Current issues and challenges

Sep 20 - 26, 2004





Performance appraisal has been one of the most debated management practices for several decades. It has generated a wide variety of viewpoints. The thrust of performance evaluation appraises employee's performance and concentrates on the entire spectrum of performance management and improvement strategies. These include employee performance improvement, performance development, and training, cross training, challenging assignments, 360-degree feedback and regular performance feedback. This article discusses different issues related with performance appraisal, such as organization culture, performance related pay, the assessment of performance, and the use of standards and gives recommendations to overcome these problems. In the end, results of a performance evaluation survey conducted.


The culture of the organization affects appraisal relationships to a great extent. The only possible way for organizations, to minimize the possible conflict among appraisal objectives, is to emphasize on climate setting that will facilitate achieving the objectives that an appraisal system intends to achieve. Thus what needs to be done is to encourage managerial styles that will lead to openness and frankness in relationships as a condition for establishing an effective performance appraisal system. Pakistani companies need to realize that the relationship between organization culture and performance appraisal system is a two-way process implying that they can successfully use their performance appraisal system to bring about cultural change.


Appraisal requires one person i.e. the appraiser to make an objective assessment of another person's performance. One of the major problems in appraisal is perception, and this is a fact that appraiser's personal perception tends to be a major influence on actual grades awarded. Appraisal is supposed to be objective and accurate; the reality is that when a manager evaluates people, he starts thinking about its impact on his relationship with the guy and his future in the organization. Many managers deliberately distort and manipulate appraisals for political purposes. The degree of openness and trust between manager and subordinate is a huge factor in determining the accuracy of the appraisal. How useful the appraisal process is will depend heavily on the commitment of top management, training, open discussions, and rewarding the efforts of managers to do effective appraisals

Another problem is that whereas most jobs are multi tasks, appraisers are frequently influenced by only or two critical aspects of the job. A common mistake made by most appraisers is that they tend to rate employees according to some recent significant achievement. Experience suggests that such a grading is likely not to be realistic. Yet another problem related to appraisers' judgment is similarity error i.e. giving people credit for behaviour they see in themselves. Last but not the least appraisers are known to fit the data. It means determining the grade to be awarded before the appraisal interview takes place. During the interview the appraiser 'fits' the data to the preconceived grade.

Various studies suggest that training should be given to appraisers and this should be an ongoing process not a matter for few hours. The training and retaining process needs constant debugging of the process in order to make the process of appraisal reflect reality than partial reality tinged with a good dose of fantasy.


Establish straightforward, honest criteria that tell people exactly what they must do to achieve particular results. Too often organizations fail to have criteria beyond the judgment of a manager. If they have criteria, they fail to share them with employees. Both of these make up a recipe for disaster. While organizations are unlikely to eliminate the judgment of the manager as part of the criteria mix anytime soon, the impact of his or her opinion should be minimized, where possible.


"Pay-for-performance" philosophy is a keystone of organizations' compensation system. Such a system requires solid grounding in a clear and documented link between performance and salary increases. Unfortunately, the link between individual performance and pay is frequently nonexistent "merit" pay is a hollow concept in this regard. Several factors get in the way of materialization of the pay for performance idea:



* First, the annual salary change based on performance is usually a small percentage and is thus insignificant for most employees.

* Budgetary constraints

* Managers appear unwilling to differentiate among their subordinates

* Finally, performance-related pay is only one element in the staff management system and cannot make up serious deficiencies elsewhere.

In order to overcome these problems an organization has to:

1) Review its current system (linking performance with reward systems)

2) Use of performance measurement tool that differentiates individual performance.

3) Exercise a decision-making tool designing a strategy that fits with business strategy.


A research team has conducted a survey in performance evaluation of 57 companies working in Pakistan and analyzed what is being practiced over here.

The result says that 65% companies are practicing performance evaluation formally whereas 31% are doing it informally and 8% have mentioned other ways of doing performance evaluation such as ICP.

Analysis also shows that 7 out of 19 i.e. only 36.8% companies having life of organization less than 10 years are using informal method of performance evaluation and are small or medium size organizations. Whereas out of the remaining 38 companies, which have age more than 10 years, 37 (97%) are using formal method for evaluating their employees.

Only 24% companies are using 360 Evaluation. Most companies are using Rating Method and Annual Confidential Report (ACR). Organizations have to go for 360 Evaluation as it gives more objective result to organizations than others methods of Evaluation.

Furthermore the survey asked a question from all the organizations regarding problems faced by them in performance evaluation. But only 7 organizations identify problems out of 57 companies and they mentioned following problems: Delegation of authority, evaluation by senior only, correct reporting and cross matching with objectives, communication problem, fixation of quota to evaluate your employee's performance or to give reward, a criterion for ranking is not specific and biasness.


Performance evaluation is intended to assess employees' performance and reward them according to it. It is also a very important tool for providing feedback to employees so that they can improve upon their performance. It is influenced, directly or indirectly, by several factors. The culture of an organization should support transparency, openness, and frankness in order to facilitate the process of performance evaluation. Some of the problems faced by Pakistani companies in carrying out performance evaluation are lack of 360 degrees feedback, need for standardization of performance measurement criteria, lack of employee involvement in the process, and personal biases of appraisers. To overcome these issues organizations have to review their whole system objectively and revamp performance evaluation strategy by laying down specific criteria that links with their business policy.