attracted considerable criticism, despite being an important feature in most of today's workplaces, with the condemnation mainly focusing on the poor execution of most appraisals;

nonetheless, appraisal, or to use the current terminology, performance review, is still at the heart of managing performance. This is mainly the case because performance has to be reviewed somehow if it is to be properly managed;

most employers continue to see the appraisal process as a way to improve individual and corporate performance, as well as to identify development needs;

employers have attempted to rectify some of the common difficulties with appraisals by training line managers to perform them with greater consistency and to provide more objective feedback on performance;

as well as providing training and guidance to line managers to carry out more effective reviews, a growing number of organisations have alternative arrangements to the traditional top-down appraisal;

the main changes that have occurred involve staff exercising greater input into the review process, including engaging in some form of self-assessment. Managerial assessment is increasingly being scrutinised by peers, senior managers or both to ensure consistency and fairness. Input into the assessment process from several different sources, including peers and internal and external customers (called multi-source feedback), is also emerging in some quarters, especially for higher-level staff;

the most popular current approach is a combination of downward and self-appraisal. This can take several forms but usually amounts to the appraisee recording examples of where objectives have been achieved and progress towards implementing his or her personal development plan;

self-assessment is seen as boosting the effectiveness of performance reviews by generating greater satisfaction with the system among both appraisers and appraisees via increased participation, better communication and clarification of what is expected;

self-assessment requires mutual trust between the two parties as appraisees are unlikely to provide a candid assessment of their own performance if they do not trust the line manager not to take advantage of their honesty. There is a temptation for individuals to overestimate their performance if the review process is linked to pay;

the use of multi-source feedback is growing. This can include feedback on performance from immediate team-mates and colleagues (peer review); or from subordinates and direct reportees (upward or 180-degree feedback); or from all, or a combination of, superiors, subordinates, peers and internal and external customers (360-degree);

most employees are likely to accept the use of 360-degree feedback when its purpose is developmental. Managers, however, tend to question the value of subordinates' views when the outcomes of appraisals depend on the opinion of others; and

multi-source feedback suffers from a similar problem as conventional appraisal - it is not possible to remove bias completely, and, as such, multi-source feedback is in reality a series of subjective views by people who might not possess the skills required to rate performance.

Performance appraisal has attracted considerable criticism, despite being an important feature in most of today's workplaces (see figure 4.1 for summary of the main problems). Criticism has mainly focused on the poor execution of most appraisals. The most recent research shows that the inability of many line managers to perform appraisal effectively remains a big issue. This is the case even where competency frameworks, which generally specify clear positive and negative performance expectations, have been implemented. The annual Competency & Emotional Intelligence benchmarking survey in 1999/00 reported that assessment of competencies was the most frequently mentioned problem by employers.¹ The survey revealed that: "Line managers and/or employees do not treat the assessment process seriously; or there is subjectivity and inconsistency in the decisions."

The 1998 CIPD research also uncovered evidence of continuing problems with the performance review process, despite a high level of enthusiasm and satisfaction among line managers. Although most individual participants felt they understood how assessments were reached, a substantial minority (26%) did not, and more than half believed that the best ratings were given by managers to people they like.² In addition, only 7% of participants rated appraisal as very effective. And chapter two referred to research by SHL, which found that appraisal failed to motivate staff effectively.³

Nonetheless, appraisal or, to use the current terminology, performance review, is still at the heart of managing performance. The 1998 Industrial Society survey of 480 organisations reported that appraisal by the line manager was more likely to be a main element of performance management than any other feature.⁴ Some 89% of respondents said this was the case. The CIPD research found that annual appraisal was an important element of performance management in 83% of companies surveyed.² It should come as no surprise that appraisal remains popular, given that many employers still see it and performance management as one and the same. The Industrial Society found that almost a quarter of survey respondents regard appraisal as a central component of their performance management arrangements. This was particularly the case among small employers.

More importantly, performance has to be reviewed somehow if it is going to be properly managed. The purpose of performance appraisal is straightforward; it is to provide accurate, reliable and useful feedback on performance to aid improvement. And the process is designed to assess an employee's strengths and weaknesses, agree objectives and expectations, and to identify future needs, such as training and development. It should also present employees with a clear picture of how the organisation views their contribution and inform them about their future prospects. The appraisal process should be beneficial because, as writer Alan Fowler acknowledges:

"Staff work best when they know what they have to do, how well they have to do it, and how well they are thought to have done, so they need to talk to their managers at least once a year about this, and their managers need to take their staff's views into account when setting goals and deciding who needs training."⁵

NEW APPROACH TO APPRAISAL

So despite strong reservations, firms persist with appraisals. According to IRS, most employers continue to see the appraisal process as a way of improving individual and corporate performance, as well as to identify development needs: one or both of these were reported as the main aims of appraisal by around 90% of respondents to a 1999 survey.⁶ IRS also revealed that better communication between managers and employees is the most commonly reported benefit of appraisal systems. A 1997 Industrial Society report found that the three most popular purposes of appraisal were to: identify individual development needs (cited by 85% of the 536 respondents); set objectives/targets (84%); and give feedback on performance (76%).⁷

The Community Development Foundation (CDF), the London-based charity, provides an example of the corporate aims of the appraisal process.⁸ At present, its aims are fourfold:

Assess - past performance, current performance, future potential, existing skills and training needs.

Develop - plan training on an individual basis, identify areas of strength and weakness and enable individuals to make the most of their abilities.

