Page 156 - Psychological Management of Individual Performance

different purposes of performance appraisal 139
When designed carefully, a performance appraisal system provides well-defined
criteria for assessing an employee. The superiors are able to define the strengths and
weaknesses of the employee on the grounds of these criteria. They give the employee
feedback and agree with him/her on measures to develop his/her skills and competences
and to reach his/her goals. These arrangements do not only include training but also
advice for working habits and for being organized.
Of course a superior could manage these tasks even without an appraisal system.
But there are some clear advantages for supporting this process by the means of an
appraisal system: one of the most important advantages is the standardization of the
evaluation process and the feedback dialogue. Without a performance appraisal system
some superiors provide feedback to their employees and others do not, some do it
in a detailed manner and others make only a general statement about the employee’s
performance. Also, in all probability, superiors will assess different criteria according
to their preferences. Without a performance appraisal system, feedback—if feedback
takes place at all—depends much more on the personal potential of the superior to pass
assessment. Thus, one aim of a company for implementing a performance appraisal
system can be to standardize the process: the superiors have fixed dimensions which
they use to appraise. The appraisal is required regularly and can be controlled by the
personnel department. Giving feedback is a difficult task for many superiors and they
often try to avoid it. With a performance appraisal system the necessity of a feedback
dialogue is set by the system and the superiors can be trained based upon its standards.
Because the performance appraisal system offers a standardized appraisal, it can en-
sure comparability of the appraisals. As a consequence, it becomes easier for employees
to change to different business domains within a company. The aim of a company can be
to ensure an optimal deployment of their staff. Especially large international companies
try to build up skill databases of their employees. A successful and standardized perfor-
mance appraisal system is one prerequisite for such a database. But the comparability of
appraisals has to be regarded with care and can only be realized within a certain range.
We will refer to this when we discuss rating scales.
A performance appraisal system can also be used to support goal achievement. Some
companies implement goal setting together with the performance appraisal system. The
superior and the employee define goals for a certain period of time. These goals should
have certain criteria: they should be measurable, well defined, acceptable for the em-
ployeeandwithinreachandtimed.Ifthegoalsmeetthesecriteriaitcanbejudgedwhether
they are achieved or not. Assessment of goal achievement may also be a part in the per-
formance appraisal dialogue (see also Algera, Kleingeld, & van Tuijl in this volume).

PERFORMANCE APPRAISAL FOR SALARY DISTRIBUTION

A performance appraisal system can be used for salary adjustment. In addition to fixed
salaries, many companies offer their management staff a bonus or specific type of flexible
pay. This trend is increasing. This bonus is often related to individual performance. Thus,
performance appraisal is used to determine the amount of the flexible salary. In general
there are two possibilities to combine the compensation with the performance appraisal.
The first method is to define targets between superior and employee. If these targets
are achieved the employee will gain a certain bonus. In this case, the employees know
exactly which amount of money they can expect. The flexible part of the salary is