HRM Report: Employee Performance Appraisal and Compensation Analysis

This report provides a comprehensive analysis of employee performance appraisal and its crucial role in determining compensation strategies within an organization. It begins by exploring various performance appraisal methods, with a particular focus on the 360-degree feedback method, and discusses how these methods can be effectively utilized to align with employee compensation plans. The report then delves into the impact of performance appraisal on key stakeholders, including management, employees, and union members, examining how each group is affected by the implementation of such systems. Furthermore, it addresses potential ethical and legal challenges that may arise from the alignment of performance appraisal and employee compensation, offering recommendations for organizations to mitigate these risks and ensure fair and compliant practices. The report concludes by emphasizing the importance of a well-designed performance appraisal system in fostering employee motivation, productivity, and overall organizational success. The report highlights the need for effective communication, fairness, and consistency in the application of performance appraisal methods to achieve optimal outcomes.

HUMAN RESOURCE
MANAGEMENT
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Method of employee performance appraisal..........................................................................3
Use of employee performance appraisal method for employee compensation......................4
Impact of performance appraisal on three different stakeholders..........................................5
Recommendation for prevention of ethical and legal challenges faced by an organization due
to the alignment of performance appraisal and employee compensation...............................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
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INTRODUCTION
There are various kinds of performance appraisal methods that are being used
consistently by management around the world to make sure that employees are given the reward
for their efforts and work in an efficient manner. However, it is also essential that such
performance appraisal method is used efficiently for the purpose of determining employee
compensation. The current report will discuss the importance of performance appraisal program
for employees and its overall impact on employee compensation in the longer run (Board, 2018).
The impact of performance appraisal on three different stakeholders of the company will also be
analyzed in detail under the report. It will help in better understanding of job analysis etc.
Through proper evaluation and implementation of such a strategy, it becomes easier for an
organization to align performance appraisal and compensation plan over time (Schaufeli & Taris,
2014). This report will discuss the ‘360 degree feedback’ performance appraisal method and how
the same can be aligned with employee compensation of the organization.
MAIN BODY
Method of employee performance appraisal
Employee performance evaluation or appraisal is a key factor which is essential to
improve as well as enhance the quality of work and inspire them to do well in an effective
manner. A comprehensive employee performance evaluation process often consists of different
evaluation methods to help judge an employee’s performance (Bogner, 2018). Using multiple
techniques can help an organization get a broader perspective of the areas where the
organization's employees need to improve and the steps you can take to support the growth of the
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employees. There are plenty of performance appraisal methods which can be used by
management for the purpose of evaluating the employee performance in an effective manner.
One of the methods, which is being used as performance appraisal and evaluation is 360-degree
feedback method (Bothur, Zheng & Valli, 2017).
360-degree feedback method
360-degree feedback method is one of the strategies which are often used by various
organizations and employees evaluation software for carrying out the evaluation process in an
efficient manner. The process consists of taking anonymous feedbacks from teammates,
employees and other peers on various aspects of employee’s performance in an efficient manner
in the longer run (Goh & Yip, 2014). The person from whom feedback will be taken includes
subordinates, customers, and even the individual himself about his perception of his own self and
what future expectations he carries.
This method helps in providing an opportunity for the purpose of studying various skills as well
as the capabilities of employees in an effective manner (Byrnes, 2014). It also helps in making
necessary networks, igniting leadership and collaboration among all the employees of the
organization. The aim of such kind of method is to make sure that only the best employee in the
team is rewarded for the work done. This will inspire and motivate other individuals as well to
do well in upcoming tasks of the organization (Ruggunan, 2016).
