Performance management systems

  • A company executive speaks with a woman during a business meeting.

    A company executive speaks with a woman during a business meeting.

Performance appraisal has been around for a very long time.

The first reference in history goes back to the Wei Dynasty in China in the third century. An Imperial Rater graded the official household members. Back then a concern was expressed about subjectivity, a concern that is still with us. Siniew, a Chinese philosopher, was reputed to have said: “An imperial rater of nine grades seldom rates men according to their merits but always according to his likes and dislikes.”

When subjectivity is present, raters tend to give higher ratings than deserved to those they like and lower ones to those they dislike.

This is also known as bias. A major concern of human resources managers is to maintain objectivity in their performance appraisal systems.

The first industrial application of performance appraisal is said to have taken place in the cotton mills of New Lanark in Scotland during the Industrial Revolution. Colours rather than words were used to describe the worker’s performance. The first white collar application was designed by the editors of the Dublin Review who published a system to evaluate the effectiveness of the members of the Irish legislature in 1780.

Performance appraisal started to proliferate after the Second World War and it is now used in one form or another by most organisations in both the public and private sectors. Because it is used as a technique of management, it is particularly sensitive in educational institutions where the question of tenure arises.

A problem also arises in unionised environments where a person’s rating may not be used as a factor in determining his/her remuneration, potential for promotion, etc. Collective agreements negotiated by powerful unions may preclude the achievement of many of the objectives for which performance appraisal systems are set up.

Appraisals are usually conducted once a year by the person to whom one reports directly.

Organisations have many different types of systems to help them to be effective. These systems, of which performance appraisal is one, should have a direct link to the organisation’s mission statement.

A study conducted in the United States by Alan Locher and Kenneth Teel yielded the following uses of performance appraisal in organisations, in rank order:

— Compensation

— Performance Improvement

— Feedback

— Promotion

— Documentation

— Training

— Transfer

— Manpower Planning

— Discharge

— Research

— Layoff

In the United Kingdom a study was carried out by Gill to assess the purpose of performance appraisal schemes. The following is the rank under findings of 288 organisations:

To assess training needs, to improve current performance, to review past performance, to assess future potential, to assist career planning decisions, to set performance objectives and to assess salary increases.

Increasingly systems are being use for coaching, counselling and validation of selection techniques, to have a skills inventory data base, to keep job descriptions up to date, to ensure continued equity in pay scales and salary grading and to ensure compliance with human rights and employment equity legislation.

Numerous systems exist. The following are some samples: Management by objectives, criteria-based, critical incidents, traits, competencies, standards, 360º feedback

Paul Loftus, B.Comm., BA, MSc, FICB, is a leading authority on performance appraisal/management. He has spoken at numerous international conferences on the topic and is published widely in journals and magazines. For more information you can contact Mr Loftus on (514) 282-9111, e-mail or visit the website at

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Published Jun 26, 2012 at 8:14 am (Updated Jun 26, 2012 at 8:14 am)

Performance management systems

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