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If one reads few articles on performance appraisal, he will soon discover that this is a topic about which huge arguments are kept. One can find opinions varying from performance appraisal being “so inherently flawed that it may be impossible to perfect it” , to “the most crucial aspect of organizational life” .
This work is set to demonstrate big variety in opinions about performance appraisal and related activities. Additionally, a link between performance appraisal practices and employees’ attitudes, behavior, development and improvement within organization is portrayed. This work also wants to show that if performance appraisal is done properly, it may have very positive effects on the employees and thus performance of the company.
In this paper, a closer look will be taken at performance appraisal as a whole; some recent as well as older views on appraising will be presented, including definition of traditional and developmental approach. Most commonly used performance appraisal techniques will also be described.
Subsequently, employee attitudes and behaviors will be discussed; what those are, how they form and which are desirable ones. Job related attitudes, job satisfaction and job dissatisfaction, will also be covered.
Finally, focus will be placed on effects of performance appraisal on those attitudes and when it is suitable to use which performance appraisal technique to achieve a desired goal (attitude or behavior). Discussions about whether performance appraisal should or should not be linked to remuneration will not be omitted.
Even though performance appraisal as a distinct management procedure dates from the time of World War II, in a broader sense, it is one of the oldest professions.  People judge themselves and they do judge other people as well.
Definition of performance appraisal
In organizational setting, performance appraisal (PA) is defined as “a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development.”  Moorhead and Griffin (1992) describe it as “the process of evaluating work behaviors by measurement and comparison to previously established standards, recording the results, and communicating them back to the employee. It is an activity between a manager and an employee.” (p. 784) 
In companies, performance appraisal systems (PAS) began as simple methods for deciding whether or not the salary of an employee was justified. Later on, empirical studies  showed that pay rates were not the only element that had an impact on employee performance. It was found that other issues, such as morale and self-esteem, could also have major influence. That resulted in progressive rejection of emphasis of performance appraisal on reward outcomes, and in 1950s, in the United States, its potential as a tool for motivation and development was recognized. The general model of performance appraisal, as it is known today, began from that time. 
If an appraisal within a company is carried out without any rules and prospect of things linked to it, it might cause severe troubles: not only can it damage climate at workplace and lead to decrease in productivity, it also can end up with ethical and legal problems.  Manager should always be aware of what he or she is doing and what consequences might it have when appraising performance.
In many organizations, appraisal results are directly or indirectly linked to remuneration. That means, the better performing employees get pay increases, bonuses, promotions; while those poorer might get some counseling, or in extreme cases, demotion, dismissal or decreases in pay. 
Oberg lists goals of performance appraisal programs, which are: help for supervisors to do a better coaching job; motivate employees by providing feedback on how they are doing; provide data for management decisions such as salary increases or decreases, transfers or dismissals; improve organization development by identifying people with promotion potential; and establish a research and reference base for personnel decisions. 
It should be also noted that performance appraisal is a part of a performance management which “includes activities to ensure that goals are consistently being met in an effective and efficient manner.”  Performance management includes many other practices besides performance appraisal, like employee performance improvement, performance development, training, cross-training, challenging assignments, career development or coaching. 
However, as was mentioned in the very beginning, there are scholars who consider performance appraisal useless and evil. Daniels says: “The research on performance appraisals has never shown that they improve performance.” Furthermore, he claims that the only reason why they are so prevalent in the workplace is that “they are a way to document poor performance – in other words, a step in the firing process.” Furthermore, he suggests that the best performance appraisal is one that is done every day. 
Approaches to performance appraisal
According to Hansen, there have been two approaches to performance appraisal. Traditional (a.k.a. organizational or overall) approach was primarily concerned with the overall organization and has been involved with past performance, while developmental approach viewed the employees as individuals and has been forward looking through the use of goal setting. 
Performance appraisal using traditional approach was used for promotion, feedback to employees, reward decisions. Developmental approach performance appraisal adds to those additional purposes, like providing employees the opportunity to formally indicate the direction of the employee’s ambition, showing organizational interest in employee development, and providing satisfaction and encouragement to the employee who has been trying to perform well. 
Performance appraisal techniques
A study by Locher and Teel shows that three most common appraisal methods in general use are rating scales (56%), essay methods (25%) and management by objectives (MBO) methods (13%).  Since the study is more than 25 years old, it is probable there has been a development in appraisal techniques used. Oberg adds few more, including field review, forced-choice rating, critical incident appraisal, work standards approach, ranking methods and assessment centers. 
