Performance Appraisal in Microsoft Corporation

The human resources department is considered one of the key support factors of a company against the highly competitive and unpredictable business environment. The companies have realized the growing need for qualitative and satisfied personnel, while at the same time they focus on developing techniques and methods of managing their human resources. Human resources management considers the employees as its most important asset, which are capable of giving to the company a dynamic and sustainable competitive advantage. The decisions related to the Human Resource Management are necessary for the completion of business strategies. Among the most important functions of Management is the planning and evaluation of human resources.

This paper focuses on evaluation methods that have been developed by theoretical and practical researchers and how these methods are applied to Microsoft UK.

PERFORMANCE APPRAISAL

Definition

 Performance evaluation is the process whereby organizations assess the performance of employees. Provided that it is done correctly, the employees, their supervisor, the field of human resources and the company as a whole reap the benefits of knowing that their individual efforts contribute to the achievement of strategic objectives.

Of course, the appraisal is influenced by various other activities that take place within the company and can affect its success. Performance appraisal is performed in Microsoft UK. Senior managers’ performance is assessed once a year, whereas the other employees’ performance is assessed twice a year. Direct Reports to the Managing Director are assessed by him/her once a year, and they are the only ones that can assess the performance of their immediate supervisor, i.e. the Managing Director.

Objectives Assessment

Apart from the accurate and objective measurement of performance, specific objectives of this process are:

1. Decisions regarding promotions, salary increases, layoffs, etc.

2. Identify training needs.

3. Performance improvement and development of employees.

4. Determining the validity of the techniques of personnel selection.

5. Better internal organization of the company.

6. Setting up a specific and acceptable system of measuring performance.

The performance appraisal is not usually an overall assessment or a general description of the employee, but it concerns individual dimensions. These dimensions derive from the job analysis and are related to individual skills that the employee must have.

Every employee of Microsoft UK has a job analysis and the objectives of performance appraisal are in accordance with the above mentioned.

General categories

The assessment methods can be divided into two categories:

The objective methods are based on measurable criteria and data (e.g. percentage of sales, number of products produced, the number of errors, etc.). A key drawback of objective methods is that they cannot be applied to professions where the output is qualitative in nature (e.g. secretary, directors, etc.), but also when uncertainty factors, outside the control of the person, affect the produced output.

Subjective methods are applied more frequently and involve the use of some judgements usually made by supervisors to their personnel. However, the subjective methods cannot ensure the absolute accuracy of the results of the appraisal, since they can be influenced by the prejudices and biases of the evaluators. For example, an assessor can be affected by a single dimension, either positive or negative about the image of the person being evaluated and this judgement can affect all other aspects. In addition, managers often desire to show leniency or to avoid the displeasure of their subordinates, so they make fewer negative appraisals or tend to rate all subordinates in the average.

In Microsoft UK both objective as well as subjective methods are used in employees’ performance appraisal. The employee writes the tasks that s/he is going to perform within the next six months and what s/he wants to achieve from them and gets the approval or remarks on these from his/her immediate supervisor. At the appraisal period, the employee assesses himself/herself according to the goals achieved, then s/he discusses his assessment with his/her supervisor and gets the appraisal mark.

Employees’ performance is ranked from 3 to 5, whereas three shows the minimum accepted employee performance and five the best. Most employees get 4, which is the average for the reasons mentioned above. In order to achieve objectivity, objective methods are used to a large extent, whereas the use of subjective methods is minimized.

Appraisal Process

Creating a reliable method of personnel performance appraisal is a difficult task and is based on a number of key processes in which:

The first step is to analyse the work of a particular position (job analysis), for the simple reason that before someone is judged on the way s/he acts, it should be clarified what is sought from him/her. Such an analysis aims to study the tasks and activities, the economic resources, the way to achieve the objectives and their importance, and finally it includes the definition of knowledge and skills needed to carry out the task successfully. In some occasions, it was noticed that the job analysis for certain positions in Microsoft UK was rather vague and this resulted in having difficulties in appraising specific employees. An issue that occurred quite often was the range of responsibilities that an employee should have. In some occasions, the employee was appraised for tasks that s/he could not do since s/he had limited authority to perform.

Then, the results or attitudes that lead to the successful project implementation should be determined and weighed, as much as possible, according to their contribution to success. The weighting can be done according to estimations or according to the contribution of these data to the costs or profits of the business. This has been proven particularly difficult for qualitative positions such as the Licensing Manager and/or the Antipiracy Manager, etc.

Finally, ways to measure achievement of the performance appraisal methods are found, after having avoided errors that could decrease the credibility of the assessment.