Use of employee performance appraisal method for employee compensation
As far as aligning a remuneration plan with execution, there is no all-inclusive or right
decision. A framework that is useful for one association might be incapable and
counterproductive for another (Head & Alford, 2015). "For instance, compensating people who
create the best measure of yield might be proper in certain associations that are very production
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oriented. However, this methodology could be dangerous in an association whose work demands
close consideration regarding how results are accomplished, especially as to issues, for example,
quality, safety, or cooperation." If the performance plan is effectively designed then the same
will reflect in the good performance of the whole organization in general, it is a long term
process which can be achieved through planning and strategies made specifically for enhancing
employee motivation (Lasserre, 2017). The employee pay for performance compensation plan
selected by the management must be accepted by the people within the organization. It is
essential that the supervisor must also be fair towards employees and they need to be attentive
during the whole process in an efficient manner (Lockyer, 2013). Supervisors and employees
must be given necessary training, in order to ensure that the system selects is implemented in an
efficient manner. The most effective compensation plan that will be based on performance, will
ensure that organization’s best performers gets the greatest reward possible for the work done,
while average performers must receive a bit lesser than the best performers. On the other hand,
poor performers must not be rewarded and they will not receive any kind of rewards in terms of
increase, etc (Mizouni & Lazarova-Molnar, 2012).
360 degree feedback plan can be used for deciding on employee compensation. Under
this the feedback received from colleagues, subordinates, supervisors, managers and the
individual himself can be used to decide the compensation that should be given to individual, and
whether the person deserves an increment for the same or not. This is a very useful and effective
system of performance appraisal, which can be aligned with employee compensation easily
overtime.
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Impact of performance appraisal on three different stakeholders
Stakeholders of the organization which will get affected with the pay for performance
plan includes management, employees, and union members. These are important stakeholders of
the organization which gets affected by the compensation plan which is being selected. For
example, if the 360-degree feedback method will start to work, then managers and employee are
likely to feel accepting of the system being used and incentivized by the compensation rewarded
to them (Nesbit, 2012). However, if the performance evaluation system is not adequate then the
conflict between employees and managers would ensue ultimately derailing the entire process.
Jealousy and animosity would introduce bias into the reviews which dilute the process
(Rowbotham, 2013). Union members are also one of the stakeholders which get affected by the
performance appraisal system that is being implemented in the organization. A good system will
ensure their satisfaction, and a bad system can lead to protests, time off from work and a loss in
output for the organization (Pawlik, T., & Neumann, 2015). Therefore, the importance of good
pay for performance appraisal system cannot be denied.
Recommendation for prevention of ethical and legal challenges faced by an organization due to
the alignment of performance appraisal and employee compensation
There are plenty of ethical and legal challenges that the company will face if the system
select is not adequate and does not contain the stakeholders which are affected by such a system.
Therefore, it is essential that compensation plans must be planned and the people who execute
the same must have adequate knowledge of human resource management. If something is
overlooked or neglected and something happens where the reviews are no longer accurate, then
this could place the company in legal trouble (Peña, 2016). A faulty system in place can be
regarded as discrimination in pay and a complete violation of the protected classes under the
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laws frame by the governments in this regard. Hence, it does not matter which kind of
performance appraisal method is being used, it is essential that the ultimate goal of proper and
effective communication between employees and managers are being met. The aim should be to
make performance reviews as productive as possible (Poulsen, 2013). It is important to keep the
whole process simple and lead the same with a positive attitude and should not indulge in a
confrontation with peer members, supervisors, subordinates with regards to the system. It should
be made consistent and effective throughout. 360-degree feedback is a system of performance
appraisal which is a two-way conversational system, it also aims to address the necessary
concerns of employees (Ross, 2017). The manager or supervisor should be an active listener of
their concerns to provide necessary feedback to them in an effective manner, thereby improving
the workings of the company as a whole over a period of time.
CONCLUSION
Thus, from the above discussion, it can be concluded that effective pay for performance
compensation plan can help an organization in motivating its employees to perform efficiently
for the growth as well as the development of the organization. However, the selection of proper
pay for performance plan is essential, which address the needs and desires of all employees in an
efficient manner. It should be designed to make sure that great performers within the process are
rewarded and poor performer should get inspired to do well in the future. The impact of such a
system on various stakeholders should be analyzed and then necessary amendments within the
system should be made to make it suitable for the organization and its processes in an effective
way. The alignment of pay for performance with compensation plan will ensure a higher level of
productivity as well as profitability in the longer run.
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REFERENCES
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