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Literature review of Performance appraisal

Why Accenture is Ditching Performance Reviews


Starting September, multinational management consulting firm Accenture will officially get rid of its performance reviews as part of a ‘massive revolution’ in internal operations.


‘Imagine, for a company of 330 000 people, changing the performance management process – it’s huge,’ Pierre Nanterme, CEO of Accenture, told The Washington Post. ‘We’re going to get rid of probably 90 per cent of what we did in the past.’


The company is ditching these reviews as they failed to achieve their primary purpose: to promotebetter staff performance. Instead, the firm will switch to a more fluid system in which employees  receive regular feedback from their superiors.


Accenture sees annual appraisals as an excessive use of time, money and effort, and is one of the few businesses moving away from them. In 2014, a survey by the Society for Human Resource Management (SHRM) looked at 391 US and multinational organisations and found that only 3 per cent had fully eliminated reviews. Despite 72 per cent of respondents saying their firms conducted
annual performance appraisals, only 2 per cent of HR professionals believed their company deserved an A-rating with regards to how well they managed performance as a result of the data gained.


One of the reasons why Accenture has made this move is that they wish to evaluate employees based on their individual roles and performance. ‘All this terminology of rankings – forcing rankings along some distribution curve or whatever – we’re done with that,’ Nanterme said. ‘We’re going to evaluate you in your role, not vis-à-vis someone else who might work in Washington, who might
work in Bangalore. It’s irrelevant. It should be about you.’


Although Accenture is one of the few companies to completely overhaul their performance review processes, it turns out that many organisations are aware of their flaws. A recent PwC study conducted in Australia showed that 81 per cent of companies had performance management systems which were only ‘somewhat effective’ at achieving their goals. There is, however, a mixed
bag when it comes to scrapping this sort of review process altogether. When a firm has no performance ratings, the PwC study found that this move could result in:

  • Reduced employee disengagement and less of a fixed mindset
  • Fewer negative feelings from respondents about being judged
  • Greater benefits especially in high talent populations
  • Increased bias with managers creating their own rules
  • An unofficial, unregulated employee ranking system.

Accenture aims to hit a middle ground by regularly supporting its employees and ensuring they perform better without having to evaluate them after they have contributed. ‘It’s all about selected the person. And if you believe you selected the right person, then you give that person the freedom, the authority, the delegation to innovate and to lead with some very simple measure,’ Nanterme said.

As to whether the company gets the best value out of this change, only time will tell.


Issues to consider for your report:


1) Do you believe that abandoning formal performance reviews is a good idea for an organisation like Accenture?
2) Removing all formal performance management reviews may have immediate financial benefits for a firm, but could the resulting issues create problems that end up costing the firm much more than they save?
3) With the understanding that formal performance reviews will not be reinstated, provide some recommendations for how Accenture could effectively monitor, assess, and improve the performance of their employees.

Literature review of Performance appraisal

Performance appraisal is the tool that is used by the management to measure the performance of its employees, to evaluate which employees are efficient and which employees are not. Evaluation of performance is very important, it lets the organization measure the overall performance of the organization. It also helps the organization and the HR management in promotions and increment of the pay of the employees. During the time of redundancies, performance appraisal becomes the basis for redundancy of the employees. Moreover through performance appraisals lets the employees know their weak areas, and where it is important for them to improve.

Accenture, a global management and consulting services, that employees, 330,000 more than employees used annual reviews as their performance appraisal technique, which they found was not efficient enough because it involved a lot of time, money and effort and so the company decided to adopt a different appraisal technique and stop using the technique of annual review. Accenture wants to evaluate the employees based on the individual’s roles and responsibilities of the employees, this is one of the main reason that the organization is planning leave using the annual review technique of performance appraisal, Management by objectives, behavioral checklist and Psychological appraisals.

Performance management and appraisal practices are one of most recent studies on the performance appraisal. It is the proof that successful organizations, realize that performance management is a very important tool for converting the strategies in to results.  Performance can also be defined as the the results that was needed for the achievement of goals already set. Performance is talks about the job done, how the job was done and what has been achieved compared to what was meant to be achieved (DeNisi & Smith, 2014).

Performance appraisal is a systematic, periodic and unbiased rating system of the employee’s performance, in matters related to the present roles and responsibilities of the employee and the potential the employee has for better performance. There are mainly three purposes of performance appraisal, for allocation of rewards, like salary and remuneration, it is used for pointing out the weakness of the employees, it can be used for selection and development programs. It differentiates the good performers from the poor performers. There are many ways performance appraisal is used, they are mainly, 360 degree performance appraisals

Behavioral checklist- Behavioral checklist is a list of criteria that an employee needs to work on to be a good employee. The criteria of the checklist differ, based on the type of the job. This is a favorable method as the basis of evaluation is individual employee performance, without any comparisons (Landy, Zedeck, & Cleveland, 2017). 

360 degree performance appraisal- This performance appraisal technique includes feedback  rom the supervisor, team members and direct reports. For this type of of appraisal the complete profile of the employee needs to be assessed. The appraiser apart from evaluating the work performance of the employee, technical skills required, a deep feedback is collected from the subordinates, colleagues and the supervisor (Landy, Zedeck, & Cleveland, 2017). .

