MANAGING

HUMAN CAPITAL

Student Name | Bao Quan Nguyen
Student ID | B0103HOHO0813

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Managing Human Capital
CONTENTS
ABSTRACT ............................................................................................................................................................... 3
INTRODUCTION ..................................................................................................................................................... 4
PERFORMANCE APPRAISAL ............................................................................................................................. 6
1. Literature Review .................................................................................................................................... 6
Definitions ...................................................................................................................................................... 6
Process of Performance Appraisal ........................................................................................................ 7
Purposes of Performance Appraisal ..................................................................................................... 8
What makes an Effective Performance Appraisal?......................................................................... 9
2. Methods of Performance Appraisal ............................................................................................... 10
Types of Judgment ................................................................................................................................... 11
Focus of the Measure .............................................................................................................................. 11
3. Critique on the Performance Appraisal ........................................................................................ 14
Authorianism ............................................................................................................................................. 14
Fairness ........................................................................................................................................................ 15
Raters errors .............................................................................................................................................. 15
Bias and Personal Prejudice ................................................................................................................. 17
Devolution ................................................................................................................................................... 17
PERFORMANCE MANAGEMENT .................................................................................................................. 18
1. What is Performance Management? .............................................................................................. 18
2. Performance Management vs. Performance Appraisals ........................................................ 19
3. Activities for Performance Management ..................................................................................... 21
Setting performance and development goals ................................................................................ 21
Providing ongoing feedback and recognition ................................................................................ 21

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Managing Human Capital
Managing employees development ................................................................................................... 23
Mid-year and year-end performance appraisals .......................................................................... 23
Building a climate of trust and empowerment ............................................................................. 23
4. 360-Degree Feedback.......................................................................................................................... 24
CONCLUSION ....................................................................................................................................................... 26
REFERENCES ....................................................................................................................................................... 28



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Managing Human Capital
ABSTRACT
For many decades, the performance appraisals have been an indispensable
component for organisations to evaluate the ability to perform of employees. However,
although there are many methods of performance appraisals that organisations can use to
rate the employees and big amount of investment for building a comprehensive appraisals
process, there are still a variety of shortcomings that avoid companies to have optimum
evaluation and for this reason, having an impact in employees motivation and development.
Performance management system a process that has been evolved from performance
appraisals appears to adapt with the managers requirement. This paper will be based on
the secondary research of existing literature to point out the critics regarding to the
performance appraisals and evaluate the development of performance appraisals into
performance management system. The main purpose of this paper is to help indicate the
improvements of performance management system to eliminate performance appraisals
disadvantages. Also, the employees should be taken part in designing and adopting the
performance management to ensure their goals will be aligned with the organisational
strategies.

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Managing Human Capital
INTRODUCTION
The rapid development of international business has made the world becoming much
more harsh for organizations to survive and develop. For this reason, companies and firms
have to own strategic capability - resources and competences needed for organizations to be
survived and flourish (Johnson, et al., 2007). Successful organization is the one which can
make strategic capability become its sustainable competitive advantage which is better
than other competitors at some aspects and can maintain the advantage in a length of time
(Noe, et al., 2011). Obviously, human resource a part of strategic capability and has played
an important role in organizations strategic management; in addition, human resource
management considers people as assets that are essential for organizations competitive
advantage and bringing human resource into line with the corporate strategy (Armstrong,
2009), forming a high-performance work system (Noe, et al., 2011). Below is the illustration
of strategic human resource management (HRM):

Figure 1. Strategic HRM (Noe, et al., 2011)
People not only establish and drive the organization; through the people, the whole
firms objectives are also set for staffs to target (Toppo & Prusty, 2012). For this reason, the
employees get the jobs and are required the tasks to be done to contribute for the common
objectives of the organization this can be called job performance (Stewart & Brown, 2011).
The process which can be used to measure the contribution of staffs is performance appraisal
(Stewart & Brown, 2011). The evaluation of employees performance helps to reveal the