Motivate - encourage individuals by showing that good performance will be recognised.

Problem solve - highlight problem areas and help provide solutions to them.

The CDF document detailing the staff appraisal scheme for 2000 goes on to outline the potential benefits for both employees and managers:

"Staff benefit from regular planned contact with management to consider progress, identify training and development needs and acknowledge their contribution to the work of the organisation. Management benefits from having staff performance reviewed on a systematic basis, which makes the review of jobs and development activities easier to co-ordinate and provides greater managerial consistency across the organisation."

Employers have attempted to rectify some of the common difficulties with appraisal by training line managers to perform them with greater consistency and to provide more objective feedback on performance. The 1997 Industrial Society survey of appraisal found that training in coaching and feedback skills for appraisers was provided by around a third of respondents.⁷ However, appraisal training tends to emphasise the positive nature of the process, often making line managers reluctant to offer critical feedback.⁹

As well as providing training and guidance to line managers to carry out more effective reviews, a growing number of organisations have alternative arrangements to the traditional top-down appraisal.

A general picture of appraisal at the beginning of the new millennium is emerging. As chapter two acknowledged, the feedback process is evolving rather than there being a wholesale change. In the main the changes that have occurred have involved staff exercising greater input into the review process. Instead of being passive recipients of a manager's evaluation, individuals often engage in some form of self-assessment. More and more appraisees see the full performance report, and are asked to comment on the findings. A small but growing band of organisations gives individuals "ownership" of appraisal documents to the extent that they write the report themselves, incorporating their own views and those of the manager. Also, managerial assessment is increasingly being scrutinised by either their peers or senior managers, or both, to ensure consistency and fairness. Often this includes the appraiser producing evidence that an individual has achieved the appropriate standards and attained his or her objectives (see Abbey Life example in chapter three ). Input into the assessment process from several different sources, including peers and internal and external customers (called multi-source feedback), is also emerging in some quarters, especially for higher-level staff.

Michael Armstrong and Angela Baron's joint research on performance management for the CIPD led them to conclude that traditional top-down appraisal is being gradually replaced by a joint-review process. They stated:

"Performance management in the early 1990s still carried the baggage of the traditional performance appraisal scheme, in which the appraisal meeting was an annual event involving top-down and unilateral judgments by 'superiors' of their 'subordinates'. Since then, it has increasingly been perceived as a continuous process, involving reviews that focus on the future rather than the past, and for which the key words are 'dialogue', 'shared understanding', 'agreement' and 'mutual commitment'."²

Despite some moves to the contrary, figures show that top-down appraisal continues to exercise a hold over the performance review process in the majority of organisations, however. The IRS survey of appraisal found that some form of downward appraisal comprises part of the system in 98% of 126 organisations responding to the question: "What kinds of assessment are formally used?".⁶ The most common approach was a combination of downward and self-appraisal, with 46% of firms using this method; almost 31% operate only a downward review system; and 19% combine downward with one or more approach from peer, upward and self-appraisal.

Other studies have produced similar findings to those of the IRS survey. The Industrial Society's 1997 survey also reported that downward appraisal, in this case defined as being performed by a line manager, was prevalent, with 95% of organisations reporting this form of review taking place. By contrast, self-appraisal featured in 61% of cases; upward appraisal in 11%; peer review in 10%; and feedback by customers in 8%. The Industrial Society's 1998 survey produced similar findings to its 1997 research: 89% using line management appraisal; 58% operating self-appraisal; and 14% using 360-degree feedback.

The pros and cons of the different methods of appraisal are summarised in figure 4.2 . Below we focus on each approach in more detail to ascertain the respective potential strengths and weaknesses.

Figure 4.2:Pros and cons of different methods of appraisal

Pros			Cons
Top-down appraisal
	regular communication between manager and subordinate			subjective
	identifies strengths and weaknesses			tendency for inconsistency/lack of accuracy
	feedback on managerial performance			overmarking
	agree objectives, personal development			"halo" effect - one event casts undue weight
	raise issues of concern			personal prejudice
	motivate staff			lack of knowledge
	basis for pay decisions			time consuming
Self-appraisal
	employee input			bureaucratic
	better basis for discussion			time consuming
	focus on issues important to individual			temptation to exaggerate achievements, especially if linked to reward
	sense of "ownership"			line manager uncomfortable with self-assessment of performance
	motivate staff			outcomes can sour relations between parties
	less subjective			third-party resolution
	mutual trust
360-degree
	rounded assessment			bureaucratic
	employee input			time consuming
	less subjective			less acceptable for pay decisions
	development-based assessment/informs training needs			complicated to administer for lower level staff
	evaluation of senior staff			difficult to interpret results
	supports "leadership" development			costly - often requires external support
	supports cultural change - more open management			bias still common/fear of being honest
	more effective teamworking			process open to manipulation
Peer group review
		identifies good and bad performers		bureaucratic
		peer pressure		time consuming
		less subjective		reluctance to be honest
		reinforces team ethos		disrupt team harmony
		improves group performance/communication		sours team relations
		monitors team activities		uncomfortable appraising close colleagues
		better cooperation among team members		third-party validation required
Upward appraisal
		employee input		bureaucratic
		good indicator of managerial performance		time consuming and costly
		assess strengths and weaknesses - training needs		reluctance to be honest/personal bias
		assess behavioural characteristics, especially "leadership" skills		disrupts team harmony
		improves team performance/communication		subordinate training necessary
		supports cultural change		difficult to interpret results - third-party interpretation often needed
		encourages openness		reluctance to share results

TOP-DOWN/SELF-APPRAISAL

The popular combination of downward and self-appraisal identified by the IRS survey, and referred to as a "joint-review" process by Armstrong and Baron, can take several forms. The "self" element of such arrangements usually amounts to the appraisee recording examples of where objectives have been achieved and progress in implementing personal development plans, among others, prior to the formal meeting. Self-assessment is seen as boosting the effectiveness of performance reviews by generating greater satisfaction with the system among both appraisers and appraisees via increased participation, better communication and clarification of what is expected.