Limitations of the performance appraisal process

Many factors from the internal and external business environment impact the performance appraisal process. As key external factors may be considered the employee unions and the law, whereas as internal factors may be considered the culture of the company and the increasing use of teams for the work execution. In Microsoft UK, there are no employee unions and as a multinational enterprise is extremely careful to any legal issues. The culture of the company, although it emphasizes employee initiatives and team work, it could be said that it is rather strict and the employee has to follow the hierarchy instead of taking independent decisions. This actually is a hindrance to employee empowerment.

Legal restrictions

The form of assessment chosen by the company should be reliable, accurate and above all legal. Otherwise, the conclusions would not be a sound basis for decisions on matters relating to personnel and potentially laws such as equal employment opportunities may be affected. Such issues arise when an employee is dismissed, demoted or his/her promotion is not realized.

Microsoft UK is particularly careful on issues such as racial, religious and sex discrimination. All employees receive equal treatment regardless of their religion, race or sex. However, it is noticed that top management positions are mostly occupied by white males.

Evaluators’ prejudices

 The problem with subjective methods is the possible influence of the outcome by the evaluators and the personality traits, ideas and opinions that they have, or even the kind of relationships they have with the evaluated employee. The training of managers that carry out assessments will help to reduce subjectivity.

So far, only the Managing Directors of all subsidiaries have received training on employee performance appraisal and although subjectivity is not reduced, it was eliminated to a large extent.

The training should be expanded to the other managerial positions since it has been noticed that subjectivity played a crucial role in subordinates’ performance appraisal.

The error of the central tendency

Some reviewers do not wish to present employees as fully effective or ineffective, and so they rate everyone near the accepted average, something that is the case in Microsoft UK. The findings provide assessments that are not comparable with themselves, and they are unsuitable for statistical analysis or other purposes.

Grace and rigor

In the first case, the assessor makes the assessment with relative ease and ranks favourably while the opposite happens with the manager that seeks to appear ‘tough’ and is negative in appraising employee performance. Effects of grace and hardness are extreme, causing grievances and problems and are usually presented in companies with vague ideal performance levels.

This is also the case with some qualitative jobs in Microsoft UK where as the performance levels were vague, the line of responsibility was also vague and the employee was subject to the assessors’ personal grace or rigor.

Intercultural effects

Everyone expects others to develop responses and attitudes based on his/her own culture. Problems appear in the cases where people from different nationalities have to work together. Microsoft is a multinational company and people from different nationalities have to cooperate. So far, there has not been a particular programme aiming at training people to work with people from other cultures.

Personal bias

Negative perceptions of an evaluator for a group of people can distort the rating they receive. For example, it has been observed that some male supervisors are unfair to women subordinates who hold traditionally male jobs. The phenomenon of discrimination between men and women is something that still exists to a lesser degree than before.

Effect of recent past

When subjective methods are used, the score is heavily influenced by the recent acts of employees, either positive or negative, which are likely to be remembered by the evaluator.

METHODS OF ASSESSMENT

Rating Scales

 It is the oldest and most frequently occurring performance appraisal method that requires the existence of an evaluator who gives a score for the performance of each employee based on a scale ranging from the lowest to the highest level. The assessment is related to the personal views of the evaluator and in some cases the criteria may not be directly related to the job. In a business, the ranking will be made by the head who chooses the most appropriate one depending on the behaviour of the worker in relation to each criterion. The responses of the assessor can be linked to numerical values allowing this way to export average scores for each employee which can then be compared. This is directly related to the reward system and salary increase. Other advantages of this method is the low development and management cost, the fact that the evaluators do not require significant training or a lot of time to complete the relevant criteria form as well as that it can be applied to a large number of employees. The disadvantages are also pretty. Prejudices, perceptions and personality traits of the head may affect the assessment to be made as well as the relationship s/he has with each subordinate. The format of the assessment form and the criteria selected might not represent or be equally important for all jobs.

This is the performance appraisal used for all Microsoft subs.

Critical Incident Method

 The evaluator observes and records very good and bad behaviours of the respective employee that occur during the period the appraisal takes place. The recorded events are accompanied by detailed and precise descriptions whereas the comments on the part of managers should be made on a daily basis. The observations are grouped based on the criterion on which such cooperativity, work quality, consistency, etc. and then conclusions for the employee are drawn, his/her strong points as well as the points that need improvement. Employers often use this method in addition to the method of rating scales method. This ensures that the supervisor thinks of the subordinate throughout the year because these events have to be accumulated. Consequently, the scores do not merely reflect the recent performance of the employee. The most useful feature of this method is to draw conclusions directly related to the job and benefit particularly the employee. In addition, it further reduces the effect of personal bias of the head when carrying out the assessment as it happens in other types of appraisal methods. The main disadvantage is the tendency of assessors to record events in the beginning of the appraisal period, followed by a blank space where they neglect their duties and when the time of appraisal comes, they observe and record behaviours. In this case, the assessor is affected by the events of the recent past and the result can not be objective. The method of critical incidents consumes much of supervisor’s time and it is relatively have a final image of the employee since this is based on recent actions and events. Of course, since many reviewers find difficult to remember all the facts relating to each employee throughout the assessment period, a calendar of critical events can be a very useful support tool for the other assessment methods.

