THE DETERMINANTS OF EFFECTIVE PERFORMANCE APPRAISAL IN ORGANISATIONS (A STUDY OF THE UNITED BANK FOR AFRICA)

ABSTRACT

This paper analysed factors that determined effective performance appraisal in organisations. The analysis relied heavily on those factors  that  makes  performance   appraisal  in  an  organisation effective.   This paper also looked at the purposes and benefits of performance appraisal as well as its challenges to organisations. The chi-square analytical techniques were used to determine factors that  makes  performance  appraisal  effective  and  whether performance appraisal was beneficial to the organisation.   It was also used to determine the challenges faced by organisations in appraising performance.  The findings of the study suggested that factors such as set standard, communication, documentation, feedback and personal bias significantly determine an effective performance appraisal and motivation/satisfaction, training and development, employees, evaluation and recruitment/selection as benefits of performance appraisal to organisations. It also suggested that criteria for rating, evaluation techniques, competence raters and error in rating were the challenges faced by organisation.   To conclude, the study recommended that system procedures and its administration   should   be   standardized   and   uniform   in   their application especially when the information generated by the appraiser is used to compare employees.

CHAPTER ONE INTRODUCTION

1.1    BACKGROUND OF STUDY

One of the responsibilities of management is to ensure that an organisation functions effectively and efficiently.   In order to achieve these goals, managers must be able to determine and assess the performance levels of both an organisation and its individual employees.  This is because people are different in their abilities and their attitudes and there are some differences between the quality and quantity of the same work on the same job, being done  by  two  different  people.    For  this  reason,  an  appropriate system of measurement must be developed and applied which is known as performance appraisal.

Peter Allan (2004) Performance appraisal which is defined as a structured formal interaction between a subordinate and superior that usually takes the form of a periodic interview in which the work performance of the subordinate is examined and discussed had its root in the early 20th century.

Performance appraisal which is a method of evaluating the

behaviour of employees in the work spot normally includes both

quantitative and qualitative aspects of job performance and should be done on a regular basis without bias. It should take place more than once in a year.

Wayne F. Cascio (2003) Performance appraisal may be formal or informal, documented or undocumented, scheduled or unscheduled. It could be individual or multiple person appraisals.

Performance appraisal is a formal evaluation of an employee’s job performance. To conduct a formal performance appraisal, the manager must complete an evaluation document and conduct an oral review with the employee who is being evaluated.

This process involves providing the employee with feedback, regarding how well he or she is performing, the essential functions of his or her job in the organisation.

John Bernardin (2002). The success of a company requires that, the boss and subordinate staff should evaluate their selves on- the- job performance on a regular basis, if they don’t know how well they are doing.

A manager should also make sure that, he/she conducts at least an annual performance appraisal with each subordinate. There is this probability that, one will earn consistent promotions, obtain salary increases, which leads to the success of the organisation.

The process of performance appraisal establishes a standard which must be communicated by the appraiser (the superior) to the appraised (the subordinate).   The results then must be objectively analyzed to measure actual performance.    Organisations can take corrective action based on the result derived from the appraisal.

Gerald   V.   Barrett   (2003),   the   essence   of   performance appraisal is to assess the character, attitude, potentials and past performance employees of on the job. Performance appraisal is also done to evaluate the employees’ strengths and weaknesses.

Another reason for employee appraisal is to obtain information for promotion, demotion, transfer, pay increase, training and development and discharge. For the employee, an appraisal gives a feedback as to know how management perceives his contributions to the organisation. If an employee perceives that he is poorly evaluated, it could affect his morale; increase his absenteeism rate and tardiness and consequently, his overall production. This is why employee  evaluation  is  expected  to  be  done  in  the  spirit  of objectivity, honesty and fair play.

When an official evaluates, he is in effect passing judgment that he has the competence to evaluate; he know the employee and has observed him at work for a long time.    Many employees are afraid of evaluation and have negative feelings about it.  Every day

in an organisation, employees informally evaluate one another, even the supervisor is not left out. When the official evaluation comes out, employee   compares   the   opinions   they   hold   with   the   formal evaluation result from their supervisors.

