Performance appraisal systems are one of the main sources of dissatisfaction at work.  Rarely does the boss or appraisee look forward to it, and often neither is totally happy with the outcome.  It can become a sterile paper chase. 

Even if an organisation introduces a modestly successful appraisal system, the enthusiasm will probably wane and it will soon look as bad as any that went before.  Furthermore, when the cost of developing, implementing and maintaining the system is considered, some argue it is simply not worth considering one.  Stories abound of organisations dropping quietly a system they trumpeted as state-of-the-art. 

Some organisations may be bound by a contract or legal guidelines to conduct appraisals, sometimes in a particular way.  The litigious Americans have gone to court over performance appraisals.  Hence guidelines have been developed to help people make sure they are conducting legally sound appraisals.  These include the following: 

Performance ratings should be based on specific dimensions of job performance requirement; 

Where possible, there should be multiple raters to ensure reliability; 

Extreme (negative) ratings should be accompanied with documentation about incidence, data, location and outcome; 

The system should have an appeal process. 

But most organisations are not legally required to introduce any system.  The human resources department may be eager to do so, but is it wise?  Do the cost outweigh the benefits?  Do appraisal systems help or hurt the organisation? 

There are three classic objections to appraisal systems 

1. The system can interfere with teamwork 

Performance appraisal is nearly always conducted on an individual basis, but people do, and are constantly exhorted to, work in teams.  Most are interdependent and it is not possible, or desirable, to separate the contribution of individuals. 

The system over-emphasises individual differences in performance, looking for differences that are not there.  In this sense, some say, it seeks to be divisive, emphasising difference and diversity over homogeneity, morale and common goals. 

These arguments have some force when it comes to traditional assembly-line jobs.  But job performance in service industries depends heavily on the effort and ability of individuals because there are few dictates on how to behave.  It is possible to separate the performance of the individual from other factors by asking raters to identify how specific "other" factors (breakdown of machinery, cut in budget, chronic absenteeism of a staff member) may have affected performance. 

Nothing prevents an appraisal system being conducted for teams with individuals sharing the mean team rating.  People are usually happy to enjoy the "class average" if they feel the "class" has been working with equitable input. 

2. Appraisal systems send mixed messages 

The gap between the rhetoric and reality can be a serious problem.  The rhetoric says the system is about communication and improving the quality of decisions.  The reality is that often it is only about performance related pay.  Organisations say the appraisal process is crucial for all managers, but rarely reward those who do it well and conscientiously, or punish those who do a poor job.  The party line is that appraisal is crucial for providing the data on which administrative decisions are made.  Yet all too often, appraisees have no clear idea of what is done with ratings, partly because few organisations have a consistent policy on how they actually process, store or make decisions on the data arising from them.  And even if they do, they do not communicate it effectively.  This objection is not inherently a problem of the system, rather the way it is introduced. 

3. The appraisal system is a major cause of dissatisfaction and discontent 

The system is the most popular butt of complaints and ridicule in any organisation for various reasons.  First, there is what has been described as a demoralising trilogy: ranking, rating and forced distributions.  The appraisal system, often driven by statistical necessity, forces appraisers to differentiate and make distinctions which are neither realistic nor functional.  In fact, pointing out (minor) differences between employees can disturb team morale.  Second, appraisees are often disappointed by the appraisal because self-assessments are usually more favourable than others' assessments.  In this sense, more appraisees feel their appraisal is insensitive and unfair even when it is completely accurate. 

Third, the managers who do the rating have ambivalent and contradictory roles, for they are both judge and counsellor, evaluator and mentor.  This ambiguity can be a cause of stress for managers more used to challenging than supporting their staff and vice versa. 

Fourth, ratings are inevitably subjective.  Even when thorough, fair and reliable in that others agree, because they are not objective they become a lightning conductor for generalised concerns over fairness and equity.  The best way around this is to have multiple raters - ideally supervisors, subordinates, peers and customers. 

Perhaps the best way to deal with the complaints is to encourage the disillusioned to say not what is wrong with the system, but how it can be fixed.  Focus should be moved to alternatives.  Critics should be asked what alternatives they prefer: no appraisal system and pay being dependent upon collective bargaining, with promotions being linked predominantly to service or who you know, or an alternative system with managers each being given a "pot" of cash to distribute at their own discretion.  In short, what other approach can overcome the problems without causing new or different ones. 

It is necessary to point out the way appraisal systems help organisations.  Most obviously, they provide a rich and useful data bank to enhance the quality of all human resource decisions - promotions, pay, lay-offs and transfers across the organisation.  They can also help individuals to think through their present and future roles.  At their best, they can build and cement employee commitment and satisfaction.  None of these benefits automatically follows from an appraisal system, but it is difficult to imagine the first two without a well devised, organisation-wide system.  The army often runs tough, efficient and well-accepted systems by being consistent. 

The disillusionment with appraisal systems is nearly always a function of implementation.  We are appraised at school, at sport, in skilled extra-mural activities, but we are seldom angry or cynical about the process.  It is only at work that adults become highly emotional about appraisal.  Pusillanimous human resource managers, untrained appraisers and uncommitted senior staff are a recipe for disaster.  Yet all organisations need to estimate quality.  One cannot manage what one does not measure.  And that is especially true of people.