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Managing Human Capital
contribution of the employees in the organisational objectives (Toppo & Prusty, 2012). The
performance appraisals can also help the organisations to measure employees behaviours,
traits and achievements. Hence, the performance appraisals not only be used in traditional
human resources process such as salary, layoffs or retention but they are also applied for the
employees development purposes. However, during the development of the modern
international business, the performance appraisals have shown a lot of shortcomings. One of
the most problem is the occurrence and increase of discrimination and bias due to the rapid
growth of globalization which leads to the diversity in workplace.
Therefore, performance management system was born as an evolution from
performance appraisals. Performance management takes a role in strategic HRM and is
considered as an important HRM process providing the basis for improving and developing
performance. Moreover, the most important aspect of performance management system is
that it encourages the continuous monitor toward employees, the engagement of employees
in review performance and reduce the impact of bias through goals-directed element.


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Managing Human Capital
PERFORMANCE APPRAISAL
1. LITERATURE REVIEW
Definitions
In the aspect of history, earliest usage of performance appraisal was in Industrial
Revolution; back to 1800s, it was used as a way to help controlling and enhancing the cotton
output of Scottish cotton mills worker that era was also the flourish time of bureaucratic
organization (Rubin, 2011). At that time, the mechanism of performance appraisal is
punishing employees who got the poor performance so they could be motivated to achieve
better outcomes (Kondrasuk, 2011). Overtime, the performance appraisal can now be simply
defined as an official interchange the details regarding to the performance in once or twice
per annual (Rowley & Jackson, 2011). As a result, proper appraisals apprise staffs having
good performance, their efforts in work are notified and acquaint employees who achieve
poor performance so they can amend ways of working to improve (Camardella, 2003).
At the modern business era, the performance appraisal system has evolved from the
conventional carrot and stick mindset to become more comprehensive and try to capture
all areas of employees contribution (Stewart & Brown, 2011); besides, performance
appraisal has been developed with a system of setting employees job expectations and tend
to engage employees more (Kondrasuk, 2011). As a result, Gomez-Mejia et al. (2012) stated
a comprehensive model about Performance Appraisal; in which, performance appraisal is
the inclusion of identification, measurement and management of human performance in
organization:
Identification: areas of contribution and work that the managers should look at
when measuring performance.
Measurement: making managerial judgments on employees performance. It is
important that organizations must keep consistency in measurement.
Management: not only a past-oriented activity to judge on employees
performance, the appraisal must take the future-oriented view to utilize the
potential of employees contribution toward organization.

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Process of Performance Appraisal
Regarding to Lussier and Hendon (2013), the process of performance appraisals
include of four steps:
1. Job analysis: firstly, the managers should know about what a job consists of in
order to evaluate employees performance.
2. Develop standards and measurements methods: the job analysis leads to the
job description (Rowley & Jackson, 2011). With the job description, both the
manager and employee would acknowledge about the job criteria. In this step, the
job criteria standards or the standards of acceptable behaviours would be
developed in order to make the assessment toward performance.
3. Continuous feedback with informal performance appraisal-coaching and
disciplining: aligning the employees efforts with the jobs standards should be a
continuous process (Dessler, 2012). Beside the formal performance appraisals
that happen once or twice per year, the employees would need regular unofficial
feedback so they can know how good or bad performance in their jobs at the
current state so the managers or leaders can take action immediately (Dessler,
2012).
4. Prepare for and carry out the formal performance appraisal: this step would
include the selection of appraiser (Boachie-Mensah & Seidu, 2012) and providing
formal performance review with the appraiser. In this step, a variety of
performance appraisals methods would be used to produce a comprehensive
result regarding to employees contribution.
During conducting the process, it is important to have a clear connection among the
organization objectives and mission with the process.


