Performance Appraisal Systems: Formal vs Informal

This assignment discusses the aspects of performance appraisal systems and their impact on employee performance. It compares formal and informal appraisal systems and their advantages and disadvantages. The case study is based on Matrix International Corporation (IMC).

Running Head: MANAGEMENT
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Management
4/10/2019

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The assignment brings about the discussion on the aspects of performance appraisal
system and the leading impact on the performance of the employees in an organisation. The
discussion will be taken forward in context to the Matrix International Corporation (IMC),
being in the position of a project leader. The Director of the company has emphasized the
aspect of success of project to be achieved through a critical analysis of the future
performance. For gaining an in-depth knowledge of performance, it is essential to conduct a
research on performance appraisal systems.
In every organisation measuring and evaluating performance is an essential part of the
organisational success. Performance appraisal is the systematic evaluation of an individual in
context to the performance at job and individual’s potential for development. It is a
developmental tool for measuring for the overall development of the organisation, along with
the employees. The objective behind using the tool to measure or evaluate performance is to
enforce and ensure promotion, training and development, compensation, and obtaining
positive feedback from the employees. However, there are variety of performance appraisal
methods used in management practices, which consists of management by Objectives, 360-
degree feedback, Performance ranking, combined manager employee appraisal and others
(Landy, Zedeck & Cleveland, 2017).
Now, the discussion will move onto the analysis of the difference between formal and
informal performance appraisal systems.
Formal appraisal systems used at a specific period, to evaluate the performance. In context to
the organisation, MIC it has been found that managers carry performance appraisal systems
over their meeting, and discuss about the employees who meet or exceed standards. Formal
feedback or appraisal of an employee is generally done on papers, and it requires to be done
on regular basis, i.e. every 90 days to the 6 months or annually (Kampkötter, 2017).
Under formal evaluation methods, 360-degree feedback is often found more relevant
to be used to evaluate in the organisation. The company mentioned above rely on this
method, to assess the performance of their employees, and provide them rewards, feedback,
compensation and other benefits accordingly. Flow of communication is also dependent on
the authorities, i.e. superior and subordinate, as it helps in undertaking the analysis of every
employee in the organisation (Ishizaka & Pereira, 2016).

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On the other hand, informal appraisal systems can take place at any time as per the
need of the situation with their subordinates or employees in the organisation. Thus, informal
appraisal system is usually done on daily basis, to resolve the queries and issues faced by
employees in their work to improve their performance. Informal appraisal or feedback is
provided to the employees without following any formal lines of communication, which act
as an advantage to resolve queries easily.
Advantages of using formal appraisal systems are that the company MIC will be able
to achieve their long-term goals effectively with the appropriate strategies. However, a
disadvantage of the system has observed that it does not aim to achieve short-term
objectives and focus more on the numbers, and other facts to evaluate performance of
employees. Pros of implementing the informal method of performance appraisal it has been
analysed that it resolves the issues affecting the performance of the employees, as it
facilitates informal communication (Lueg & Radlach, 2016).
Furthermore, it has found that many of the organisations use these methods in a
combined manner. Organisations use formal and informal methods of performance appraisal
wherein the method of formal appraisal system, is a primary method of evaluating and
rewarding the performance of employees in the organisation. In this method, there are
positive implications of using informal system, as using informal appraisal system managers
will get frequent performance feedbacks from their employees. This will facilitate managers
to identify loopholes and rectify those taking appropriate measures to improve the employee
performance. Hence, it appears to be a mixed system of measuring or evaluating employee
performance within organisation.

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References
Ishizaka, A. & Pereira, V. E. (2016). Portraying an employee performance management
system based on multi-criteria decision analysis and visual techniques. International
Journal of Manpower, 37(4), 628-659.
Kampkötter, P. (2017). Performance appraisals and job satisfaction. The International
Journal of Human Resource Management, 28(5), 750-774.
Landy, F., Zedeck, S. & Cleveland, J. (2017). Performance measurement and theory. United
Kingdom: Routledge.
Lueg, R. & Radlach, R. (2016). Managing sustainable development with management control
systems: A literature review. European Management Journal, 34(2), 158-171.