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Testing the effectiveness of Performance Appraisals

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Performance appraisal is one of the popular concepts among the multinational and local companies. The concept has been defined by DeVries et al., (1981) as the process which allows firms to measure and consequently evaluate an employee’s achievements and behavior over a certain period of time. The basic purpose of using performance appraisal techniques within an organization is to align the employee’s efforts with the overall objective of the firm.  


There has been a widespread discussion within the academic circles as to how to define performance (, 2006). Drawing upon Briscoe & Schuler (2004) performance can be viewed as a combination of several variables, such as motivation, ability, working conditions and expectations. It has been established that there are certain factors that affect employees’ performance more than others. These factors, according to Dowling et al (1999) include the compensation package; the nature of task; support from higher management; the working environment and the overall corporate culture. 


There are many advantages mentioned in the literature regarding the use of performance appraisals within an organization (, 2006). It has been suggested that it improves the communication between the higher to lower level management; identify areas of improvement; show employees training needs; help in promotion, retention and termination decisions; and means of managerial control (Fletcher, 1992). In order to take full advantage of the performance appraisals, the goal in designing such systems should be congruent to the overall aim and vision of the company. For instance, it is evident that there is a direct correlation between the performance of employees and their rewards as businesses do seek creation of wealth as their primary goal. Therefore one of the increasingly adopted uses of performance appraisals is to motivate employees to perform better by linking it with reward packages.


The concept and its uses can be further explained with the help of the example of Nokia.  Nokia has incorporated performance appraisals in its compensation plans for its employees. The company has adopted the philosophy of pay-for-performance and therefore measuring and gauging different performance indicators of each employee is essential to the company. Nokia is an innovative firm with a global matrix structure and a typical line management configuration at the country level. Therefore the performance appraisal system called ‘Investing in People’ has been designed as 360 degree feedback and electronic briefing sessions (Pollitt, 2004), which are perfectly aligned with the structure and overall aim of the company.   


It can be concluded from the discussion that valuable organizational objectives are served with the help of performance appraisals and organizations should use the technique by aligning the performance parameters with their overall mission and vision.




Briscoe, D. & Schuler, R. (2004), “International Human Resource Management” 2nd Ed., Routledge


Dowling et al (1999), “International Human Resource Management – Managing People in a Multinational Context” 3rd Ed., International Thomson Publishing


DeVries, D.L., Morrison, A.M., Shullman, S.L., Gerlach, M.L. (1981), “Performance Appraisal On The Line, Center for Creative Leadership”, Greensboro, NC


Fletcher, C. (1992), “Performance management: its nature and research base”, in Developing a Performance-oriented Culture (Eds), Association for Management Education and Development


Pollitt, D. (2004), “Nokia Connects HR Policy with Company Success”, Human Resource Management International Digest, Vol. 12 No. 6, p30-32


Papers For You (2006) "P/HR/244. Performance appraisal and 360 degree assessment", Available from [22/06/2006]


Papers For You (2006)  P/HR/208. Performance appraisal and employee feedback", Available from [21/06/2006]

C/B/686. Performance Management in Adult Mental Social Care Unit:

S/HR/143. Overview of Performance Management

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C/HR/157. Performance Management in Adult Mental Social Care Unit

C/HR/155. Performance Management – Literature Review

E/HR/84. Methods and benefits of performance management

E/HR/81. Is performance management merely a means for control?

S/HR/160. Role of motivation in organisational performance

S/HR/106. Which problems, commonly thought to undermine earlier approaches to performance appraisal, are upward appraisal techniques said to solve? How plausible are these claims?

E/HR/70. Appraisal system

E/HR/60. Performance appraisals

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P/HR/208. Performance appraisal and employee feedback

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P/HR/170. Theoretical background of performance appraisal

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P/HR/162. How to deal with poor employee performance?

P/HR/148. Report on performance management at Bass Brewers

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E/HR/13. Discussion of 360€ Appraisal in Theory vs in Practice

C/HR/44. Assessment and Evaluation of Performance Management and Appraisal Concepts and Various Techniques and Issues

S/HR/37. Critical analysis of Education and Library Board (ELB) Performance Management System

S/F/23. Skandia Navigator: Intellectual Capital (IC) Performance and the Financial Performance

C/HR/23. Literature review on Performance Appraisal

C/M/105. To design a communication and reporting procedure to monitor the activities and performance of you sales team who are geographically dispersed across the UK

S/HR/29. Employee Performance Measurement and Reward: A Discussion of the Various Issues and Techniques

C/HR/19. Performance Management and Appraisal

S/HR/28. Relationship between job satisfaction and self performance of employees.

C/F/45. How effective are budget targets as personal performance measures?

P/HR/74. Performance Related Pay (PRP)?

P/HR/15. How can one account for the increasing emergence of employee appraisal in recent years. Identify the relative validity and effectiveness of any two methods of performance appraisal.

P/HR/19. The purpose of performance appraisal, its implementation and its meaning in the organisational context.

P/HR/28. Performance Appraisal

P/HR/42. Performance appraisal

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