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Managing Human Capital
Purposes of Performance Appraisal
Employees performance appraisal is important and demands a significant amount of
investment in business time, energy and money (Davis, 2012). Most of the authors agree that
the two purposes of organizations to conduct the performance appraisal are administrative
and developmental uses (Gomez-Mejia, et al., 2012).
Administrative uses of appraisals are applied when they are basis for making
decision regarding to the employees daily work condition which is inclusive of
promotion, rewards, salary, benefits and even recognition programs; additionally,
the performance appraisals provide systematic judgments to back up those
information (McGregor, 1957). Moreover, managers also use the appraisal
information in order to decide the retention, contract termination in case the
employees show poor performance. Therefore, the administrative decisions can
have significant influence toward employees future careers and make the
managers feel itchy when receiving negative appraisal information which can lead
to the employee layoffs (Noe, et al., 2011).
Developmental purposes tend to tune up and improve the employees
performance and skills by providing the feedback, helping employees to conduct
personal development plan, offering internal departmental or cross-departmental
and job rotation training (Salleh, et al., 2013). This helps boost employees
confidence and morale level in daily routine and even the employees who
achieved the performance expectations can become more treasured when they
have chance to be heard and discussed about performance feedback (Noe, et al.,
2011). Appraisals should be used as a helpful tool for the purpose of career
planning and providing a chance to review employees career plans (Dessler,
2012).



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Regarding to Boachie-Mensah and Seidu (2012), two other purposes of performance
appraisals would be system maintenance and documentation. Performance appraisal can
help organisations to amend the common goals, referring to system maintenance uses.
Besides, documentation purposes are to achieve the legal demands by authenticating the
decisions regarding to HR aspect and leading to the corroboration of research on the
performance appraisals tools (Boachie-Mensah & Seidu, 2012).
Last but not least, Dessler (2012) also stated that performance appraisals also play a
central role in the whole process of performance management.
What makes an Effective Performance Appraisal?
In order to achieve the goals as well as the objectives that managers indicate for
organizations, the methods of measuring performance must be good (Noe, et al., 2011). An
accurate measurement of performance can help the employees know where they can
improve (Lussier & Hendon, 2013). There are criterion determine the effectiveness of the
performance appraisal:
Mission and objectives connection, fit with strategy: the managers always have to
make sure that performance management systems lead to the accomplishment the missions
and objectives of the organizations (Lussier & Hendon, 2013). In another hand, performance
measurement should target at achieving employees behaviours and attitudes that cope with
the organizations strategy, goals and culture (Noe, et al., 2011). The performance appraisals
a central part of performance management system would play an important role in
measuring whether employees are engaging in those behaviors.
Validity and reliability: since there are would be many areas that the employees can
contribute to the organizations, an effective performance appraisal should be valid which
is an accurate measure that measures the process that the managers really want to measure
(Lussier & Hendon, 2013). The measure also must be reliable, it means the measure must
keep its consistency in delivering the result and be conducted in the same way everytime it
is used.



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Managing Human Capital
Acceptability and feasibility: beside the validity and reliability, the performance
appraisal should be also acceptable and feasible for the one who must use it. Both the
appraisers and appraisees should feel that the measurement tools can evaluate
comprehensive the performance and major aspects of the job, that tool would be acceptable
and feasible.
Specific feedback: the performance measurement feedback form should be as much
detailed and specific as possible since it can help the employees acknowledge well the
expectations and clear indication of working methods to achieve them. Moreover, a specific
feedback also leads to the mutual benefit between organizations and employees: it can help
the organizations satisfy the objectives of supporting organization strategy and the
employees are developed (Noe, et al., 2011).
2. METHODS OF PERFORMANCE APPRAISAL
There are many approaches for managers to conduct performance appraisals;
organizations usually mix and combine different of approaches in order to design their own
unique method (Grote & Grote, 1996). Regarding to Gomez-Mejia et al. (2012) the most
common methods can be divided into two ways:
a. Types of Judgment
b. Focus of the Measure