The self-appraisal element might include the completion by the appraisee of an appraisal preparation form, which is designed to help guide the discussion. Individuals generally receive the form several days or weeks before the meeting. The form provides them with the opportunity to assess their own performance against previously agreed objectives or general standards, such as attendance, time-keeping etc, over the period under review, as well as document critical incidents, successes and achievements, and to comment on the level of support by their manager.

The changing performance management process at NAAFI, the retail and social organisation serving the armed forces, was referred to in chapter two. The individual "ownership" of the process discussed there also filters into the appraisal arrangements, which follow the same common approach discussed above. About a month before the appraisal meeting, a NAAFI employee will complete a self-appraisal form, which includes career aspirations and development needs. In conjunction with the manager's assessment of past performance, this forms the basis of the appraisal discussion.¹⁰ A similar approach is taken at the London Borough of Hammersmith and Fulham.¹¹ Once the date and time of the appraisal has been agreed (usually well in advance), individuals are encouraged to prepare for the meeting by thinking about their performance since the last appraisal and by writing down issues they wish to bring up at the discussion. This is passed to the appraiser at least five days before the proposed meeting, and the content, together with the appraiser's prepared written comments, form the basis of the discussion.

The self-appraisal element in other firms might take the form of allowing individuals to comment on their own performance or make an overall assessment about the views expressed by the manager before the process is "signed off" - that is, a jointly agreed performance summary. At the Natural History Museum, for example, the first section of the appraisal form requires the appraisee to "write a brief assessment of how well you feel you have performed during the review period" (see case study 2, Case studies). HSBC also follows this line, inviting the appraisee to make some "overall comments" on the "Performance plan and performance review" form (see case study 1, Case studies). At Standard Life the final stage of the end-of-year review (and the interim ones if the participants wish) is to fill in the "summary of contribution" page. This carries space for notes by the appraisee under two questions: "What went well?" and "What do I need to improve?" with a smaller section for the manager's comments. The section is meant to summarise what has been detailed in the rest of the review and give an overview of the individual's performance over the period and points for development. The guidance for managers assumes they will be completing this summary for their subordinates, but in practice many people fill in their own and then pass it to their manager for comment (see case study 4, Case studies).

Polaroid International Business Centre, the sales and marketing business, takes the self-assessment concept a stage further: appraisees "write the report themselves after their performance management discussion, incorporating both views. Both parties then sign the form."⁶

Self-assessment usually includes a right of appeal against an appraiser's evaluation. Appraisal sessions involving an element of self-assessment systems can include a discussion of performance based on ratings prepared by both the appraisee and the appraiser, or based entirely on the employee's assessment. The latter method is considered to be more effective in generating satisfaction with the process because it guarantees a level of employee influence over the discussion.

Armstrong and Baron believe that self-assessment has the following four main advantages over the traditional top-down approach:

helps to generate less inhibited and more positive discussion;

involves reviewees actively in the review process;

is likely to reduce defensive behaviour; and

provides scope to run the review meeting as a constructive and open dialogue by reducing the top-down element of traditional performance appraisals and minimising their unilateral nature.²

Problems and issues

While the addition to the conventional downward review process of a self-appraisal element overcomes several of the common criticisms levelled at such arrangements - such as a lack of accuracy and the absence of any meaningful discussion - and generates a sense of ownership, it still raises the potential for problems.

The need for mutual trust between the two parties, which as chapter two noted has been seriously eroded in many firms, is crucial. Appraisees are unlikely to provide a candid assessment of their own performance if they do not trust the line manager not to take advantage of their honesty. Where the appraisal outcome influences reward decisions, there is always the temptation for individuals to overestimate their performance, placing the line manager in the uncomfortable position of having to scale back the appraisee's assessment. Self-appraisal also requires clear targets and standards against which performance can be judged.²

Figure 4.3 details the best approach to conventional line management appraisal of staff. Guidance on assessment techniques for appraisers - supplied by Mid Kent Holdings - are outlined in figure 4.4.

MULTI-SOURCE APPRAISAL

Multi-source appraisal can include feedback on performance from immediate team-mates and colleagues (peer review); or from subordinates and direct reportees (upward or 180-degree feedback); or from all or a combination of superiors, subordinates, peers and internal and external customers (360-degree).

Polly Kettley, author of a report on multi-source feedback from the Institute for Employment Studies (IES), believes that such schemes are "especially suited to measure behaviours related to leadership and interpersonal relations."¹² This is why 360-degree feedback and upward appraisal are generally applied to senior managerial posts, and peer reviews are mostly found in teamworking situations.

