Critique the performance review process.

Question

What will be an ideal response?

Answer 1

There are issues related to performance appraisals that a leader needs to know
about. Some employees view the appraisal process as unfair and showing favoritism.
Others may fear the appraisal process and view it as punitive. There are perceptual
biases that may affect the rater’s ability to accurately rate follower performance (from
Chapter 5, major perceptual errors are primacy, recency, availability, contrast, and
halo). These errors have been shown by research to affect the performance rating
process. In addition, there may be a tendency for a rater to be too lenient (or too strict)
in their ratings. They might have a central tendency error in which they rate all
dimensions of performance as average (e.g., rating every dimension as 3 on a 5-point
scale). Cultural values such as power distance and collectivism may influence how a
rater assesses the performance of another person. Performance appraisals should be
supported by training for those making the ratings to avoid these errors and increase
sensitivity to the perspectives of employees from different cultural backgrounds.
These perceptual biases may be avoided by rewarding for results rather than behaviors.
For example, in profit-sharing plans, employee bonuses are based upon reaching a
financial target such as return on assets or net income. Stock options are a variation of
profit sharing where employees are given stock options as part of their compensation
package. Gain-sharing plans are another alternative, in which compensation is tied to
unit-level performance (e.g., the employees receive a percentage of the sales increase
or cost savings for efficiency improvements). These plans tend to increase
performance. However, the pay may be too variable for employees to rely solely on
these plans for their total compensation. Also, the focus on results may encourage
unethical behaviors to reach the targets.