Use of Performance Appraisals as a Reward System

Performance appraisal has been described as the process whereby the relative worth of an employee in a particular company is evaluated. It involves measurement of an employee’s work behaviors, comparing them to already established standards and communicating the results back to the employee. Performance appraisals were instituted as a means of income justification i.e. they were used to decide if an employee deserved to be paid a given wage amount (Lawrie, 1990).

This application of performance appraisals has continued until now but many arguments have been raised on its usage particularly as a means to justify pay increases or cuts. Personally, I believe performance appraisals to be an integral part of an organization operation and that its advantages outweigh any disadvantages perceived.

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In the past, performance appraisals were only used as a remuneration tool whereby it was assumed that a rise or a cut in pay was the only motivation employees needed to improve their work. This view however changed after numerous researches proved that the traditional system often failed since salary levels was not the only element that determined employee performance (Locher & Teel, 1977).

The modern performance appraisal system is aimed at identifying an employee’s strengths and weaknesses as well as determining ways of improvement and subsequent skills development. The performance appraisals are also used to determine reward outcomes whereby bonuses, promotions and pay increases are allocated to employees who are judged to have performed above a given level.

The main purpose of a given company is to generate profits and thus employee management is a very important aspect. One of the most important features involved in employee management is the performance appraisal system. When correctly used, it serves as a tool for identifying and fixing problems facing the employees. Non-productive members in the organization can also be identified and appropriate measures taken either through training or dismissal.

Performance appraisals should inherently be associated with reward outcomes. It is essential for organizations to distribute rewards in an open and fair manner whereby those most deserving in regards to merit and results are identified and justly rewarded. The performance appraisal system is the only process available that can be applied to achieve a rewarding system that is fair and consistent.

Apart from this performance appraisal also offer other advantages when used as a pay-increase system. Employees generally expect to be rewarded when they perform better and tend to distrust the management if they feel someone who is less deserving has received a reward (Lawrie, 1990). This can be easily solved using a performance-based pay increase system. Secondly, this system allows for financial planning.

Time and time again, companies face financial difficulties and thus it is very hard to distribute what little is available among the workers. With a performance appraisal system geared on pay increase, the company can isolate those individuals who really deserve an increase from the rest.

However, many critics have pointed out that this system is flawed without any way to perfect it (Derven, 1990). Many have pointed out that this system damages trust between managers and employees in the workplace thus undermining harmony in the workplace. The performance appraisal system is usually done by the managers who are given the task of being the judge and the jury. The employee in this case becomes the defendant trying to defend their performance levels to a work mate. If negative feedback is provided an employee becomes disgruntled and the communication system between the employees and the management team begins to suffer (Heathfield, 2009).

Another argument against the use of the system for pay increases or cuts is that it limits an employee from performing at his/her personal best. Once an employee receives a feedback that he does not believe to be fair, he becomes defensive and his work begins to suffer as he believes the manager is against him and that there is no need for him to apply himself (Derven, 1990).

In conclusion, a performance appraisal system that is used to determine pay increase has its flaws but is indispensable to any particular organization. Since no alternative way to fairly judge who merits a pay increase and who does not, this system cannot be neglected. If a well structured appraisal system does not exist in a company, people will informally and arbitrary judge each other’s work performance creating more problems in the organization.

Derven, M.G. (1990). The paradox of performance appraisals Personnel Journal, 69(4), 107-111.

Heathfield, S.M. (2009). Performance Appraisals Don`t Work. Retrieved from
http://humanresources.about.com/od/performanceevals/a/perf_appraisal.htm

Lawrie, J. (1990). Prepare for a performance appraisal. Personnel Journal, 69(2), 132-136.

Locher, A.H., & Teel, K.S. (1977). Performance appraisal – a survey of current practices, Personnel Journal, 56(5), 245-257

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