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Managing Human Capital
Types of Judgment
Types of judgment are also mentioned as subjective performance measures which
are the measures that signify judgments made by raters (Stewart & Brown, 2011). There are
two types of judgment that the managers can make: relative judgment and absolute
judgment. Relative judgment requires the supervisors to make the comparison toward the
performance of employees who are in charge of the same jobs or tasks (Gomez-Mejia, et al.,
2012). The most simple approach of relative judgment is simple ranking which the
supervisors rank the employees regarding to the aspects of highest performers and poorest
performers (Noe, et al., 2011). A variation of this judgment can be called alternation ranking
method. In this method, the supervisors will work from a list of employees. First, the
supervisors will choose the best and the worst employees. After that, the remaining
employees will be rated as the second best, second worst, etc. alternatively until all of them
are rated.
The absolute judgments require the raters to make judgment based totally on the
performance standards. This type of judgment is also called forced distribution method in
which the raters place the preset portions of subordinates in performance categories
(Dessler, 2012).
Focus of the Measure
In the opposite of subjective performance measures, the objective performance
measures or the focus of the measure are the performance measures based on counts of
traits, behavioural and outcomes data (Stewart & Brown, 2011).
Trait appraisal instrument requires the managers to conduct the evaluation
regarding to the traits of the workers (Gomez-Mejia, et al., 2012). Traits help to identify the
physical and psychological characteristics of a person (Lussier & Hendon, 2013); the traits
can include of resourcefulness, enthusiasm, drive, application and even intelligence
(Torrington, et al., 2005). One of the typical instruments to rate the traits is graphic rating
scale. Graphic rating scale is a method for measuring performance by listing the traits of
employees and adding the rating scales for each of the trait (Noe, et al., 2011). Below is an
example of a graphic rating scale:

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Managing Human Capital

Figure 2. Graphic Rating Scale (Noe, et al., 2011)
Behavioural appraisal instruments place more emphasis on the assessment of
employees behaviours (Stewart & Brown, 2011). In this method, instead of listing the list of
traits and rating employees regarding to the list, the supervisors need to measure the
employees certain behaviours (Gomez-Mejia, et al., 2012). Two popular ways to appraise
the exhibited behaviours of employees are critical-incidents method and behaviourally
anchored rating scale (BARS). In the critical-incidents method, the supervisors will keep an
circumstantial records of employees work-related behaviours (Dessler, 2012) and review
those with employees in a periodic time. This method of performance measurement can help
to clarify the good or bad aspects of employees in behaviours.
The behaviourally anchored rating scale (BARS) is a rating technique that evaluates
the workers performance concerning to the job-related incidents (Daft, 2010) and combines
them with the quantitative ratings by anchoring a quantified scale with specific narrative
examples of good and poor performance (Dessler, 2012). The BARS scale will show various
levels of performance concerning to the employees behaviours.

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Figure 3. A sample of BARS to rate the performance and behaviours of a Sales
Manager
(Gomez-Mejia, et al., 2012)



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Managing Human Capital
Outcome appraisal instrument is an approach in which the managers will assess the
outcomes accomplished by the employees (Gomez-Mejia, et al., 2012). The typical method
for this instrument is management by objectives (MBO) a system in which the organisations
will set the goals, the process of these goals will flow from the top level to the bottom level
so to ensure that everybody in each level of the organisation can contribute to the overall
goals (Noe, et al., 2011). These goals will be used to rate employees performance.
3. CRITIQUE ON THE PERFORMANCE APPRAISAL
Obviously, the performance appraisal is important to the development and
performance measurement of the organizations; however, although there are many
approaches as well as methods in appraising the performance, the performance appraisal
still appears some limitations as well as challenges that can cause tremendous problems and
avoid organization to build an effective performance management system.
Authorianism
Performance appraisals process are often conducted as manager-centric: the raters
dominate the meeting when the employees must justify themselves and the raters play the
role of judgment (Davis, 2012). The matter is that how an organisation can build up and
maintain a supportive environment so that the employees can feel free to talk and give
feedback information in the performance appraisal process.
Moreover, most of methods in appraising the performance are past-oriented. Not only
that the appraisals do not help to change the behaviours or outcomes that already happened,
it also would require the raters to spend time and invest in collecting details to conduct a
comprehensive review and rating regarding to the employees; therefore, if supervisors are
not rewarded for the accurate ratings, they are not motivated to invest and carry out details
gather (Grund & Przemeck, 2012).