The use of multi-source feedback is growing. Research by Pilat, a London-based HR consultancy, found multi-source feedback increased in the UK between 1994 and 1998.¹³ Pilat's survey of 235 organisations found that 25% were using this form of appraisal, with a further third planning to introduce it by 2001. Other findings included the following:

senior managers are most commonly covered by multi-source feedback - reported by 70% of respondents;

only 9% of participants apply multi-source feedback to all staff;

93% of those surveyed use questionnaires, typically based on competency frameworks, to gain feedback.

Pilat also identified the main reason for the introduction of multi-source feedback: it was part of an organisation-wide training/development programme - reported by 48% of respondents.

Increased use of multi-source feedback is partly explained by the problems with traditional appraisal (above) and the fact that line management review is less appropriate in flatter organisations with multiple reporting lines, and where "empowered" staff work in teams. Evidence of individual performance from several sources, rather than one person, should provide a more complete picture of someone's contribution, and strengths and weaknesses. Carefully designed schemes have the additional benefit of providing a means to reinforce desired behaviour.

360-degree feedback

"We want the 360 to be used to have a rounder view of their performance, but be able also to focus on specific areas they need to develop to enhance their performance in the future," says Phil Watts, Whitbread's director of HR services and corporate HQ (see case study 5, Case studies). The public houses, hotels, health clubs and restaurants group applies 360-degree feedback to its 3,000-strong management population. Other organisations report similar aims for their use of 360-degree appraisal. Brighton & Hove Council introduced 360-degree assessment for its first, second and third tiers of management to gain a comprehensive picture of their strengths and areas where training, development and support would aid improvement.¹⁴ Accountancy firm BDO Stoy Hayward wanted to enhance staff development, and decided 360-degree appraisal - which now covers all of its 600 qualified staff - could help: "We felt it would give a more complete picture, rather than a one-way view of the world," says Jo Adams, BDO's training and development manager.¹⁴

A survey of 45 organisations using 360-degree feedback by the Ashridge Management Research Group found that they employ it to examine the following facets of performance:

personal attributes (76% of respondents);

leadership skills (74%);

teambuilding skills (65%);

communication skills (62%);

professional knowledge/competency (38%); and

strategic skills (29%).¹⁵

Towers Perrin's global survey of 360-degree feedback reported that the four most popular reasons given by companies already using the measurement process were to: improve employee development; provide input for leadership development; improve quality/reliability of feedback; and reinforce company values/behaviour.¹⁶ A CIPD survey of 360-degree feedback conducted in 1998 also found that the two most popular uses of the technique were to assess development needs (92% of the 51 organisations surveyed) and to help in performance-coaching (80%).²

Full 360-degree feedback is also being used to boost knowledge sharing among staff. One study of knowledge management asked participating companies to rate the effectiveness on knowledge sharing of different HR initiatives.¹⁷ The best initiative, rated either "great" or "good" by 44% of firms, was 360-degree feedback. One commentator has claimed that 360-degree feedback is the only means of "comprehensively revealing how successful an individual is in all their important working relationships."¹⁸ This form of appraisal is becoming increasingly popular and is an integral feature of current performance management practice. And it is performance management systems that many companies have turned to as a formal means of establishing behaviour that regards knowledge sharing as a key feature of work.

IBM highlights the role its performance management system, which includes 360-degree feedback, plays in getting staff to share knowledge in the following statement: "When we introduced our new performance management system a number of years ago, teaming was introduced as an essential part of our personal business commitment, which included 360-degree peer input. How well people share with others and mentor others is measurable. Successful execution, however, requires managers to fully understand the importance of teaming and setting well-defined goals to take advantage of it."¹⁷

Clive Fletcher, writing in People Management, believes that companies have reached what he describes as phase two in their use of 360-degree feedback. By this Fletcher means that the focus has shifted from employee development to evaluation and, sometimes, pay.¹⁹

As the Pilat research referred to above highlighted, the 360-degree feedback process generally consists of a questionnaire being completed by a specified number of people with whom the appraisee has direct contact. At Brighton & Hove Council, for example, the questionnaire, which was specially devised for the authority by Cambridge Management Centre (CMC) and based on the Management Charter Initiative national management standards, consists of 63 questions covering nine areas; each person being assessed receives feedback from his or her line manager and up to eight other people.¹⁴ Appraisees also complete the questionnaire. At least another five must also be completed to ensure unambiguous data. Appraisers, who complete forms anonymously, must grade colleagues using the following options:

positive;

area for improvement;

not relevant; and

don't know.

They are also encouraged to make additional comments to clarify and expand the findings. Once the results have been analysed - the findings of individual managers' psychometric tests are added to the results at Brighton - the appraisee has a detailed one-to-one feedback session with a specialist from CMC, followed by a written summary detailing their strengths and development needs.

BDO Stoy Hayward's use of 360-degree feedback is linked to a competency framework consisting of core areas of behaviour, values and skills that the company believes are important for the future. In all there are 10 dimensions against which people are scored. Staff are asked to nominate 10 people who they work closely with. Five of these are chosen in conjunction with the individual's line manager to give the feedback. This process gives staff some control over the list of appraisers, but prevents them from picking friends. The company initially had between 15 and 20 people giving feedback but found that fewer appraisers did not materially affect the result. On average, most employees contribute to about eight 360-degree appraisals of their colleagues. Assessors grade their colleagues' behaviour against 71 statements, and the form also includes space for comments. Jackie Ward, head of HR, says this element is the most useful because it explains why someone scores well or poorly. Assessors complete evaluations directly on to a computer, using an in-house system based on the competency framework (Whitbread has also put its 360-degree system online, see case study 5, Case studies). The software generates a framework profile report detailing how well the appraisee is performing against the 10 dimensions in comparison with the peer-group in that business unit. As well as 360-degree feedback, BDO also operates a more conventional appraisal system looking at the individual's overall performance. The feedback results are discussed at the appraisal meetings, which take place twice a year.

