European Journal of Social Sciences – Volume 7, Number 3 (2009)

A New Framework for Selection of the Best Performance

Appraisal Method

Mostafa Jafari
Industrial Engineering Department, Iran University of Science & Technology
Narmak, Tehran, Iran
E-mail: mostafajafari2006@yahoo.com
Tel: +98-912-1382658

Atieh Bourouni
Industrial Engineering Department, Iran University of Science & Technology
Narmak, Tehran, Iran
E-mail: bourouni@ind.iust.ac.ir
Tel: +98-912-5007402

Roozbeh Hesam Amiri

Industrial Engineering Department, Iran University of Science & Technology
Narmak, Tehran, Iran
E-mail: amiri_r@ind.iust.ac.ir
Tel: +98-912-5356487; Fax: +98-21-88814576

Abstract
Performance appraisal is one of the most important processes in human resource
management, because it has a great effect on both the financial and program components of
any organization. There is a verity of methods for the appraisal of employees' performance.
Obviously, no method can claim that it has an integrated approach in performance
appraisal. Therefore, human resource managers should select an appraisal method which is
most efficient in their organizations. In this paper, we propose a framework for the
selection of appraisal methods and compare some performance appraisal methods in order
to facilitate the selection process for organizations. The value of this framework is that,
with use of it, organisations can evaluate their performance appraisal method with respect
to the key features of it before implementing any method as well as expending extra costs.
This framework is theoretical in nature, and is build based on a review of related literature.

Keywords: Human Resource Management, Absolute Standards, Relative Standards,

Objectives Approach, Simple Additive Weighting (SAW), Personnel
Psychology

1. Introduction
One of the basic and major needs in any organization is to evaluate its employee’s performance
contiguously and continually to find out whether they improve or not and know their situation in
organization. There are many methods for performance appraisal which are suitable for different
situations and organization’s characteristics. the major focus of enquiry for several authors (e.g.
Freeman, 2002; Seddon, 2001; Wilson and Western, 2000; Randell, 1994; Segall, 1989; Long, 1986)
has been examining why, in such a volatile environment, performance appraisal systems tend not to
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incorporate goals and the direction or strategic needs of the business, or the personal aspirations of the
employees and their future development. The HR strategies adopted by an organization (Harris, 1994)
may have an effect on the type of appraisal system adopted by an organization. The purpose of this
paper is to present a framework for performance appraisal comparison and show how organization can
use it. The purpose of this comparison can be summarized in two objects (Avison, 2006):
1. Academic purpose: for better understanding of nature of techniques in order to doing
classifications and improving coming knowledge mapping
2. Practical purpose: to select a technique or part of one or more techniques for specific
application or the whole of organization.
There are many successful (Pettijohn et al., 2001b; Roberts & Reed, 1996; Pettijohn et al.,
2001; Roberts, 2003; Shah & Murphy, 1995; Martey, 2002; Austin, 2008; Simmons, 2005; Ford, 2004;
Khoury, 2004; Grifell-Tatjé, 2008) and unsuccessful (Blackmore, 2005; Shih, 2005; McAdam, 2005)
cases because of suitable or unsuitable performance appraisal methods. In additional, Verbeeten (2008)
argued that the definition of clear and measurable goals is positively associated with quantity and
quality performance. The results suggest that the behavioral effects of performance management
practices are as important as the economic effects in organizations.
In this paper, in order to select an appropriate appraisal method, the Simple Additive Weighting
(SAW) is used. This method has been described in literature (Ching-Lai, 1981; Kwangsun, 1981; Fiala
et al., 1997; Tyc et al., 2004; Azar, 2000; Smith, 2006; Hwang and Yoon, 1981; Zavadskas and
Kaklauskas, 1996; Balcomb and Curtner, 2000; Triantaphyllou, 2000).

2. Review of Literature
2.1. Performance Appraisal
Employees want to know how well they perform on their jobs. A simple statement, almost axiomatic in
any organization, yet it has probably caused more controversy, applied research and practical advice
than any other assertion in the history of management writing and thinking (Kavanagh, 1997).
Performance appraisal has many definitions. “Performance appraisal” is a process within the
overall performance management process (Dowling et al., 1999), and is defined as “the evaluation of
an individual’s work performance in order to arrive at objective personnel decisions” (Robbins et al.,
2000).