Disadvantages of traditional yearly performance reviews

Management by objectives- Management by objectives is an appraisal system in which evaluation is done based on the objectives, the manager sets objectives and the employee needs to attain those objective, performances are measured through deviations, comparing the required performance with actual performance (Landy, Zedeck, & Cleveland, 2017). .

Psychological appraisal- The appraisal method evaluates the intellect, emotional strategy and analytical skills and the other psychological traits. This method is useful when the employer gas to put the employees in to teams based on their traits (Landy, Zedeck & Cleveland, 2017). 

I completely agree that that abandoning the formal performance reviews is a good idea for Accenture, the company failed to achieve better staff performance, moreover the annual review system of appraisal uses excessive time, money and effort. There are several disadvantages of the present appraisal system and hence, Accenture is one of the companies that considered changing the performance review system based on the disadvantages of the annual performance appraisals. In support of my answer, I have discussed the disadvantages of the annual appraisals below.

It creates a Halo effect, which is also known as influence of a rater’s general impression on specific parameters of rating system. The hallo effect is created by impression the rater has on the rate qualities, it occurs when a employee us rated high on all the criteria of rating system, even the employee has performed good in just one criteria. The rating system is based on certain standards, when the employer rates the employee without considering the the standard, this usually happens when the rater compares the present performance of the employee with the past performance, this is known as contrast error. The rating system is often affected by the biasness of the rater, prejudices, and employee can underrate an employee by discriminating based on race, sex, religion, appearance and favoritism. Central tendency occurs when the rater puts all the employees within a narrow range considering them to be of average level. The nature of the annual review performance appraisal is that it needs the rater to draw a conclusion on the performance of the employees. This kind of appraisal is mostly based on the negatives, so at times this appraisal system discourages the employees (Keong Choong, 2013).

It is a very traditional approach of performance appraisal and has limited perspective, it is a tool only includes the manager’s view point, of his/her subordinate. If the manager has several other works and have to report to his supervisor as well he has limited time, he would not be able to see the how the overcome any particular problem, and how efficient is his or her communication, interpersonal relationships. This kind of appraisal system often creates conflict between the supervisor and the subordinate, and hence decreases the chances of employee improvement. The improvement of weak areas can be improved through joint efforts of the employer and the employee, but when pay is tied to the appraisal, employees mostly focus on their strong areas and do not focus on improvement of weak areas, this creates conflicts over pay increases, decreasing employee motivation, and also harms the superior-subordinate relationship. This annual appraisal system is very time consuming.

Rejecting the previous performance reviews might cost the organization, because if the organization adopts any other performance appraisal system it will have to train the managers about the new performance appraisal system, how the managers will rate or judge the qualities of the subordinate and seek improvements in the weak areas of the employees. If the organization adopts 360 degree feedback for appraisal of the employees, the managers will be needed to be trained, as how they will conduct the 360-degree feedback, which are the sources from where they can take the feedback, all these requires training. Training includes a lot of cost, so adopting a new technique for management reviews might prove costly for the organization but later they will definitely see the benefits of this change, there was lot of cost that was previously involved in the annual appraisal method (Espinilla et al., 2013).

The company has changed almost 90% of the management activities so that is definitely going to cost a lot to the company but, once the successfully start using the new method for performance appraisal perhaps, they will see the results in the employee motivation, and the performance of the employees. The formal method used for Performance appraisal often causes conflicts between the employees and their supervisor, this often de motivated the employees, if the employee lacks motivation it would result in poor performance of the employees, and hence not be beneficial for the organization. The risk is too much for any organization to have dissatisfied employees. The resulting issues from the change will definitely cost the organization but the benefits of the new change will compensate for all the cost that will be incurred (Iqbal, Akbar & Budhwar, 2015).

The employees will be motivated and perform well, there will be overall improvement will be seen gradually, there will not be any long-term issues due to the removal of the formal performance appraisals, rather the organization will be benefitted in the long run. Every major change incurs a lot amount of cost in the initial stages but later the cost can be compensated if the execution of the new methods is done properly (Armstrong, Ittner, & Larcker, 2014). 

The organization has decided to adopt a regular feedback process which is much better than the annual performance appraisal system, and there is no chance there will be issues that will prove to be so costly that will be more than they can save. Regular feedback will let employees know their shortcomings, and weakness with every task and hence they will be able to improve their weak points with every tasks. Regular feedback will be beneficial for the supervisors as well, there will not be any requirement for checking the previous performances at the end of the year. Which might cause many errors, all this benefits of the method that Accenture is planning to adopt will not have any long lasting issues apart from the initial cost that will be required for training the managers and supervisors about the new method of measuring employee performances (Dusterhoff, Cunningham,  & MacGregor, 2014).