Every technique has its combination of strengths and weaknesses, so they should be used relative to goals of concrete performance appraisal.
Narrative or Essay evaluation method means that the evaluator describes strengths and weaknesses of an employee’s behavior. 
Graphic rating scale is currently the most widely used rating method, which is based on assessing a person on the quality and quantity of his work (e.g. outstanding, above average, average, unsatisfactory). When supplemented by a few essay questions, it should be suitable for many purposes. 
Forced-choice rating was developed to reduce bias and establish objective standards of comparison (appraiser chooses among groups of statements those which best / least fir a rated individual). The technique is usually limited to middle- and lower-management levels where jobs are similar enough to make common forms. 
Work-standards approach has evolved from MBO method, where organization set measured daily work standards. When realistically used, it can make an objective and accurate appraisal for the work of both employees and supervisors. 
Performance appraisal software was recently introduced and is used in many companies. It is often named electronic performance monitoring, and it may be part of a complex electronic monitoring system. In United States of America (1999), 67.3% of employers use some form of electronic monitoring.  Advantages of performance appraisal software are that they cut the time it takes to do an appraisal by offering step-by-step instructions to help a supervisor write the performance plan, keep notes on performance, and finally rate the employee. It also helps companies with tight budget and downsized human resources (HR) departments.  However, some argue, and rightly, that performance appraisal should be an interpersonal communication process, and thus appraising performance using software is not a progress, but a step back. “Even between two people, it [performance appraisal] is not often done well. Automating the process is a waste of money and time, and HR departments that go that route are doing charitable work for the vendors of the software. It’s bad enough we mechanize a human process using paper forms.” Now we can take it one step further, and managers never have to speak to staff. This is progress? 
Employee Attitudes and Behaviors
Definition of attitude
An attitude could be defined as “a learned predisposition to respond in consistently favorable or unfavorable manner with respect to a given object” (Kreitner and Kinicki, 1992, p. 98) . Moorhead and Griffin (1992) propose two views of attitudes:
§ Dispositional view holds that attitudes are stable dispositions toward an object. According to this, attitudes have three basic components: affect (emotional feeling toward the object), cognition (perceived knowledge about the object) and intention (intended behavior toward the object).
§ Situational view contends that attitudes evolve from socially constructed realities.
(p. 108-110) 
Attitudes are formed throughout the time, can be changed and may be influenced by a manager. One of tools for initiation of attitude change is performance appraisal, and it will be discussed later. However, there is an important finding: a result of research of 5,000 middle-aged male employees shows that their job attitudes in general seem to be very stable over five-year period. 
Employee attitudes are crucial for an organization, since they usually lead to desired behaviors. Moorhead and Griffin (1992) discuss two primary job-related attitudes: job satisfaction and job dissatisfaction. It is “an individual’s attitude toward his or her job. … When this attitude is positive, employees are said to be satisfied. Dissatisfaction exists when the attitude is negative.” (p. 112) 
These attitudes arise from the following factors: 1) 1) organizational factors, such as pay, promotion opportunities, work itself and working conditions; 2) group factors, which include coworkers and supervisor; and 3) personal factors, such as needs, aspirations and instrumental benefits. 
These two attitudes are very important, because they influence how well employees, and accordingly an organization perform. Job satisfaction usually leads to desired actions: low turnover of employees and low absenteeism. If effects of factors mentioned above lead to job dissatisfaction, that means that employee incline to higher turnover and absenteeism. 
According to Moorhead and Griffin (1992), other important work-related attitudes are commitment and involvement. Commitment can be defined as “the individual’s feelings of identification with and dedication to the organization,” (p. 116) whereas involvement refers to a “person’s willingness as an organizational ‘citizen’ to go beyond the standard demands of the job.” (p. 116) 
Effects of Performance Appraisal on Employee Attitudes
In previous pages, several types and techniques of performance appraisals were mentioned, as well as attitudes an employee can have. This chapter focuses on presenting how appraising performance may influence employee attitudes and behavior.
Archer North suggests that mere individual recognition, that is to say appraising performance, can lead to higher job satisfaction and reduced absenteeism and turnover rates. “In fact, there is evidence that human beings will even prefer negative recognition in preference to no recognition at all.” 
In traditional appraisal process, the manager, commonly annually, rates the performance of a reporting staff member using some technique listed above. Most of the time, the appraisal reflects the most recent events; that is a big disadvantage.  If a manager doesn’t talk to staff during the year, and he “saves up” everything they mess up, the employee actually rated may feel very uncomfortable when faced a list of all mistakes he had made during the year. 