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Managing Human Capital
Fairness
The most important objective must be achieved for performance appraisal is fairness.
In fact, managers and supervisors still disregard the accuracy and honesty during the process
of appraising performance since they want to use this process for the political purpose (for
instance, the managers give good appraisal to employees so they dont get along with whom
leaving the organisations) (Dessler, 2012). Therefore, regarding to Dessler (2012), the
standards for employees performance evaluation must be clear and the employees should
be known that in which aspects and basis they are appraised.
Raters errors
These are the errors in performance appraisals that reveal consistent biases
regarding to the point of view of the raters (Gomez-Mejia, et al., 2012). Below are the the
typical errors that appear in the process of performance appraisals:
Halo error
The halo error here means that the general congeniality in rating process that
managers give to an employee can influence the assessment of the other aspects or fields
that the raters are conducting (Torrington, et al., 2005). Therefore, the raters may give a bad
review in all fields of traits toward an employee who shows an unfriendly attitude during
work (Dessler, 2012).
Distributional error
Raters may make distributional error when they have tendency to use a limited part
of rating scale (Noe, et al., 2011). The distributional error can be divided into three aspects:
leniency, strictness and central tendency (Lussier & Hendon, 2013). The leniency rating
occurs when raters tend to give easy or restricting ratings to the high result; the strictness
results when raters use the low portion of the rating scale and the central tendency arises
when raters make the average or middle point ratings (Gomez-Mejia, et al., 2012).



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Managing Human Capital
Recency error
This type of error occurs when raters emphasize too much on recent employees
behaviour and outcomes (it can happen when conducting the critical incidents method)
(Lussier & Hendon, 2013). In this case, an employee may show a good range of performance
during the whole period of performance review may have possibility of being appraised with
lower rating if the performance was not such high right before the ratings were conducted;
as a result, the raters may place emphasis on recent data because it is easier for them to recall
recent outcomes (Stewart & Brown, 2011).
Moreover, regarding to Lussier and Hendon (2013), there are some other types of
errors that can happen as well:
Similarity error
The similarity error happens when the raters consider that the employees who have
or share the similar traits or characteristics with them are the good employees; otherwise,
the employees who have the opposite or different traits can be evaluated as poor performers
Proximity error
This error occurs when raters tend to give similar marks to items that are near (or
proximate to) each other in the form of performance appraisal although that, in fact, they
show differences in measuring performance.
Contrast error
This error happens when the raters tend to compare and contrast the performance
between two employees instead of giving comprehensive performance measurement to
evaluate each of them (Becker & Miller, 2002). For example, a good performer can be rated
as below average employee when comparing him/here with an outstanding one.
Attribution error
The attribution error might occur when the supervisors observe a behaviour or
action of an employee and then make the subjective conclusion toward the performer. For
instance, when the rater observes the employee arguing with another one, the rater can
assume that employee is a poor performer with bad attitude.

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Managing Human Capital
Bias and Personal Prejudice
The bias happens when the ratees characteristics (age, sex, race) might have an
impact in the evaluation process although these characteristics do not have any concern to
the performance (Dessler, 2012). Raters tend to give lower rating points to employees who
belong to the minority group and high portion of points to employees who share the same
race with them such as white raters give higher evaluation to white employees and real
reasons behind the discrimination and bias regarding to the racial diversification still remain
unknown (Stewart & Brown, 2011). Additionally, the performance ratings can also be varied
between male and female raters tend to demean womens performance concerning to the
male-typical jobs (Dessler, 2012). Moreover, there still exist something so-called glass-
ceiling an invisible barrier that prevents minority and women develop themselves into top
management positions (Daft, 2010). Regarding to the sex, another sensitive issue should be
mentioned is about the homosexual employees in the workplace. The homosexual
employees can be discriminated and lose jobs; hence, gays and lesbians tend to fabricate
heterosexual identities to secure their careers and overcome the glass-ceiling (Daft, 2010).
The issue of bias can be developed into the prejudice and stereotyping. The prejudice
is the tendency to view the people who are heterogenous or different as being deficient (Daft,
2010) while stereotyping is classifying person into an affinity group and making an
assumption that the person also has the same characteristics with the others in that group.
In this case, the people who are homogenous or in a homogenous team can have a prejudice
or blame the different people and take advantage of the cultural difference to suggest that
the others cannot be better than us (Fish, 1999).
Devolution
In some organisations, the performance appraisals process is designed by Human
Resource department and the process will be used by the line managers for implementation
(Davis, 2012). Therefore, some line managers say that they do not have any support from HR
when they want to implement the process as well as they cannot give out their idea on
developing the form of performance appraisal to HR.