A      supervisor  is  said  to  be  fair  or  unfair  based  on employees’ preconceived opinion of themselves and one another. The human inclination to  judge can  create serious, motivational, ethnical and logical problems in the workplace. Without a structured appraisal  system,  there  is  little  chance  of  ensuring  that  the judgments made will be lawful, fair, defensible and accurate.

Performance appraisal helps to rate the performance of the employees  and  evaluate  their  contributions  towards  the organizational goals. If the process of performance is formal and properly structured, it helps the employees to clearly understand their roles and responsibilities and this will give direction to their individual performance

In the absence of a carefully structured system of appraisal, people tend to judge the work performance of others, including subordinates, naturally, informally and arbitrary. Often performance appraisal has been called performance evaluation or performance rating.

Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified. The process was firmly linked to material outcomes. If an employer’s performance was found to be less than ideal, a cut would follow. On the other hand, if their performance was better than the superior expected, a pay rise was in order.

Little consideration, if any, was given to the developmental possibilities of appraisal. It was felt that a cut in pay, or a rise, should provide the only required impetus. For an employee to either improve or continue to perform well.

Sometimes, the basic system succeeded in getting the results that were intended, but more often than not, it failed. For example, early motivational researchers were aware that different people with roughly  equal  work  abilities  could  be  paid  the  same  amount  of money and yet have quite different levels of motivation and performance.

These observations were confirmed in empirical studies, pay rates were important, yes; but they 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 a major

influence. As a result, the traditional emphasis on reward outcomes was progressively rejected.

In many organisations but not all, appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions.

By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay.

There are many reputable sources such as researchers, management,  commentators,  psychometricians  who  have expressed doubts about the validity and reliability of performance appraisal process. Some have even suggested that the process is so inherently flawed that it may be impossible to perfect it.

There are those, for instance, who believe that performance appraisal  has  many  important  employee  development  uses,  but scorn any attempt to link the process to reward outcomes such as pay rises and promotions.

This group believes that the linkage to reward outcomes reduces or eliminates the developmental value of appraisals. Rather than an opportunity for constructive review and encouragement, the

reward- linked  process  is  perceived as judgmental, punitive and harrowing.

For example, how many people would gladly admit their work problems if, they knew that their next pay rise or the much wanted promotion was  riding on  an appraisal result? Very likely,  in that situation, many people would deny or downplay their weaknesses. Nor is the desire to distort or deny the truth confined to the person being appraised. Many appraisers feel uncomfortable with the combined role of judge and executioner.   Appraisers often know their appraisees well and are typically in a direct subordinate – supervisor relationship. They work together on a daily basis and may at times mix socially, suggesting that the subordinate needs to brush up on certain work skills.

Shelley R. Burchett (2006) there is a strong rival argument which  claims  that  performance  appraisal  must  unequivocally  be linked to reward outcomes. The advocates of this approach say that organisations must have a process by which rewards which are not unlimited resources may be openly and fairly distributed to those most deserving on the basis of merit, effort and result. There is a critical need for remuneration justice in organisations. Performance appraisal, whatever its practical flaws, is the only process available to help achieve fair, decent and consistent reward outcomes.

It  has  also  been  claimed  that  appraisee  themselves  are inclined to believe that appraisal results should linked directly to reward outcomes and are suspicious and disappointed when told this is not the case. Rather than feeling relieved, appraisees may suspect that they are not being told the whole truth or appraisal process is a sham or waste of time.

Research 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. Such findings are serious  challenges  to  those  who  feel  that  appraisal  results  and reward outcomes must be strictly isolated from each other.

Rosenberg (2006) argues that the evaluation of employees for reward purposes, and frank communication with them about their performance, are part of the basic responsibilities of management. The practice of not discussing reward issues while appraising performance is, say to be critics, based on consistent and muddled ideas of motivation.