Recently, a method of 360-degree feedback was developed. It is “a process in which you evaluate yourself on a set of criteria, your manager evaluates you, as do your peers and direct reports. You receive a gap analysis between how you perceive yourself and how others perceive you. Effective 360-degree feedback processes also include coaching sessions and development planning.” Before, it was only used to evaluate executives, but now, participants are individuals at all levels of organizations. 
Effects of particular performance appraisal techniques on employee attitudes
Right decision on what performance appraisal technique to use is essential for the rest of the process.
For motivating employees by providing them feedback on how they are doing, the MBO or work-standards approach seem to be good choices. If they involve real participation, it is most likely to lead to an inner commitment to improved performance. 
MBO method of performance appraisal may, on the one side, overcome some of the problems that arise when assuming that the employee traits needed for job success can be reliably identified and measured. Instead of assuming traits, MBO method focuses on actual outcomes. These methods of performance appraisal can give employees a satisfying sense of autonomy and achievement. However, they can also lead to unrealistic expectations about what can and cannot be reasonably accomplished.  It has been shown in numerous studies (e.g. Locke, et al.) that “goal-setting is an important element in employee motivation. Goals can stimulate employee effort, focus attention, increase persistence, and encourage employees to find new and better ways to work.” 
From a Total quality management (TQM) perspective, traditional performance appraisal can possibly hurt quality and teamwork, because it can make employees compete against one another. Solution might be rating teams rather than individuals. 
To show effects of performance appraisal on employee attitudes, a study by Gabris and Mitchell, made in an organization with a quarterly performance appraisal system, which focused on Matthew effect, will be used. “Matthew effect is said to occur where employees tend to keep receiving the same appraisal results, year in and year out. That is, their appraisal results tend to become self-fulfilling: if they have done well, they will continue to do well; if they have done poorly, they will continue to do poorly.” They explored an extent of frustration rising from biased performance appraisal. “The workforce was divided into two groups: those who had been given high appraisal results consistently, and those who had low results consistently. When the groups were asked if the appraisal system was fair and equitable, 63 per cent of the high performers agreed, compared to only 5 per cent of the lower performers. The groups were asked if their supervisors listened to them. Of the high performers, 69 per cent said yes, while among the low performers, 95 per cent said no. Finally, when asked if their supervisors were supportive, nearly half of the high performers agreed that they were, while none of the low performers agreed.” 
It is a cardinal principle of performance appraisal that employees should have the chance to improve their appraisal results – especially if their past results have not been so good. It is a very serious flaw in the process of appraisal if this principle is denied in practice. 
Heathfield says that employee whose performance is under review often becomes defensive. “Whenever his performance is rated as less than the best, or less than the level at which he personally perceives his contribution, the manager is viewed as punitive. Disagreement about contribution and performance ratings can create a conflict ridden situation that festers for months.” 
Oberg warns, negative feedback from performance appraisal not only fails to motivate the typical employee, but also can cause him to perform worse. Only those employees who have a high degree of self-esteem appear to be stimulated by criticism to improve their performance.  According to study by Baron, “destructive criticism”, which is vague, ill-informed, unfair or harshly presented – will lead to problems such as anger, resentment, tension and workplace conflict, as well as increased resistance to improvement, denial of problems, and poorer performance. 
Mentioned implications should be dealt with big attention. It may be suggested that an appraiser should delineate performance appraisal process to a person appraised not as an opportunity to criticize him, but primarily as a way for explaining what could be done better and how could he (and thus the whole company) perform better in future.
Bannister notes, it is important that the appraiser be well-informed and credible. If it is so, employees are more likely to view the appraisal process as accurate and fair. They also express more acceptance of the appraiser’s feedback and a greater willingness to change. 
Bacal recommends that when talking to an employee about a problem, one should phrase his comments in terms of preventing the problem from recurring, by using the inappropriate performance as a jumping off point, explaining why it is problematic, and then quickly moving on to preventing re-occurrence. This moves the focus from blame to improvement.  He also suggests a cooperative, dialogue approach for managers. This approach puts the manager and employee on the same side, and working towards the same goals is getting better and better.  Employee may feel “noticed”, more self-confident, proud that he or she is working with the boss, and thus may be motivated to perform even better. Mere fact of talking with his supervisor might be very important.
Research studies show that employees are likely to feel more satisfied with their appraisal result if they have the chance to talk freely and discuss their performance. It is also more likely that such employees will be better able to meet future performance goals. 