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PERFORMANCE MANAGEMENT
1. WHAT IS PERFORMANCE MANAGEMENT?
The ultimate objective of any performance appraisals system is heading to the
performance management (Gomez-Mejia, et al., 2012). Actually, the fact in some
organisations or corporates is that the employees always have to wait until the official
appraisal time which happens usually once or twice a year to be indicated if they are
performing good or bad (Dessler, 2012). Moreover, during the performance appraisals
process, there are high possibility of occurence of errors and problems as being stated above
and beside, both employees and raters might not be able to remember everything happening
throughout the year due to their selective memory (Mustapha & Daud, 2013). Therefore,
more and more employees as well as employers take part in more continuous approach to
the performance appraisal (Dessler, 2012). Additionally, there has been a shift away from
subjective evaluation on desirable traits towards a multi-characteristics or multi-traits
review of process behaviour and outcomes; furthermore, a collaborative approach to
establishing objectives and analysing requirement of development and training (Rowland &
Hall, 2012). As a result, performance management is a continuous, evolutionary and flexible
process that involves both managers and employees within a framework that sets out how
they can best work together and improve the performance overtime (Armstrong, 2009). In
another way, when Gomez-Mejia et al. (2012) mentioned a model of performance appraisal
in which includes of identification, measurement and management of human performance
in organization; Dessler (2012) emphasized that performance management is the continuous
process of identifying, measuring and developing the performance of employees and aligning
their performance with the organisations objectives. The performance management focuses
on future performance planning and improvement as well as personal development instead
of past-oriented performance appraisals (Armstrong, 2009).


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2. PERFORMANCE MANAGEMENT VS. PERFORMANCE APPRAISALS
Sometime it can be assumed that performance management is the same thing with
performance appraisal (Armstrong, 2009). However, there are still significant differences
between them. In actual workplace practice, Armstrong (2009) stated that the performance
appraisal is usually operated as a formal performance assessment or ratings after the review
and it is discredited since it has been conducted as a top-down and bureaucratic system
owned by HR department instead of line managers. Therefore, modern business
environment requires much more than that from performance appraisals. The performance
appraisals has been evolved into performance management. Regarding to Dessler (2012),
there are three main points that distinguish between performance management and
performance appraisal:
1. Instead of meeting employees in an official review sessions one or twice a year,
the performance management means there must be continuous, daily or weekly
interactions between the supervisors and performers to ensure the continuous
improvements.
2. The performance management is mainly the goals-directed.
3. Performance management means the continuously re-evaluating and if necessary,
modifying the ways of employees or teams use to get things done.
Additionally, apart from the conventional paper and pen (or even electronic) forms
in performance appraisals process, with the breakthrough advances in technology, the
application of high-technology devices or software in managing performance is necessary
and recommended since they would help managers or supervisors in direct and continuous
tracking of employees performance. One example for performance management software
system would be Cadena HRM Series (applied by large corporates such as InterContinental
Hotels Group Plc., Starwood Hotels & Resorts, etc.): a comprehensive and flexible system
which is mainly used for managing human resources within organisations. For instance, it
not only helps the managers to manage the daily routine, time attendance, payroll or
promotion of employees but also records the training process of each department to develop
the staffs.

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Managing Human Capital

Figure 4. Cadena HRM Series interface
(Source: http://cadena-hrmseries.com/Resources/Images/img_pr_2.jpg)
As a results, building up a comprehensive total performance management would help
the organisations to evolve the performance appraisals from a process in which the raters
dominate and are affected by the bias to become an interactive system the raters and the
employees can interact with each other so they can track the performance measurement
continuously.