Mary C. Kernan (2004) Performance appraisal is like a double edged sword for an organisation. Although it has many benefits for the organisation, various studies have revealed that performance appraisals have the equal probability of having a bad impact on the organisational as well as the employee performance.

Where the performance appraisal improves the work performance and employee satisfaction, it can also demotivate employees and leaving a bad impression on the good employees. Most of the employees do not approve of continues performance monitoring and performance appraisals; they consider it as a burdensome activity.

1.2    STATEMENT OF THE PROBLEM

Performance  appraisal systems  are  thought  subjective  and favoritism is prevalent. In many organisations, the performance appraisal process is unfair, inaccurate, ineffective or not properly done. It is subjective, full of bias and favoritism. Most supervisors doing performance appraisal may have biases related to their employee’s personal characteristic such as race, religion, gender or age group and as such dislike them.

In any case, employee evaluation is expected to be done in the spirit of objectivity, honesty, and fair play.   Appraisal manager must identify and overcome the causes of these flaws to ensure the usefulness of the system. If these flaws are not overcome, it will significantly affect the success and objectives of organisations.

1.3    OBJECTIVES OF THE STUDY

The objective of this study attempts:

(i)      To  determine  and  analyse  the  performance  appraisal system of organisations.

(ii)     To  determine  the  purpose  of  performance  appraisal  in organisations

(iii)    To  determine  the  benefits  of  performance  appraisal  to organisation.

(iv)    To   determine   the   challenges   organisations   face   in performance appraisal.

1.4    RESEARCH QUESTIONS

The study focused on the following research questions:

(i)       What are the factors that make organisations performance appraisal effective?

(ii)     What   are   the   purposes   of   performance   appraisal   in organisations?

(iii)    What   are    the    benefits    of    performance    appraisal   to organisation?

(iv)    What   are   the   Challenges   of   performance   appraisal   in organisations?

1.5    RESEARCH HYPOTHESES

1.  Ho:  Performance  appraisal  system  in  organisations  is  not effective.

H1: Performance appraisal system in organisations is effective.

2.  Ho:  Performance  appraisal  system  is  not  beneficial  to  the organisations.

H1:   Performance     appraisal     system     is     beneficial     to organisations.

3.    H0:      Performance  appraisal system  in  organisations  poses challenges.

H1:    Performance appraisal system in organisations does not pose any challenges.

1.6    SIGNIFICANCE OF THE STUDY

The study will be of great interest to stakeholders of organisations, organisations and students/Academicians.

Employers

Employers will identify and overcome the problems faced by employees in their work. Employers will know whether their employees are doing what is expected of them or not. The study will also help employers to know which employee gets promotion, transfer,  increase  in pay or demotion as well as knowing  which employee gets counseling or training.

Employees

It will help employees to gain better understanding of their faults and strengths and adjust behaviour accordingly. Employees will know what is expected of them in organisations.  The study will

also  help  them  to  know  if  their  contributions  and  opinions  are valuable or not in organisations.

Investors

The  study  will  enable  Investors  that  want  to  invest  in organisations to know whether to risk their funds or not. It will help them predict the risk on investing in a particular organisation. Shareholders

The study will enable Shareholders to know when to expect higher dividends from organisations as good performance will lead to higher profit as well as higher dividend.

Government

The study will enable the government to know which organisation is contributing to the development of the economy positively.

Customer

The study will enable customers to know which organisation to patronize.

Organisations

Organisations will know what to do, to ensure that their goals are accomplished.  The study will also help organisations to know how best their resources are being used to accomplish their goal.

Students/Academicians

The Study will serve as a body of reserved knowledge to be referred to by both students and researchers.

1.7    SCOPE OF STUDY

This research has covered United Bank for Africa, with specific emphasis on the Okpara Avenue, Agbani road, and, Kenyentta branches.

1.8     LIMITATIONS OF STUDY

TIME:  The  time  given  to  the  researcher  to  carry  out  this  study was limited as the session was coming to an end.