Barrie and Sow claim there must be standards of comparison. People need to know how well they are doing at their jobs and where they could improve. It is important to keep in mind that appraisals do not equate to criticism. It may be necessary to explain the importance of completing tasks within timelines or changing the technique of doing a task. Unfortunately, many performance appraisals only frustrate the employee by adding more tasks to what appears to be an already overloaded agenda. 
A person appraising performance should be aware of “feedback-seekers”. It is a situation described by Larson, when usually a poor performing employee seeks feedback from his supervisor (future appraiser, actually) in inappropriate moments, when he is not ready or able to give accurate or frank assessment. If that is the case, a supervisor would often provide a few encouraging words of support. The problem arises in appraisal time. The supervisor will find that the employee recalls every casual word of praise ever spoken. This is a very difficult situation for a supervisor, because he either lied when giving the praise, or least, misled the employee in thinking that his performance was acceptable. Supervisor might feel “caught in a trap” and may actually upgrade the results of performance appraisal. This situation is rather simple to avoid by a manager – he should always tell “feedback-seeker” that he doesn’t have time and ask him or her to see him in the office later. 
A recent trend – introducing electronic monitoring systems (and performance appraisal software), should not be left unnoticed. Even though the whole system goes further than mere appraising performance; it deserves mention in this work. Despite its negative effects on employees, it is used more than ever before. Managers fail to realize that electronic monitoring is not able to replace the role of supervisor. It is likely to increase worker stress and decrease employee job satisfaction. Although this may lead to increased productivity, this is frequently accompanied by a decrease in quality and customer service. Study among monitored employees showed a rise in cases of extreme anxiety, severe fatigue or exhaustion, a loss of feeling in the finger/writs, shoulder soreness and depression. The stress associated with electronic monitoring in these cases clearly has real world effects. The stress that employees experience may cost employers more on medical bills in the long run. 
Discussions about link of performance appraisal to remuneration
Among those, who do not reject performance appraisal, a big discussion is lead over whether a performance appraisal (and its results) should or should not be linked to remuneration.
Main argument against linking appraisal results from reward decisions is the belief that a close link could create a threatening and potentially punitive system.  Another argument, provided by Archer North, says that the linkage to reward outcomes reduces or eliminates the developmental value of appraisals. “For example, how many people would gladly admit their work problems if, at the same time, they knew that their next pay rise or a much-wanted promotion was riding on an appraisal result? Very likely, in that situation, many people would deny or downplay their weaknesses.” 
A fact that should not be overlooked is that many appraisers feel uncomfortable when they are in a role of judge. It may end up in a problem, when raters and ratees know each other well, maybe even mix socially. In that situation, if a appraiser has to give an appraisal result that has the direct effect of negating a promotion or even salary decrease, it may result in “resentment and serious morale damage, leading to workplace disruption, soured relationships and productivity declines”. 
On the other side, there are advocates for that appraisal results should be linked to remuneration. They argue that an organization needs a system to distribute rewards fairly. According to them, performance appraisal “is the only process available to help achieve fair, decent and consistent reward outcomes. It has also been claimed that appraisees themselves are inclined to believe that appraisal results should be linked directly to reward outcomes.”  Recent research by Bannister and Balkin has reported that “appraisees seem to have greater acceptance of the appraisal process, and feel more satisfied with it, when the process is directly linked to rewards.” 
Performance appraisal systems are not, as many critics say, useless and evil. When paying attention to careful PAS planning and proper techniques used, performance appraisal might be perceived not only as an irreplaceable tool for recognizing and rewarding good performance and correcting poor performance, but mainly as a way how to maintain long-term development within an organization.
During a research carried out when preparing this work, an author found a big variety of views on performance appraisal and all of its aspects. Often, opinions were completely opposed. That gives evidence, that, in contrast to other management topics, performance appraisal as whole is very hard to do “right”, since there are not many “right” solutions that would have no opponents.
There are several things, however, that should be kept in mind when preparing and doing performance appraisal. Appropriate technique should be always used; performance appraisal should be done as a “running” on daily basis, rather than annual reports. Human Resources department and appraisers should consider performance appraisal mainly as a means for development and motivation, not only a guideline for remuneration and promotion / demotion.
He also found that there is a link between performance appraisal and employee attitudes and behaviors. In previous pages, several examples of effects of performance appraisal on attitudes are said.
In articles, an author noticed global efforts to make changes in approaches to performance appraisal towards developmental and motivational uses.