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3. ACTIVITIES FOR PERFORMANCE MANAGEMENT
There are many approaches that would be used for performance management to
engage the employees in the process of performance management. Mone et al (2011)
summarized and suggested that there are five performance management activities. They
include:
Setting performance and development goals
Firstly, setting performance and development goals plays an essential role in the
process of performance management (Mone, et al., 2011). Additionally, this step means that
with the collaborative engagement of both supervisors and employees, the interaction
between them would be better. In this step, regarding to Dessler (2012), there are two
elements within setting the performance and development goals:
(1) Direction sharing which means the organisation communicates the goals and
objectives throughout the whole organisation and interpreting those goals into the doable
departmental, teams and individual goals.
(2) Goal alignment this means that the organisation should develop method that can
help the supervisors and employees to see and understand the relationship between
employee individual goals with the departmental and companys goals.
This activity is also a critical part in the outcome appraisal method management by
objective (MBO).
Providing ongoing feedback and recognition
Providing ongoing and effective feedback is another important component in
performance management, an ongoing feedback would help the employees to improve
performance and engage more in the performance management process (Mone, et al., 2011).
This activity also has two steps need to be done (Dessler, 2012):



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Managing Human Capital
(1) Ongoing performance monitoring this step includes of using the computerised
and electronic systems that measure the progress and performance measurement of
employees. Then, the managers will use the email or the system report forms to inform the
employees about their progress in performance. The computerised system supports the
managers in continuous observation and monitor so that they can immediately make the
implementation.
(2) Ongoing feedback the managers can make feedback and implementation face-
to-face with the employees or giving out the feedback comment through email. The feedback
here can be either positive or negative (Stewart & Brown, 2011). Also, regarding to Stewart
and Brown (2011), the positive feedback can bring the positive motivation toward the
employees while the negative feedback can have different impacts toward the employees:
either decrease the motivation of employees who perceive the negative feedback as criticism
or increase the motivation of employees who are confident in their abilities.

Figure 5. The effects of positive and negative feedback (Stewart & Brown, 2011)


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Managing Human Capital
Managing employees development
Through the ongoing and continuous monitor and feedback, the managers will have
an overview of how well or bad performance of the employees are. Then, the managers can
make the decision which training and coaching should be conducted to encourage the good
performance or to enhance the employees who have bad progress. A good performers can
be trained to broaden the types of tasks (job enlargement) or they can be authorized more
decision-making right (job enrichment) (Noe, et al., 2011). For both good and bad
performers, the job rotation or cross-departmental training which is a method to help
enlarging the job knowledge by moving employees through different jobs or departments
(Noe, et al., 2011) would be a useful way.
Mid-year and year-end performance appraisals
After that, the official mid-year and year-end performance appraisal would be
conducted with the methods mentioned in previous parts. One of the most important point
that Mone et al (2011) mentioned in conducting performance appraisal is that it can help
employees to perceive the fairness within the organization so fostering the engagement of
employees in performance management process.
Building a climate of trust and empowerment
Once the employees perceive the fairness in the organisation and trust their
managers, the can be empowered to do their job and being encouraged more in engaging the
performance management process (Mone, et al., 2011).


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4. 360-DEGREE FEEDBACK
Through the activities of performance management, the ongoing feedback plays an
important role because through that, the raters can help to design the training and coaching
programs for employees. Therefore, it is very important for the supervisors and managers
to collect and analyze the information and working details of the employees (Noe, et al.,
2011) because the issue of them is that managers and supervisors cannot have the complete
picture of their employees and they suffer from both contamination and deficiency (Stewart
& Brown, 2011). Contamination occurs when information that should not be included in
performance measurement is included while the deficiency is vice versa: information that
should be included in measuring performance is not included (Stewart & Brown, 2011).
Below is the graph shows the contamination and deficiency of a job performance measure:

Figure 6. Contamination and Deficiency in Performance Measurement
(Stewart & Brown, 2011)