Ashridge Management Research Group argue that "the key advantage of 360-degree feedback is that it helps capture the full complexity of managerial behaviour".¹⁵ Ashridge found that 76% of the 174 managers surveyed said that 360-degree feedback gave them a better understanding of how their behaviour affected others; 67% said it provided them with a more accurate understanding of how they performed; and 48% said it created a better understanding within their team. IES found that when 360-degree feedback was introduced to support wider cultural change, it helped employees to understand performance expectations and the importance of development and self-evaluation.¹² The case study organisations featured in the IES study were also of the view that managers receiving personal feedback are better able to adapt their style to suit the needs of the organisation, and that this is beginning to show in the results of employee attitude surveys. IES reported that multi-source feedback was most effective when it was received as part of a development centre or management development programme, perhaps because the participant is given the time and support to reflect on what they have learned.

Full 360-degree feedback can help personal development, improve a team's performance and reinforce company values. Both Brighton & Hove Council and BDO claim that 360-degree assessment has been successful in providing reliable data to inform training and development needs and to evaluate the effectiveness of departments, as well as reinforcing cultural change.

Problems and issues

There are several main problems associated with 360-degree feedback. Companies contemplating the use of multi-source assessment, such as 360-degree feedback, need to have a clear purpose for using it and ensure everybody concerned has a clear understanding of the aim and what is being measured. IES found most employees were likely to accept the use of 360-degree feedback when its purpose was developmental. Managers, however, tended to question the value of subordinates' views when the outcomes of appraisals depended on the opinion of others.¹²

Ashridge Management Research Group's study also identified problems when 360-degree feedback was used for issues other than development.¹⁵ In its development application, 360-degree feedback tends to focus on "soft" behavioural aspects of performance, but when it is applied to performance management, it uses "hard" aspects of skills, knowledge and work results, reports Ashridge. When pay decisions form part of the remit, it makes it "a more controversial process, with the stronger likelihood that employers would attempt to manipulate the process for their own purposes".

The major claim made for 360-degree feedback is that it is more objective than conventional appraisal. Yet it suffers from a similar problem. It is not possible to remove bias completely, and, as such, multi-source feedback is in reality a series of subjective views by people who might not possess the skills required to rate performance. Organisational culture and politics may distort the results. Assessors may be fearful of providing truthful feedback. And where it is linked to pay, people tend to give a more favourable assessment. The civil service union PTC says that while multi-source feedback appears more open and democratic, "the more people involved in assessing an individual's qualities, the greater the risk of subjectivity, bias and discrimination".¹¹

The process can be quite time consuming, so people need to be able to devote enough time to it. The use of a computerised system, as is the case at Brighton & Hove and Whitbread, can speed the process up and make it less bureaucratic. Computerisation can be costly though. Participation in 360-degree feedback is usually voluntary - this is the case at Brighton & Hove and Whitbread, but not at BDO, for example. However, the very people that would often benefit from multi-source feedback are the ones reluctant to take part.

Peer group review

Peer reviews are defined as the assessment of an individual's performance based on the views of colleagues. Peer reviews have been positively associated with distinguishing very high from very low performers. Behavioural characteristics usually form the basis of such arrangements. Generally, each appraiser will base his or her judgment on evidence of appropriate behaviours over the review period, and provide proof to back up their assessment.

By their very nature, peer reviews are most appropriate in formal teamworking settings. The difference between peer reviews and 360-degree feedback is the fact that feedback is only by colleagues. Experience suggests that effective team performance requires training in three chief categories: communication skills, administration and technical training.²⁰ Performance reviews are one area of administration that team members need training in, while giving and receiving feedback is a crucial communication skill. According to Armstrong and Baron, peer reviews in team settings should focus on the following aspects:

overall contribution to team performance;

contribution to planning, monitoring and team-review activities;

maintaining relationships with other team members and internal and external customers;

communicating;

working flexibly (taking on different roles in the team as necessary); and

cooperation with other team members.

Nortel Optoelectronics in Paignton, which in September 1994 adopted self-directed teamworking (SDWT) for all shopfloor employees, uses peer-group reviews.²⁰ Three times a year, each member of a SDWT undergoes a formal peer assessment. The introduction of peer reviews was the idea of shopfloor employees who were unhappy with the previous top-down appraisal process, especially the perceived inaccuracy of line managers' evaluation. The peer reviews assess individuals against seven criteria, including teamwork, attitude and ability. Team members evaluate each other in turn and the confidential ratings, which determine pay increases, are keyed into a computer database. Scores have to be justified and aggrieved individuals can complain to their manager if they think that the result is unfair. Both the company and team members view the system positively, believing it prevents the "blue-eyed boy syndrome" appearing.

The IRS survey of appraisal reported that the following companies use peer-group reviews as part of their formal means of assessment: engineering business Fisher-Rosemount; finance companies Lincoln and Lloyds TSB; Allied Distillers; Carlson Marketing Group; Glasgow-based Polaroid International Business Centre; and, in the public sector, Barnsley College, North Wiltshire District Council, Nottingham Trent University, Princess Royal Hospital NHS Trust.⁶

Problems and issues

Peer reviews suffer many of the problems associated with 360-degree feedback. Assessing and monitoring performance requires extensive time and effort of team members and can be bureaucratic. Peers may be reluctant to give a truthful assessment especially if financial rewards are dependent on their evaluation.