The performance appraisal that Accenture earlier used was not good enough, they method the organization used was annual appraisals, which is very time consuming, requires too much financial resources. There are chances that the employees are left dissatisfied, which happen most of the time, there occurs conflict among the employees and their superior. Accenture should adopt a method of measuring the performance of the employees that does not dissatisfy the employees rather they are very motivated and focus on the improvement of their weaker areas. The performance rating system should not be of limited perspective, feedbacks from the subordinates and colleagues needs to be taken so while measuring the performance of the employees other factors are also included, like how the employees overcome the difficulties while performing their tasks, how they communicate with their subordinates and colleagues, how they maintain the interpersonal relationships . The rating or performance appraisal should be free from all biasness or discrimination (Alheresh et al., 2016).

The method used for measuring performance should not be time consuming. Whenever the performance appraisal is used is tied to the pay of the employees, the focus of the employees turn towards the strong attributes that they have and normally tend to ignore the weaker areas that requires improvement. So, the performance measurement methods should not be linked to the pay of the employees, so that employees focus on the improvement of their weaker areas. Rating systems should not be considered while measuring the performance of employees, the focus should not always be on the negative points, rather the appraisal should include both positive and negative appraisal. Supervisor should also appreciate the good performances of the employees and not just point out the bad ones, this would boost the morale of the employees (Bernardin, & Wiatrowski, 2013).

For effective performance appraisal, it should be documented it should not be just a method of asking supervisors about the performances, but rather it should give step by step guidance of the evaluations of the performances of the employees. Performance appraisals should not just focus on the individual performances, rather the evaluation should also be on the overall performances of all the employees, organization, as a whole should be evaluated.  There are several other performance appraisal methods that the organization can use, assessment centre method, behaviorally anchored method, critical incident technique, Management by objective, human asset Accounting method. Of all methods, Management by objective is the most appropriate method and the organization should consider following this method for performance appraisal and management.

References

Alheresh, R., Vaughan, M., LaValley, M. P., Coster, W., & Keysor, J. J. (2016). Critical appraisal of the quality of literature evaluating psychometric properties of arthritis work outcome assessments: A systematic review. Arthritis care & research, 68(9), 1354-1370.

Armstrong, C. S., Ittner, C. D., & Larcker, D. F. (2014). An Exploratory Investigation of the Determinants and Ratings Implications of Performance Appraisal Plan Characteristics.

Bernardin, H. J., & Wiatrowski, M. (2013). Performance appraisal. Psychology and Policing, 257.

DeNisi, A., & Smith, C. E. (2014). Performance appraisal, performance management, and firm-level performance: a review, a proposed model, and new directions for future research. Academy of Management Annals, 8(1), 127-179.

Dusterhoff, C., Cunningham, J. B., & MacGregor, J. N. (2014). The effects of performance rating, leader–member exchange, perceived utility, and organizational justice on performance appraisal satisfaction: Applying a moral judgment perspective. Journal of Business Ethics, 119(2), 265-273.

Espinilla, M., de Andrés, R., Martínez, F. J., & Martínez, L. (2013). A 360-degree performance appraisal model dealing with heterogeneous information and dependent criteria. Information Sciences, 222, 459-471.

Grigoroudis, E., Tsitsiridi, E., & Zopounidis, C. (2013). Linking customer satisfaction, employee appraisal, and business performance: an evaluation methodology in the banking sector. Annals of Operations Research, 205(1), 5-27.

Iqbal, M. Z., Akbar, S., & Budhwar, P. (2015). Effectiveness of performance appraisal: An integrated framework. International Journal of Management Reviews, 17(4), 510-533.

Keong Choong, K. (2013). Understanding the features of performance measurement system: a literature review. Measuring Business Excellence, 17(4), 102-121.

Landy, F., Zedeck, S., & Cleveland, J. (Eds.). (2017). Performance measurement and theory. Routledge.

Lopes, S. A., Sarraguça, J. M. G., Lopes, J. A., & Duarte, M. E. (2015). A new approach to talent management in law firms: Integrating performance appraisal and assessment center data. International Journal of Productivity and Performance Management, 64(4), 523-543.

Park, S. (2014). Motivation of public managers as raters in performance appraisal: Developing a model of rater motivation. Public Personnel Management, 43(4), 387-414.

Phillips, J. J., & Phillips, P. P. (2016). Handbook of training evaluation and measurement methods. Routledge.

Prasad, P. (2015). Performance appraisal: An empirical study to understand job satisfaction and motivation of personnel through the system. International journal of engineering and applied sciences, 2(4), 118-125.

Rosen, C. C., Kacmar, K. M., Harris, K. J., Gavin, M. B., & Hochwarter, W. A. (2016). Workplace Politics and Performance Appraisal A Two-Study, Multilevel Field Investigation. Journal of Leadership & Organizational Studies, 1548051816661480.

Sorsa, V., Pälli, P., & Mikkola, P. (2014). Appropriating the words of strategy in performance appraisal interviews. Management Communication Quarterly, 28(1), 56-83.

Voußem, L., Kramer, S., & Schäffer, U. (2016). Fairness perceptions of annual bonus payments: The effects of subjective performance measures and the achievement of bonus targets. Management Accounting Research, 30, 32-46.

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