2.1.1. Performance Appraisal Purpose

Taylor and Wherry (1951) proposed that ratings collected for administrative purposes would be more
lenient than ratings collected for research or developmental purposes. Over the last few years, there are
no new empirical works which have been conducted (Greguras et al., 2003; Harris et al., 1995) but a
useful review of it has been written (Jawahar & Williams, 1997). While the majority of the research on
performance appraisal purpose has focused on the rater, some work has also been conducted on rater
effects (Boswell & Boudreau, 2000, 2002).
There are numerous methods to measure employee’s performance appraisal but some of these
methods are not suitable in some cases. Effective appraisal systems should address clarity, openness,
and fairness; recognize productivity through rewards; and be cognizant of appraiser leadership qualities
(Winston & Creamer, 1997).

2.2. Performance Appraisal Methods

Decenzo and Robbins (1998) denominate that there are three existent approaches for measuring
performance appraisal. These are (1) absolute standards (2) relative standards and (3) objectives.

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2.2.1. Absolute Standards

One group of appraisal methods use absolute standard. This means that employees compare to a
standard, and their evaluation is independent of any other employee in a week group (Dessler, 2000).
Included in this group are the following methods: the essay appraisal, the critical incident appraisal, the
checklist, the graphic rating scale, forced choice and behaviorally anchored rating scales.
The essay appraisal: It is the simplest evaluating method in which evaluator writes an
explanation about employee’s strength and weakness points, previous performance, positional and
suggestion for his (her) improvement at the end of evaluation term. This kind of evaluations usually
includes some parts of other systems to cause their flexibility. This method often combines with other
methods. In essay appraisal, we attempt to focus on behaviors (Mondy, 2008).
The critical incident appraisal: It focuses on key factors which make difference in performing a
job efficiently. This method is more credible because it is more related to job and based on individual’s
performance than characteristic. The necessity of this system is to try to measure individuals’
performance in term of incidents and special episodes which take place in job performance. These
incidents are known as critical incident. In this method, the manager writes down the positive and
negative individuals’ performance behavior in evaluation term (Mondy, 2008).
The checklist: In this method, the evaluator has a list of situations and statements and compares
it with employees. The checklist is a presentation of employee’s characteristics and performance. The
results can be quantitative and give weight to characteristics. Answers of checklist are often “Yes” or
“No” (Decenzo, 2002).
The graphic rating scale: This is the most commonly used method of performance appraisal
because they are less time-consuming to develop and administer and allow for quantitative analysis and
comparison. It is a scale that lists some characteristics and rang of performance of each individual.
Therefore, employees are ranked by determining a score which shows their performance level. The
utility of this technique can be enhanced by using it in conjunction with the essay appraisal technique
(Mondy, 2008).
Forced choice: This method evolved after a great deal of research conducted for the military
services during World War II. It is a method in which the evaluator should rank individual work
behavior between two or more states. Each state may be favorable or unfavorable. The activity of
evaluator is to determine which state has an explanation of employee most (Mondy, 2008).
Behaviorally anchored rating scales (BARS): This method replaces traditional numerical
anchors tools with behavioral prototypes of real work behaviors. BARS lets evaluator to rank
employee based on observable behavioral dimension. The elements of this method are result of
combination of major elements of critical incident and adjective rating scale appraisal methods (Wiese,
1998). BARS has five stages (Decenzo, 2002): 1) Generate Critical Incidents, 2) Develop performance
dimensions, 3) Relocate incidents, 4) Rating of level of performance for each incident and 5)
Development of the final instrument.

2.2.2. Relative Standards

In the second general category of appraisal methods, individuals are compared against other
individuals. These methods are relative standards rather than absolute measuring device. The most
popular of the relative method are group order ranking, individual ranking and paired comparison.
Group order ranking: In this method, employees are placed into a particular classification, such
as “top one-fifth”. For example, if a rater has 20 employees, only 4 can be in the top fifth and 4 must
be relegated to the bottom fifth (Decenzo, 2002).
Individual ranking: In this type of appraisal, individuals are ranked from highest to lowest. It is
assumed that the difference between the first and second employee is equal to difference between 21st
and 22nd employee. In this method, the manager compares each person with others than work standards
(Dessler, 2000).