FINANCE: The methods used in collecting data for this research was quite expensive. The cost of internet materials, which was the major source of collecting data for this research, has gone so high that the researcher had to get limited materials for the research. ATTITUDE OF RESPONDENTS: Respondents were not friendly at all.  They  were  arrogant  and  rude.  There  was  lack  of  rapport between the researcher and the respondents so it was difficult to get accurate or reliable information. So also, the   employees were not willing to devulge relevant information for fear of victimization from the management of the organisation.

1.9    DEFINITION OF TERM

Performance appraisal – performance appraisal is the procuring, analysing and documenting of facts and information about an employee’s net-worth to the organisation.

Organisational Profile

United Bank for Africa (UBA) is a public limited company incorporated in Nigeria in 1961 and headquartered in Lagos. It is one  of  Africa’s   leading  financial  institutions  offering  universal banking to more than 7 million customers across 750 branches in 19

Africa countries and a presence in New York, London and Paris. Formed by the merger of the commercially focused UBA and the retail focused standard trust bank in 2005, the bank has a clear ambition to be the dominant and leading financial services provider in Africa. Listed on the Nigeria Stock Exchange in 1970, UBA is rapidly evolving into a pan-African full service financial institution.

UBA history dates back to 1949 when the British and French Bank Limited (“BFB”) commenced business in Nigeria. Following Nigeria’s independence from Britain, UBA was incorporated in 1961 to take over the business of BFB. Today’s United Bank for Africa Plc (UBA) is the product of the Merger of Nigeria’s third and fifth largest banks, namely the old UBA and the former Standard Trust Bank Plc, and a subsequent acquisition of the erstwhile continental Trust Bank

Limited (CTB). The Union emerged as the first successful corporate combination in the history of Nigerian banking.

Since its historical emergence from the merger of former Standard Trust Bank and UBA Plc, the UBA group has positioned itself to be Nigeria’s dominant bank and leading player in Africa continent.   In 2000, Europe’s frontline Finance and Economy magazine, Euro money named  UBA the  best Domestic  Bank  in Nigeria, in recognition of the bank’s exponential growth in the past couple of years and the comparatively higher inflow of investment from global finance players.

UBA has consistently positioned itself as the bank to beat in Nigeria’s financially strong banking industry. It has grown its total assets by over 345.01 percent in the last five years, up from NGN

98.68 billion ($1.656 billion) in 2002 to NGN 884.14 billion ($7.368 billion) in 2006.

More  recently,  at  the  end  of  the  2008  financial  year,  it recorded gross earnings of NGN 169.6 billion, profit before tax and exceptional items of NGN 56.8 billion, profit after tax of NGN 40.8 billion and total assets of NGN 2.2 trillion.

UBA has the largest distribution network in Nigeria with over

6.8 million customers in personal, commercial and corporate market segments.   As of 30 September 2008, it had over 630 business

offices and 1332 ATMs and pioneered cheque acceptance ATMs in Nigeria. Its over 14,000 staff globally are also referred to as lions and lionesses’.

Regionally, the group has a presence in 18 African countries and in all major financial centers.   The bank currently operates in Nigeria, Ghana, Ivory Coast, Cameroon, Sierra Leone, Liberia, Uganda, Benin, Burkina Faso and Senegal, and has unfolded plans to expand its banking operations to 15 additional countries in Africa come 2009.

The UBA logo combines the mustard seed legacy of Standard Trust Bank with the typographic. UBA logo is predominant red on white. The red color purportedly represents energy, boldness, strength, innovativeness, excitement and distinction, all of which are in line with the bank’s dominance aspirations and its alleged dynamism. The white colour, is supposed to represent purity, brightness and clarity of focus. UBA Group’s operating structure is organised around seven Strategic Business Units (SBUs) and four Strategic Support Units (SSUs)  informed by the need to reinforce its leadership in service delivery, relationship management and the execution  of  its  strategy.  The  performance  of  the  Board  and Directors individually is evaluated by an independent consultant.

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