Performance management is defined as the process of continuous communication and feedback between a manager and employee towards the achievement of organizational objectives. It includes formal, semi-formal, informal means or channels of communication like grapevines and gossips. Here are some problems with Performance Appraisal in a company.
Differences among Raters:
Differences among raters in their evaluations of performance leads to several errors. One is a dissimilarity in perception. Two raters observe an employee disagreeing with a supervisor. One perceives this negatively as insubordination. The other perceives it positively as a willingness to stand up for what one believes.
Different value systems can also play a part in how raters can disagree. One rater may feel that honest and ethical behaviour is paramount, no matter what the effect on profits. Another may have a bottom-line orientation that says any behaviour including the blatantly dishonest is permissible so long as it shows a profit.
Another kind of rater difference error is created if raters observe different aspects of behaviour. One rater sees the employee on the job where the individual feels comfortable and functions effectively. Another may see the individual only at the staff meetings where the employee is uncomfortable and does not show to best advantage.
Confusing Performance and Potential:
Many rating systems that are supposed to be evaluating performance fall into the trap of measuring potential as well. This is a serious mistake that can unfairly penalize employees as well as give credit where it is not deserved. Measurement of potential is often an important aspect of any appraisal system, but the organization and the raters and the rates involved need to be absolutely clear on the difference.
Performance appraisal methods either compare employees against one another or compare employees against a standard. Within these two types, there are numerous methods of appraisal. Some are simple such as straight ranking. Others are more complex, such as behavioral scales attempting to establish a success criterion by defining performance behaviors. Whatever may be the method, the rating procedure may become something like a game or contest.
Again, these methods lay emphasis on alikeness and conformity of human performance and ignore measurement of human values.