Strategic Human Resource Management

Section Five

Performance Management

There is empirical evidence that results-oriented appraisals
have a positive impact on firm performance. The study by
Delery and Doty cited earlier, which drew on a sample of
banks, also found that results-oriented appraisals have a
positive impact on ROA.^66 In addition, companies that do not
have good appraisal systems run the risk of not being able to
justify terminations or the denial of promotions. Having no
documentation of inadequate or substandard performance
places the firm in danger of being on the losing side in litigation
or arbitration and creates financial liability.

Nonetheless, performance appraisals do not always
accurately reflect the performance of the employee nor do their
ratings always have an impact on results such as
compensation. Because of these and other problems, the
practice of performance appraisal is being revised in some
organizations because of fundamental questions about its
contributions and the changing role of human resource
management.^67 Indeed, 360-degree feedback approaches are
being adopted by many organizations because of problems with
traditional appraisal systems.