Disruption to team harmony is the likely outcome of one individual receiving a poor review. Aggrieved team members can often appeal to a higher authority, but this is likely to sour relations further. Although a degree of anonymity is present, people will often feel uncomfortable appraising close colleagues. When the reviews are collated there may be difficulties reaching a consensus. Validation of results is often required by someone outside the group to ensure fairness.

Upward appraisal

Upward appraisal has been described as a method of assessment that allows subordinates to review and comment on aspects of their superior's performance. The aim of upward appraisal is to give managers a view of their own performance from the perspective of their subordinates in order to improve their overall performance. As with 360-degree feedback, upward appraisal is normally carried out via a questionnaire with assessors asked to score their manager in terms of behavioural qualities, such as leadership, decision making and attitude to employee development. Alternatively, subordinates might simply be asked a series of questions that identify strengths and weaknesses. For example:

What is the most important aspect of my behaviour as a manager that you value?

What is the single most important thing you would like to see me change to improve my effectiveness as a manager?²¹

Mostly upward appraisal is geared towards collecting feedback that can be of benefit to the manager, so that development opportunities can be identified. Information is collected anonymously. Without guaranteed confidentiality most assessors would find it difficult to comment honestly on their manager.

Standard Life operates a form of upward feedback known as "reverse feedback" (see case study 4, Case studies). This involves the manager or individual talking to customers and colleagues before the contribution review - Standard Life refers to its performance management system as contribution management - and feeding the results into the interview. Initially introduced for the chief executive and direct reports, then cascaded to the next 40 top managers, and now covers all managers above supervisory level, the reverse feedback programme involves written reports. Managers appraised in this way do not have to show the reports to either their teams or superiors, although they are expected to include any obvious action points that come out of the process in their contribution plan for the following year.

Allied Dunbar Assurance, the financial services company, has operated a voluntary upward appraisal system for many years, although individuals must participate in order to attend a management development workshop.²² Managers "own" the process, seeking information from subordinates via a "management effectiveness questionnaire" to improve their performance.

Questionnaires reflect the company's core competencies and behavioural characteristics, and seek evidence of how well and how often the individual displays certain skills and qualities, and how important assessors believe these to be in the performance of the manager's job. Information is supplied anonymously and the findings remain confidential to the manager and immediate superior. Managers undergoing upward appraisal receive a short report detailing strengths, weaknesses and priority development needs.

At surgical suture manufacturer Ethicon, a subsidiary of Johnson & Johnson, "upward appraisal is done separately from the appraisal system and has a primarily developmental purpose. Envelopes are returned sealed to a collection assistant and contents processed by an external organisation."⁶ Multiple choice questionnaires, allowing the individual's name and handwriting to remain confidential, are used for upward appraisal by Bass Brewers, which also sends the results to be analysed by a third party.⁶

BP's use of upward appraisal covers team leaders. They receive feedback from their team on leadership practices and behaviour.¹² Confidential feedback is provided via a questionnaire rooted in the core competencies of the respective business unit. At the head office, this involves team members appraising leaders on 20 aspects of performance, including recognising and sharing success, effectively resolving conflicts and keeping team members well informed. Results are analysed by an external consultant and the team leader receives a written report detailing team members' views. The team leader shares the results with the rest of his or her team so that everyone has the opportunity to be involved in planning improvements.

Problems and issues

There is an assumption that upward appraisal of managers by subordinates produces a more reliable assessment than the traditional top-down approach. However, this rests on the belief that subordinates are willing and able to be honest in their assessments.

Upward appraisal is costly. More forms have to be processed and analysed, often by an external body, and the results presented to the appraisee. Managers will often need counselling and assistance in interpreting the results, and assessors need to develop the skills to be able to evaluate behaviour properly. Subordinates will also need to acquire a thorough understanding of the purpose of upward assessment. So again it is time consuming and bureaucratic.

An organisational culture that is based on honesty, openness and trust is the only one conducive to effective upward appraisal. Upward appraisal at BP was introduced to support changes in leadership behaviour, but the company believes it would not have worked in the "more secretive and controlling culture of the mid-1980s".¹²

Figure 4.1: Main problems with appraisal

System tries to do too many things - motivate people, improve performance through goal setting, assess performance, agree future development and determine reward - and, therefore, does not focus on any one effectively. The presence of pay, moreover, tends to dominate the proceedings, militating against honest discussion of performance failures. This in turn prevents any meaningful discussion about development needs.

Rarely accurate because it is often performed by someone who does not know the individual well enough to assess them adequately. Quite often managers do not have the time to observe all their subordinates during the course of the year. This results in evaluations that are based on impressions rather than observable facts and actions.

Top-down approach of appraisal prevents any meaningful increase in communication between superiors and subordinates.

Emphasis on past performance means that the process is viewed as judgmental and designed to apportion blame.

Most people are reticent about assessing the performance of others, for fear of the consequences.

Often performed badly because line managers have no ownership and resent a system that has been imposed on them.

If the process is tied to rewards or penalties, objectives are rarely stretching, as people will tend to verge on the side of caution and agree to goals that they are confident of achieving. This inhibits creativity and innovation.