This method has been used in Microsoft UK in combination with the rating scales method, mostly for qualitative jobs. However, all the negative aspects of it appeared as mentioned above. In addition, it has been proved inefficient for very experienced and high skilled personnel.

Field review method

Under this method, a specialized executive visits the workplace and assists supervisors in the performance appraisal process. The executive derives information about the employee’s performance, s/he processes them, and then s/he ends up with the appraisal of each employee. The appraisal report is sent to the supervisor, who makes changes, comments or notes as accepts it as it is and then communicates it to the employee. The advantages of the method is the formality of the process, greater objectivity and credibility of results since the personal element of the supervisor is limited to a certain as well as the uniformity in the assessment of employees. Although the method reduces the subjectivity of the immediate superior and exceeds his/her potential weakness of not knowing how to assess an employee, it has, however, the following disadvantages: a. the power and the role of the supervisor are reduced b. it requires an executive from the Human Resources department to know many of the characteristics of the job for which s/he will assess the employee c. it takes longer and costs more, and d. it can bring into conflict the special assessor with the immediate supervisor.

Since a lot of problems appeared in the past with the rating scales and critical incident method for qualitative jobs, this method is used in combination with them to avoid supervisor’s subjectivity.

360 Degree Feedback

 The 360th assessment is an appraisal form where someone is appraised by assessors from different hierarchical levels, departments and s/he even does self-assessment.

In the employee performance appraisals the assessors may be same rank managers, subordinates, direct or dotted managers, business executives and even external partners. In its 360th assessment, self-evaluation exists and it shows the differences from the appraisal of the others.

The results of the assessors are grouped aiming at seeing what others think on specific points of our performance in relation to what it is believed by the employee and his/her supervisor.

It is a way to have feedback on how others perceive the employee’s behaviour.

The name “360” comes from the 360th degrees of the circle. The employee gets feedback anonymously evaluated by the immediate supervisor, subordinates, same rank employees or other colleagues, customers and partners outside the organization.

The 360th assessment is considered as the most objective method for appraising the performance of employees. A unusual number of assessors per employee is from 8 to 15 people.

Balanced Scorecard

Today, the management of an organization requires the simultaneous monitoring of information regarding its performance in several areas. The economic indicators alone are not sufficient, because they reflect the economic performance of the current time, or the result of the past economic performance of the company. They do not count, i.e., the contribution of “intangible” assets that are important in a company’s distinguishment, such as the knowledge of employees, the level of satisfaction and the degree of customer loyalty, the business operations and the corporate culture that encourages innovation . The methodology of Balanced Scorecard (BSC) was created by Kapla and Norton, to provide a solution to this very problem. Based on the assumption that what is measured becomes a tool to incite shareholders to act and thereby it influences the results, the methodology proposes a set of indicators describing the “intangible” assets, and which are combined with economic indicators offering this way a more balanced outlook. Specifically, the Balanced Scorecard allows managers to observe their business through the following four perspectives, providing answers to four key questions:

– How our customers see us? (Customers’ perspective)

– Where should we be different? (Internal perspective)

– How can we continue to improve and create value? (Leadership and learning perspective)

– How do we appear to our stakeholders? (Economic perspective)

 The methodology goes beyond observation and to the drawing of conclusions on how to achieve improvement in each of these areas. With the implementation of «Strategy Maps», companies can measure, evaluate and upgrade the most critical functions, and guide in a suitable way their investment in human resource development, information systems and organizational systems and structures of providing competitive service to their customers.

CONCLUSIONS

Businesses need to remain competitive to survive in the era of free market and globalization. To remain competitive they need a continuous development of their human resources. A dynamic mechanism for development is the performance appraisal. The appraisal should be comprehensive and continuous. With performance appraisal is meant a system of reviewing and assessing the job performance of an individual or a group. However, most companies focus on the performance appraisal system of each employee whereas the performance of the team should also be evaluated.

The performance appraisal serves several important objectives. It also provides employees and the business data on current performance and is a means by which companies communicate their future expectations. The basic requirement is that the objectives of the company and the employee should be identical. It also provides information that helps in the development of employees.

Each method has negative and positive elements, therefore an appraisal system that uses a combination of different appraisal methods can be more objective and less influenced by the standard errors of the appraisal process. Microsoft UK uses combined methods which have not been proved very successful, therefore a combination of the 360 assessment and balanced scorecard is proposed since they are considered as the most effective performance appraisal methods.