Deming’s observations on performance management
Introduction
Merit rating is a method in which an employee’s performance is measured, documented, evaluated and used for promoting, demoting, imparting a bonus or deciding whether to retain an employee or not. Merit rating is mostly done by the immediate manager or supervisor of an employee, however, this is not always the case, as sometime peer reviews are also factored in calculating merit ratings (Muchinsky 2006). While merit rating and performance appraisals have been used widely since the middle of the last century and their use has consistently increased, they have been increased on various accounts as well. The primary concerns regarding merit rating have been laid out in the quotation from Edwards Deming’s work. While most scholars accept the positive effect that merit rating has on short term performance, there are areas where the effect of merit rating is vague and contested. These areas include long-term planning, teamwork, internal organizational politics, and the mental health of workers. In this report, the effect of the merit rating on the above mentioned areas of organizational and employee management will be surveyed, and the second part of the report, will document the managerial practices and tools employed to tackle these negative consequences.
Assessing reactions to merit rating system
Most of the research work done on the positive and negative effects of the merit rating system are measured by looking at the reactions employees to it. The most frequently gauged by variable in such research work was the employee satisfaction with the merit rating (Cawley et al. 1998). This is primarily because of the relationship of between employee satisfaction with the appraisal system with other important work-related outcomes including motivation, commitment to the company, drive to improve and average level of productivity. Within the variable of satisfaction with performance rating, two further forms of employee satisfaction have been differentiated: satisfaction with the system for appraisal in place, and satisfaction with the appraisal provided to the employee. The result so being satisfied with either of these is almost identical, in the context of work-related outcomes (Cawley et al. 1998).
Positive impact and importance of merit rating system
The positive impact of merit-rating on short term performance has been proven in various studies. On the other hand, it also has been shown in research that such performance appraisals also help, both employers and employees, in achieving strategic objectives by defining short term goals and communicating them with in the organization. The merit rating system, much like any performance appraisal system, provides the organization with the ability to communicate feedback and make sure that employees are developing skills that are need to tackle challenges required to fulfill the organization’s goals and aims (Bacal 2004). However, it is important to remember the nuance within these studies – which states that the presence of merit rating system would help only if it is implemented in a coherent manner, where the ratings and appraisal are given in an interactional way rather than in a simplistic top-down manner. The simplistic top-down manner, could be further defined as a way of providing feedback where the manager (the person providing feedback) is communicated is his performance rating, and is not allowed to or encouraged to discuss the reasons for the performance rating with the employees (Lawler 1994).
Even with all the negative consequences that come with it, performance appraisal and merit rating systems are considered integral for any organization. The successful implementation and handling of the merit rating system encourages development of professional and personal skills in employees and also causes an increase in the employee’s level of motivation. Perhaps, the most important role played by merit rating system is that it works as a tool that creates a link between an employee’s basic skills and the organization’s goals (Fletcher 2001).
Negative consequences of merit rating system
The negative consequences of performance rating, whether it is provided in an interactional or a top-down manner, have been investigated by various researchers as well. Lawler (1994) found that the conflicts arising between the manager and the employees, as a result of the merit rating, were often long lasting. The employees often get disillusioned with the merit ratings and consider the system as inherently unfair. This leads to dissatisfaction towards the merit rating and also to reject the merit rating system altogether (Elicker et al. 2006). The merit rating – even when accompanied with detailed reviews fails to change the way people work or improve their performance and does not lead to personal growth or development (Keeping and Levy 2000). The dissatisfaction with the existing merit rating and performance appraisal systems is clearly shown by the survey results, one of which interviewed 50,000 employees working in various organization and receiving merit ratings. The survey results showed that only 13% of the employees and the managers were satisfied with the merit rating system, while only 6% of the C-suite executives were happy with it (Posthuma and Campion 2008).
However, the above-mentioned goals of the performance appraisal and merit rating system are only going to be achieved, if the managers and the executives manage to engage employees in the process and make them satisfied with the performance rating system. Unsatisfied and unengaged employees are bound to see the process as unhelpful, and research ahs clearly shown that employees, who are satisfied and engaged with the process find it to be helpful and also show motivation to improve their performance, even when they receive merit rating lower than most of their colleagues (Burke et al. 1978). Similarly, an employee’s satisfaction with the performance appraisal system in place in an organisation, is positively related to and linked with job satisfaction, commitment with the organization and intention to stay at the job (Brown et al. 2010).
Strategies to tackle negative consequences of merit rating
Strategies relating to organizational justice
Researchers, managers and organizations have looked into and applied multiple strategies to counter the negative effects that come along with merit rating. An important approach that has been suggested by the researchers is that of the organizational justice approach. This approach focuses on making the appraisal system more ethically and morally robust and is presented in terms of justice and fairness (Adam 1963). Within the organizational justice approach, there are further two major approaches: one leaning on distributive justice and the other one using procedural justice approach. The distributive justice looks at the work that has been done and ties the rewards with the quantity of work done with little effect coming from the quality of the work. This approach has been employed and been more successful in companies and with employees, which have most of the work that does not require novel approaches but is rather considered repetitive and mechanical (Greenberg 1986). While the procedural justice approach gives more importance to the procedures that are in place and considers following elaborately laid out procedures for reward and appraisal as the integral component of evaluation. This leads to managers and supervisors having little individual level input and control over the appraisals and merit rating given to employees and leads to minimization of conflict between the employees and the managers. Procedural justice, much like the justice system in place in arbitration procedures relating to law and order, focuses on adhering to the due process, and minimizes personal bias and increases consistency in decision making, and alleviates pressure off the managers and those in-charge of evaluations (Leventhal 1980).
The organization justice approach has been further developed and expanded in recent years. A third type of justice system approach has come to light called, interactional justice. This focuses on increasing the input from the employee regarding his own performance and focuses on engaging those, who are directly engaged in similar work, such as co-workers, in a non-confrontational manner (Elicker et al. 2006). The interactional justice further has two components: informational justice and interpersonal justice. Informational justice, as the name implies, puts more emphasis on providing elaborate details and information that support the appraisal decision and treats the merit rating system as a method of conveying information to the employee reading his work and development. The interpersonal justice focuses on giving respect to the employee in conveying and making decisions related to appraisal, it could also be considered a formulized method of treating those being given approval, with due respect and kindness (Colquitt 2011).