Most people have a view of how they have performed and if the rating does not correspond to this they will have difficulty accepting the decision.

Appraisees resent a system that rates them for performance factors that are often outside their control. And evidence suggests that managers are not very good at distinguishing external factors that influence performance from personal factors.

Employees are often defensive when discussing their own performance, and for every negative example offer a positive counter-example. Thus the appraisal can lead to argument.

Process forces the individual to focus on his or her own achievements to the detriment of those of the team or the department. Ranking, for example, tends to lead to competition, while a poor rating can provoke conflict and is demotivating. Many managers, moreover, are reluctant to place staff at either end of the ratings scale, because this can lead to discontent.

Rating scales do not always adequately reflect differences in performance. Managers and staff may find it difficult, for example, to understand the difference between a three and four rating on a five-point rating scale.

Unreliable and inconsistent because it is based on the subjective views of one individual.

Bias and political considerations, such as a manager's desire to avoid conflict with his or her subordinates, often play a part in the overall assessment, which renders the evaluation meaningless. This may include exaggerating positive aspects and minimising the negative ones.

Once-a-year review means that recent events are likely to carry more weight in the assessment.

Annual nature of objective setting means that goals can quickly become obsolete.

Time-consuming and bureaucratic, with managers often giving too little time to the process.

Hierarchy is reinforced, offering very little in the way of employee empowerment.

Rarely takes the views of customers into account.

Often badly done, which can lead to demotivation, resistance and reduced organisational loyalty among staff.

Even the terminology - appraisal - has been criticised because it implies a "top-down process in which managers tell subordinates what they think of them". Quality guru W Edwards Deming is particularly critical of performance appraisal, explaining that:

"It leaves people bitter, crushed, bruised, battered, desolate, despondent, objected, feeling inferior, some even depressed, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior. It is unfair as it ascribes to the people in a group differences that may be caused totally by the system that they work in."²³

Inconsistency in performing appraisals is a major difficulty. A study of appraisal systems by Patrick McGovern and others reported wide variations in the operation of performance reviews by different line managers in the same organisation.²⁴ The research found variations in the frequency of appraisals, as well as in the actual conduct of the reviews. Some managers admitted to "going through the motions", and staff considered the system was unfair as a result, with many believing performance grades were allocated before the review meetings in order to tally with what could be afforded from the performance-related pay pot.

Figure 4.3: Guidance on performing appraisals

Michael Armstrong and Angela Baron recommend the appraiser adopts the following to ensure a constructive meeting:

encourage appraisees to do most of the talking

listen carefully to what they say

allow scope for reflection and analysis

analyse performance, not personality - concentrate on what appraisees have done, not the sort of people they are

keep the whole period under review, not concentrating on isolated or recent events

adopt a "no-surprises" approach - performance problems should have been identified and dealt with at the time they occurred

recognise achievements and reinforce strengths

end the meeting positively with agreed action plans and an understanding of how progress in implementing them will be reviewed

The Centre for Applied Microbiology and Research (CAMR) provides the following guidance for its assessors:

Guidance for assessors, grandparents and directors (not prescriptive, examples only)

Exceptional: Sustained high achievement in all elements of the job, seen continually to strive for success amidst obstacles.

Has there been exceptional performance over a sustained time period?

Have all outputs of the post been accomplished with additional areas?

Is performance truly exceptional?

Are all CAMR core competencies being met all the time?

What was the publication record (where applicable)?

Have all objectives been met to standards of cost, quality, safety and time?

Is there a high profile to the postholder's achievements within CAMR's corporate plan and business objectives?

Outstanding: Regularly and consistently exceeds job expectations by delivering superior job performance that is noticeable.

Performance must be consistently outstanding.

Have all outputs been achieved and has postholder handled difficulties and crisis with ease and professionalism?

Are the majority of CAMR core competencies being met?

What is the publication rate (where applicable or equivalent)?

Have the majority of objectives been met to standards of cost, quality, safety and time?

Has a significant and visible contribution been made to CAMR's business objectives?

Effective: Accomplishes the full range of the job demands in an efficient and capable manner.

Have the outputs of the post been achieved?

Is performance wholly satisfactory with no major shortcomings?

Are most objectives and outputs met with sound reasons for any change?

What tangible contribution has been made to CAMR's objectives and project objectives?

Is the postholder acknowledged to be effective in their day-to-day work?

Is continuous professional development and, where appropriate, publication of results being pursued?

Developing level 2

Almost effective in all parts of the post.

Meets objectives within supervisory limits.

Follows safety and quality properly and effectively.

Completed successfully initial skills training.

Approaching the effective rating in most skill behavioural competencies.

Developing level 1

Show promise in all aspects of job requirements.

Effective in learning and application.

Responds positively to guidance.

Serious about personal development.

Keen to apply knowledge and gain application in CAMR.

Poor performance

Significant lapses in effective performance in a range of areas.

Source: Centre for Applied Microbiology and Research

Source: Performance management: the new realities, Michael Armstrong and Angela Baron

Figure 4.4: Assessment techniques

Appraisal factors

The main objective of the appraisal is for all parties to agree on future actions needed to achieve agreed targets, taking into account past achievements, individual aspirations, strengths and weaknesses, identified action areas and measures needed for improved performance.

Begin in a friendly and positive way with praise and appreciation. Remember the good things the appraisee has done.

