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9. Performance Appraisal
Most organizations have some form of performance appraisal of their employees. The appraisals are usually carried out once a year. The manager makes an evaluation of the performance of the subordinate. This involves filling out a form or writing a report on the person concerned. After this, there is a meeting at which the two parties discuss the appraisal. A performance appraisal is, then, a judgment on how well a person is doing his/her work.
Appraisals help organizations to reward staff properly. They are useful when decisions have to be made about salary increases and bonuses. They are needed when managers are considering transferring or promoting staff. In these situations, they provide up-to-date information about an individual's performance, skills and career objectives.
An important purpose of appraisals is to give the subordinate feedback on how he/she is performing. The manager can talk to the subordinate about the strengths and weaknesses of his/her performance. Не/She can also discuss how the subordinate can learn to work more effectively. At appraisal interviews, subordinates can not only talk about their future, but also seek guidance from the manager. The interview may help them to think more realistically about their goals.
There are many methods of evaluating a person's performance at work.
A traditional method has been to give a 'rating'. The subordinate's evaluation is based on traits — qualities - that he/she shows in his/her work. Subordinates are judged on such things as knowledge of the job, reliability, cooperation, punctuality, initiative and sense of responsibility. The manager rates the subordinate by marking a letter or figure on a scale.
However, the most popular form of appraisal, in Britain and the United States, is Management by Objectives. This appraisal is based on a person's performance, and how well he/she is achieving his/her goals. The manager and the subordinate agree on a certain number of objectives, which should be achieved in a given period of time. The focus is on results, not personality traits.
Another appraisal method is worth mentioning too. This is the Critical Incident Method. With this system, the manager keeps a record of good and unsatisfactory examples (incidents) of a person's work. These are kept in a file and reviewed with the manager when the interview takes place. An advantage of the system is that the manager has to think about the subordinate's performance throughout the year.
In spite of the need for performance appraisals, people do not like them. Many managers see appraisals as their most unpleasant duty and those who are appraised rarely have a good word to say for the system used by their organization. One problem is that the manager is expected to criticize the subordinate and to give guidance at the same time. Many people are naturally suspicious of appraisals. They think managers are trying to find out their weaknesses, so they are on the defensive. Moreover, managers are often unwilling to say that a subordinate's performance has been 'outstanding' or 'bad'. So, the individual is described as being 'just above average'. This means that high fliers in the organization do not get a good enough evaluation while the work of poor performers may be over-valued. Finally, many managers do not like to criticize, in writing, a subordinate with whom they are working closely, day-by-day.
Appraisal can be a valuable process. At the interview, the manager should act as a guide to the subordinate, not as a judge. The purpose of the interview should be to discuss how the individual can 'grow' in the organization, and make an effective contribution. The situation allows both parties to review the work of the individual and fix realistic targets.
10. Centralization & Decentralization
Alfred Sloan (1874-1966) was an outstanding figure in the business world of America. He worked for forty-five years in the General Motors Corporation (GM). Sloan published an account of his career with the organization. In it he described some of the managerial problems he had had, and how he had dealt with them.
According to Sloan, every large enterprise has to face one major problem. It must decide how much it wishes to centralize or decentralize its business. The terms refer to the degree of authority that is given to various levels of management and to the divisions of an organization. When we talk about centralized and decentralized businesses, we mean the extent / degree to which authority has been passed down – delegated – to lower levels or divisions of an organization.
When an organization is centralized, a limited amount of authority is delegated. If it is decentralized, a greater degree of authority is given to staff and divisions. In a decentralized company, the divisions will have wider responsibilities and authority and more important decisions can be made at lower levels. There are fewer controls from Head Office.
To sum up, a centralized business has a 'tight' structure, whereas a decentralized business has a 'looser' structure.
No enterprise chooses complete centralization or decentralization. In practice, it tries to find a balance between the two forms. Fox instance, Head Office can control things like cash, capital expenditure and stock control. The divisions will have a great deal of autonomy, being responsible for designing, making and marketing.
Nowadays, decentralization is the fashion, the 'buzz' word. Believers in decentralization say that it helps to 'develop people' because staff get more responsibility, make more decisions, and so gain experience for later managerial positions. Decentralization allows top managers to delegate jobs, so these managers will have more time to work on setting goals, planning corporate strategy and working out policies. If an organization is too centralized, people become robots – which is demotivating. The strongest argument foe decentralization is that, in competitive conditions, the ‘looser’ companies will be more flexible, better able to make quick decisions and to adapt to change.
It is normal for people to like independence, to dislike control. The more educated staff is, the more they will want to make decisions, to have authority. However, it is not easy to have more decentralization if the right staff is not available. It is one thing to prescribe diversity, decentralization and differentiation, and it is another to manage it.
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