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Paired comparison: In this method, employees are compared with all others in pairs. The
N ⋅ (N − 1)
number of comparison is followed as in which N shows the number of employees. After
2
doing all comparisons, the best person is determined for each characteristic (Mondy, 2008).

2.2.3. Objectives
The third approach to appraisal makes use of objectives. Employees are evaluated on how well they
accomplished a specific set of objectives that have been determined to be critical in the successful
completion of their job. This approach is frequently referred to as Management by Objectives (MBO).
Management by objectives is a process that converts organizational objectives in to individual
objectives. It consists of four steps (Ingham, 1995): goal setting, action planning, self-control and
periodic reviews.

2.2.4. 360 Degree Feedback Appraisal

360 degree evaluations are the latest approach to evaluating performance. It is a popular performance
appraisal method that involves evaluation input from multiple levels within the firm as well as external
sources. There are numerous authors who propose definitions of the 360 degree feedback process.
“Feedback from multiple sources or ‘360 degree feedback’ is a performance appraisal approach that
relies on the input of an employee’s superiors, colleagues, subordinates, sometimes customers,
suppliers and/or spouses” (Yukl and Lepsinger, 1995). In a special edition of Human Resource
Management on 360 degree feedback, Tornow (1993) observes that in 360 degree feedback
programmes, feedback about a target individual is solicited from significant others using a standardized
instrument. Jones and Bearley (1996) refer to 360 degree feedback as the practice of gathering and
processing multi-rater assessments on individuals and feeding back the results to the recipients.
Hoffman (1995) explains that 360 degree feedback is an approach that gathers behavioral observations
from many layers within the organization and includes self-assessment.
The 360-degree evaluation can help one person be rated from different sides, different people
which can give the wider prospective of the employee’s competencies (Shrestha, 2007). It has been
used for human resource development, appraisal and pay decisions (Armstrong, 1998; Stone, 2002).

3. The comparison of Performance Appraisal Methods

As mentioned above, each method has advantages and disadvantages which make appraisal method
more precise and candid by using of several methods. In order to decision making and determining the
best appraisal method, a question should be answered: “The best for what?”
It means that the appraisal method should be achieve to which goal or measure which
performance? Therefore the manager should determine organization’s goals, objectives and
expectations of performance appraisal. Performance appraisal objectives are usually evaluating and
nurturing. On the other hand, an effective appraisal method should be reliable, trustworthy and free of
error. Moreover, it can be able to compare employees between them and organization’s parts.
In our comparison framework, we have seven important criteria which are upheld by experts.
These are Training needs evaluation, Coincidence with institutes, Excite staff to be better, Ability to
compare, Cost of method and Being free of error.
Training needs evaluation: this criterion determines that the appraisal method has the ability to
distinguish staff’s training needs.
Coincidence with institutes: this criterion determines that a method can coincidence itself with
organization’s institutes or not.
Excite staff to be better: this criterion focuses on employees, their motivation, creating
feedback and assist to human resource planning.

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Ability to compare: whenever an organization wants to make decision about preferment,

eviction, privation, wage and payment and displacing, it should evaluate its employees; compare them
and organization’s parts. Therefore an appraisal method should have the ability to compare staffs.
Cost of method: it contains cost of procurement, codifying and implementation cost of method.
Being free of error: halos effect, leniency, severity and attribution bias.
In table 1, the defined appraisal methods were compared in some cases which can be important
to selection.