Ask questions without giving direct criticism (draw attention to employee's mistakes indirectly). The appraisee may already have recognised any problems and considered ways of overcoming them (help them to save face).

Encourage - make the fault seem easy to correct, but be firm.

Give the appraisee a good reputation to live up to. This will help to build their confidence and your relationship.

Be sympathetic to the appraisee's ideas and desires. This will help formulate future needs and objectives.

Appeal to the nobler motive. Help them to understand the company's need for improvements and the reason for objectives and targets.

Throw down a challenge. Most staff wish to succeed, and be given an opportunity to prove their worth.

Performance factors

The following is a summary of indicators. These are not exhaustive, or indeed may not be relevant to each individual, but are provided as a prompt for areas the appraiser may wish to cover within the interview.

Definition of performance factors

These factors should be graded in accordance with the definition of performance ratings.

Job knowledge

Does the employee -

have knowledge to do the job properly?

is he up to date with the latest developments in his field?

have any specialist knowledge?

do others seek advice from the appraisee?

Technical/commercial/specific skills

All employees utilise certain technical/commercial/specific skills -

The appraiser should assess how expert is the appraisee in the particular techniques of his role. What skills are needed to perform the duties and how good is the appraisee at these?

Quality of work

How accurate is the appraisee's work?

Is the presentation good and does it show an attention to detail?

Does it meet the relevant standards?

How often is it right first time?

Self organisation

Does the appraisee produce work or accounts on time?

Does the appraisee use his time in an efficient manner?

Is the appraisee punctual for appointments?

Does the appraisee plan his work/working day?

Commitment

Does the appraisee show enthusiasm and self motivation?

Is the appraisee willing to take responsibility with minimal direction?

Does the appraisee show initiative?

Does the appraisee show commitment to reaching goals through hard work?

Does the appraisee demonstrate a cooperative attitude?

Does the appraisee perform his duties with relish or reluctance?

Communication

The appraiser should consider both written and verbal communication when making his assessment.

Does the appraisee -

communicate frequently enough in a logical, concise and easy-to-understand fashion?

inform the right people in an appropriate manner, and at the right time?

communicate with people at all levels?

make valuable contributions to meetings?

give well-executed presentations?

produce good written reports?

Is the appraisee -

persuasive?

approachable?

easy to talk to and articulate?

Problem solving

Has the appraisee the ability to -

identify problems?

provide creative and effective solutions?

solve problems in a timely fashion?

evaluate situations quickly?

be an effective decision maker?

Teamwork

How well does the appraisee work with others to accomplish the goals of the job and the work groups?

Is the appraisee flexible and cooperative in his approach to working within a team?

Can the appraisee establish good working relationships with fellow employees within and outside the immediate work group?

Does the appraisee enhance the atmosphere of the workplace or detract from it?

Innovation

Does the appraisee come up with original ideas?

Are the appraisee's ideas realistic?

Can the appraisee adapt existing ideas?

To what degree are methods and policies continuously examined and suggestions made for new and better ones?

Does the appraisee show initiative?

Source: Mid Kent Holdings

¹ Competency & Emotional Intelligence, annual benchmarking survey 1999/00.

²     Performance management: the new realities, Michael Armstrong and Angela Baron (1998), Chartered Institute of Personnel and Development, London, ISBN 0 8529 2727 4.

³     SHL, 1997.

⁴     "Performance management", Managing Best Practice 52, Industrial Society, October 1998.

⁵     Personnel Management, June 1991.

⁶     "New ways to perform appraisal", IRS Employment Review 676, March 1999.

⁷     "Appraisal", Managing Best Practice 37, July 1997.

⁸     Staff appraisal scheme 2000, Community Development Foundation.

⁹     "Performance appraisal in an NHS hospital", Tom Redman, Ed Snape, David Thompson and Fanny Ka-ching Yan (2000), Human Resource Management Journal vol 10 (1), pp.48-62.

¹⁰    "NAAFI looks to the future", IRS Employment Review 678, April 1999.

¹¹    Performance appraisal - a negotiators' guide, Labour Research, London, December 1997.

¹²    Personal feedback: cases in point, Polly Kettley (1997), Institute for Employment Studies, report 326.

¹³    The power of feedback, Pilat, London (1998).

¹⁴    "A rounded view", IRS Employment Review 705, June 2000.

¹⁵    360-degree feedback: unguided missile or powerful weapon?, Ashridge Management Research Group (1994).

¹⁶    360Â° feedback: the global perspective, Towers Perrin, August 1998.

¹⁷    Beyond knowledge management: new ways to work and learn, Brian Hackett (2000), The Conference Board, report 1262-00-RR, ISBN 0 8237 0711 3.

¹⁸    Creating a knowledge-sharing culture: consortium benchmarking best practice report, American Productivity and Quality Centre (1999).

¹⁹    People Management, 1 October 1998.

²⁰    "Self-directed teamworking", IRS Management Review 7, October 1997.

²¹    Transforming the performance management process, Franklin Hartle (1997), Kogan Page, London, ISBN 0 7494 2478 8.

²²    "Allied Dunbar implements strategic HR response to new customer-driven market", IRS Employment Review 593, October 1995.

²³    Out of crisis: quality, productivity and competitive position, W E Deming (1986), Cambridge University Press.

²⁴    "Human resource management on the line", Patrick McGovern, Lynda Gratton, Philip Stiles, Veronica Hope-Hailey and Catherine Truss (1997), Human Resource Management Journal vol 7 (4), pp.12-29.

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