Appraisal and the Small Company

Publication Date01 Apr 1980
AuthorA.J. Murphy
SubjectHR & organizational behaviour
Appraisal and the Small Company
A. J. Murphy
Centre for the Study of
Change and Development, University of Bath
In many large organisations appraisal systems are an
essential component in professional personnel practice.
However, there are many difficulties in managing
formal appraisals and in some places the system has
decayed into disrepute and disuse. To managers in the
small company the costs of implementing such a system
may appear to outweigh the potential benefits. This
paper examines some of these issues and describes how
one small company attempted to develop its own
appraisal system.
The theory and practice of appraisal has suffered
innumerable definitions [1] and mixed fortunes [2] in
recent years. The evaluation of its contribution to
organisation development has tended to be positive
though somewhat tempered by the lessons of experience
The appraisal of people in organisations has served
a broad range of purposes, including the assessment of
individual performance, the development of
evaluation of training procedures, the motivation of
employees and the collection of information on
organisational functions [4]. Indeed, one of the
enduring problems with appraisal is that it has served
too many purposes so that the principal objectives, for
which the system may originally have been designed,
become confused and obscure.
In the large organisation, the institution of an
appraisal system has become an essential attribute of the
professional personnel function. Management by
Objectives [5] represents one example of the degree of
sophistication to which an appraisal system may be
developed in the well ordered and highly rational
organisation. Such developments have not been without
their critics; Levinson [6], for example, questions the
degree to which such objective setting is imposed on the
individual rather than emerging from a mutual
agreement. The problems of maintaining the
momentum in an appraisal system, the difficulties of
ensuring that managers have the skills to conduct
appraisals adequately and the inevitable problems of
encouraging management development in times of
recession represent some of the issues which the
contemporary theory and practice of appraisal have
encountered. In response to these and other similar
problems management has tended to develop various
solutions, ranging from an increasing commitment and
investment of resources in the constant updating and re-
energising of the system to an implicit agreement to
allow appraisal to decay into disrepute and disuse.
Such is the complexity of these issues that, in general,
only the large organisation has had sufficient resources
to implement and service a system of employee
appraisal. To the managers of a small company, the
benefits to be derived from an appraisal system must
appear to be considerably outweighed by the costs of
developing and maintaining such a scheme. However,
with increasing pressures on organisational effectiveness
in a time of recession and with the growing demands for
development opportunities from employees, perhaps a
little less mobile and a little more educated than in the
past, those who manage small companies may look
towards appraisal systems as a means of maximising the
contribution of human resources to organisational
development. This article identifies some of the
potential role's which appraisal could play in the small
organisation and some of the difficulties which may
The process by which an appraisal system can be
instituted effectively and the potential advantages of
such a process are also described.
Some Objectives of Appraisal
In general, appraisal systems serve three different types
of purpose. They can be employed as reward
mechanisms, as performance assessments and as a
means for evaluating individual potential
Central to
these activities is the need to obtain accurate
information and to act on it. Although these purposes
overlap, most large organisations which operate an
appraisal system attempt to maintain these functions
separately. The rationale which underlies this separation
suggests that the information to be collected and the
managerial role which is required are essentially
different for each activity. The reward system, for
example, may be administered by the salary and
payment function which employs the line manager's
evaluation of performance to assess the level of reward.
The line manager supplies the information by
conducting the performance assessment with the
employee, identifying and agreeing the strengths and
weaknesses in an individual's work during the period
under review. Finally the evaluation of individual
potential is monitored by a central resource which
samples various types of information in constructing the
assessment; this central resource is charged with the
overall development of employees in the organisation
and invariably encounters considerable difficulties in
satisfying constantly changing organisational needs.
Such management development programmes may often
be bypassed by other processes in the organisation or by
rapid change in the external environment [8].
Some Problems of Appraisal
Central to any appraisal system is the collection,
collation and use of accurate information. Whatever

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