Table 1: Performance appraisal methods' comparison

The essay

incident
critical
The

checklist
The
rating
graphic
The

choice
Forced

BARS

Ranking

MBO

Feedback
360 Degree
Methods
Criteria

Training needs evaluation B A A B C A C A A

Coincidence with institutes B A A A C A C A B
Excite staff to be better C B B C C B C B A
Ability to compare C C C B B B A A A
Cost of method A B C A C C A C B
Free of error C C B C B B A B A
A- High B- Average C- Low

4. A Procedure for the Selection of the Best Appraisal Method

Our matrix is extracted from table 1 which A is replaced by 3, B with 2 and C with 1.
A1 A2 A3 A4 A5 A6 A7 A8 A9
X 1 ⎛2 3 3 2 1 3 1 3 3⎞
X 2 ⎜⎜ 2 3 3 3 1 3 1 3 2⎟
⎟
X 3 ⎜1 2 2 1 1 2 1 2 3⎟
⎜ ⎟
X 4 ⎜1 1 1 2 2 2 3 3 3⎟
X 5 ⎜3 2 1 3 1 1 3 1 2⎟
⎜ ⎟
X 6 ⎜⎝ 1 1 2 1 2 2 3 2 3 ⎟⎠
At first, the scores are normalized (converted) by Linear Scale Transformation which is done
by following formulas:
x ij x min
Benefit : rij = max , Cost : rij = i
xi x ij
Therefore, our normalized matrix becomes:
A1 A 2 A 3 A 4 A 5 A 6 A 7 A8 A9
X 1 ⎛ 0.67 1 1 0.67 0.33 1 0.33 1 1 ⎞
⎜
X 2 ⎜ 0.67 ⎟
1 1 1 0.33 1 0.33 1 0.67 ⎟
X 3 ⎜ 0.33 0.67 0.67 0.33 0.33 0.67 0.33 0.67 1 ⎟
⎜ ⎟
X 4 ⎜ 0.33 0.33 0.33 0.67 0.67 0.67 1 1 1 ⎟
X 5 ⎜ 0.33 0.5 1 0.33 1 1 0.33 1 0.5 ⎟
⎜⎜ ⎟
X 6 ⎝ 0.33 0.33 0.67 0.33 0.67 0.67 1 0.67 1 ⎟⎠

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To define normalized weight of each criterion, multiple linear regression was introduced to
define the straight rank of each criterion, then the resulted ranks were involved in the following
formula:
n − rj + 1
wj = n
∑ (n − rk + 1)
k =1
th
Where w j is the normalized weight for the j criterion, n is the number of criteria under
consideration and r j is the rank position of the criterion.
In table 2, we can see criteria, their rank, weight and their w j

Table 2: Rank, weight and wj of each criterion

Criteria Rank ( r j ) Weight ( n − r j + 1) wj

Training needs evaluation 4 3 0.14
Coincidence with institutes 6 1 0.05
Excite staff to be better 5 2 0.1
Ability to compare 1 6 0.29
Cost of method 2 5 0.24
Free of error 3 4 0.19

The ranking results were shown in table 3:

Table 3: Final result of SAW analysis

Methods Methods’ grades

A8 (MBO) 0.91
A9 (360 Degree Feedback) 0.87
A6 (BARS) 0.82
A3 (The checklist) 0.72
A5 (Forced choice), A7 (Ranking) 0.66
A2 (The critical incident) 0.54
A4 (The graphic rating scale) 0.51
A1 (The essay) 0.4

As shown above, in this example MBO method is in the top of the list, therefore MBO is the
best method to apply in putative organization as a performance appraisal method. After that, 360
degree feedback, BARS and checklist are the most suitable methods for appraisal. Forced choice
method and Ranking, include group order ranking, individual ranking and paired comparison, are
indifferent. It means that if the human resource manager uses each of them for their employees’
performance appraisal, his (or her) consent will be the same. The critical incident, the graphic rating
scale and the essay are the worst method to use. They are not even in the mean.

5. Conclusion
A part of human resource management is performance appraisal to improve corporate performance, all
the while harming the targeted individuals and even undermining the commitment and energy of the
survivors. Developing clear, realistic performance standards can also reduce communication problems
in performance appraisal feedback among managers, supervisors, and employees.
Proposed framework is based on six factors which are training needs evaluation, coincidence
with institutes, excite staff to be better, ability to compare, cost of method, and free of error.

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Along with this selection framework, a comparison of methods is represented with attention to
the key features of each performance appraisal method. These features play an important role in
successful appraisal of employees. The represented framework helps human resource managers to
select their suitable method with attention to methods’ features and apply it in organization and be sure
of doing appraisal successfully.

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