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The performance appraisal
Traditionally, the performance appraisal has been widely used as a method of evaluating employee performance, setting goals for future performance and identifying areas of professional development required by the individual (DeNisi and Pritchard, 2006; Manasa and Reddy, 2009). Typically, a formal appraisal process will be conducted for an employee at least twice a year.
DeNisi and Pritchard (2006) state:
The goal of the performance-management process is performance improvement, initially at the level of the individual employee, and ultimately at the level of the organization. The ultimate goal of performance appraisal should be to provide information that will best enable managers to improve employee performance. Thus, ideally, the performance appraisal provides information to help managers to manage in such a way that employee [and organizational] performance improves (p. 255).
Many traditional businesses also use the performance appraisal as a means of assessing employees' eligibility for performance-based pay and possible promotion opportunities (Cleveland et al., 1989; Landy and Farr, 1980).
Manasa and Reddy (2009) suggest that the goal of any performance- management system is to ensure alignment and effective management of all organizational resources in order to facilitate optimal performance. They add that the manner in which performance is managed in organizations is a key indicator of overall success or failure. As the individual is clearly an integral resource affecting organizational performance, it is essential that performance-appraisal processes are adequate and create value within the broader performance- management system (Muczyk and Gable, 1987).
There are a number of benefits associated with the effective use of performance appraisals, most notably improved communication between management and employees. Conversely, challenges such as employee dissatisfaction with the process and potential legal issues if implemented incorrectly have also been highlighted more recently (Schraeder et at., 2007; Manasa and Reddy, 2009). An additional challenge in relation to the performance-appraisal process is that a system that is deemed to be effective in one country or culture may not be as appropriate in another. Given the globalization and multinational operations associated with many modern organizations, this has also been noted as a challenge associated with performance appraisals (Hofstede, 2001). Furthermore, although academic research related to performance appraisals is well established, DeNisi and Pritchard (2006) argue that there is often disconnect between...