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Managing Human Capital
Therefore, in order to get comprehensive and detailed information of employees,
organisations combine the information from all of possible sources include employees
manager, peers, subordinates, self and customers (Noe, et al., 2011). This method is called
360-degree feedback.
Regarding to Noe et al (2011), the use of managers as a source of information can
motivate them to produce the accurate feedback since their success depends much on their
subordinates. However, the shortcoming is that the manager may do not have all chance to
observe the employees during the job duties. In this case, a feedback from the employees co-
workers would be an excellent source of information since the colleagues would have the
chance to observe the employees whenever the managers cannot. The potential
disadvantage for the peer feedback is that the friendship and rivalries can affect the bias in
giving the evaluation.
In case the person being rated is a supervisor or manager, the information from their
subordinates can be obtained (Stewart & Brown, 2011). Moreover, another approach is self-
review from employees which is really effecting when being used to discuss with other
evaluation (Noe, et al., 2011).
Last but not least, the customer feedback (from survey when using the service, or
satisfaction rating through emails) would help the organisation in evaluating fairly the
employees performance (since the employees directly serve the customers) and improve
the customer service through human resources activities (Noe, et al., 2011).



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CONCLUSION
For many years, the performance appraisals has evolved from the traditional punish
and reward method in traditional work and labour into the ongoing process of evaluating
employee performance (Lussier & Hendon, 2013). The globalization, diversity and high
knowledge workers require the organisation to invest more in building up the performance
appraisals process which is nowadays not as simple as just looking into the amount of
outcome or number of products made by the employees. The process of performance
appraisals include of four steps: (1) job analysis, (2) develop standards and measurements
methods, (3) continuous feedback with informal performance appraisal-coaching and
disciplining, and (4) prepare for and carry out the formal performance appraisal. The
managers now use the performance appraisals not only to make the decision about salary,
promotion, retention or layoff; through performance appraisals, they also help the
employees to develop themselves or improve their performance. Thus, an effective
performance appraisal process must satisfy four aspects:
Fit with the strategy
Validity and reliability
Acceptability and feasibility
Specific feedback
There are also a variety of methods regarding to performance appraisals. They are
classified into two main groups: types of judgment and focus of the measure. The types of
judgment consist of relative and absolute judgment while the focus of the measure include
traits (graphic rating scale), behavioural (critical incidents, BARS), and outcome (MBO)
appraisals instrument. However, although there are many approaches of performance
appraisals, the performance appraisals still have the limitations which can create huge
impact in evaluating the employees. The raters can dominate the employees during the
performance review session; hence, the employees do not have chance to talk or express
their own thought; it can lead to the issue that the raters may not show the fairness in rating
the employees. Moreover, during the performance review, there are some errors may occur:
the supervisors can be so strict or lenient or even central tendency which lead to the

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Managing Human Capital
inaccurate rating. More seriously, the raters may show their bias and prejudice toward the
employees. Finally, the performance appraisals happen once or twice per year and most of
them are past-oriented sessions; hence, it can be a little bit late and outdated for supervisors
and managers to implement and improve the performance.
As a result, the performance appraisals has evolved into a next level of performance
management system which is a continuous process of identifying, measuring and
developing the performance of employees and aligning their performance with the
organisations objectives (Dessler, 2012) and become a part of it. The performance
management system has the three main improvements in comparison with the performance
appraisals:
(1) Performance management does mean that the interaction between employees
and raters will be continuously maybe daily or weekly instead of once or twice per year;
hence, the performance will be continuously improved.
(2) Performance management will be goals-directed, the top purpose would be
aligning the employees goals with organisations goals; thus, it can reduce the impact of
rating the unrelated traits or characteristics of employees which cause the bias and
prejudice.
(3) Encouraging the engagement of employees through the five interactive activities
of performance management: setting performance and development goals, providing
ongoing feedback and recognition, managing employees development, conducting mid-year
and year-end performance appraisals, building an environment of trust and empowerment.
However, in the ongoing feedback and recognition activity, the issue occurs when the
managers and supervisors have to collect and analyze the information to give out
comprehensive and accurate feedback as well as avoiding the contamination and deficiency
problems. Therefore, the 360-degree feedback a performance measurement which
combine the information from many sources consisting of managers, peers, subordinates,
self and customers can be a solution.



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Managing Human Capital
In conclusion, performance management system can help the organisations to
improve their employees performance continuously to help them achieve their goals and
through that the organisations can achieve the business target. Another mutual benefit is
that the engagement of the employees can help them enlarging the knowledge in jobs;
therefore, the organisations can make a retention of talent and develop employees with
leadership competencies.
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