The document describes three case studies of companies that improved their performance appraisal systems: 1) ALZA Corporation automated their lengthy, manual system, reducing appraisal time from weeks to days and saving $300,000 annually. 2) Xerox developed a three-stage system with goal-setting, feedback, and development planning instead of subjective ratings, increasing employee understanding and satisfaction. 3) HSL Bulgaria aligned objectives and feedback across levels, finding employees understood link between performance and compensation. Regular communication and participation led to engagement improvements.

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Performance Appraisal
Effectiveness
Doaa Althalathini

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 Performance Appraisal is one of the most important
managerial processes.
 Each company try to have an effective appraisal system.
Job relatedness.
Standardization.
Training to appraises.
Open communication.
Employee access to results.
Document the results.
Recognize and celebrate employee’s achievements.
Effective Performance Appraisal

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Case # 1

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ALZA Corporation
 ALZA is the leading provider of drug delivery systems.
 It develops and manufactures pharmaceutical products
that enhance healthcare for millions of patients worldwide.
 Founded in 1968 by Dr. Alejandro Zaffaroni.
 Employs about 10,000 people during 20 years.
 Alza was acquired by Jonhson & Johnson in 2001 in a
transaction worth US $10.5 billion.

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Previous Appraisal System
 ALZA is tying reward bonuses, salary increases and
promotions to employee performance ratings.
 In the early 1990’s, the company had a numerical
ranking system that provided senior level executives with
results to make decisions about rewards and promotions.
 However, there was a flaw in the system in that
manager subjectivity tended to taint results.

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Previous Appraisal System
 ALZA then created a multi-rater assessment tool.
 They believe that most jobs require accountability to
people other than single supervisor and feedback from many
observers.
 Provided not only ranking but also objectives
and statistically reliable results.
 The system worked well for a number of years but as the
company grew in size, the complexity of manually
gathering information demands on raters involving in the
appraisal process.

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The Problem
 As ALZA grew, the complexity of managing all this
data enormous.
 Some raters were evaluating 25 co-workers at a time.
 Human resources spent a great deal of time following up
with employees and managers regarding the status of their
evaluations.
 This caused fatigue and diminished
motivation to participate in the process.

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Automated Performance Appraisals
 ALZA decided to consult with software development
company.
 ALZA learned that it could create an on-screen ranking
system and capture quality data from it.
 They designed a system with easy-to-use instructions that
simplified the rating process “first version was Visual 360”.

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Automated Performance Appraisals
 ALZA rolled TotalPerformance out to its entire
workforce during its annual fall performance appraisal cycle.

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Automated Performance Appraisals
 ALZA gives sufficient training programs to the
participants.
 The more clear information the employees have on
the process and what it is being used for, the more
trust can be established.
 It’s not allowed to managers to change raters
without justification and notification to the
employees affected by changes.

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The Results
 Time Savings: Employees are able to perform their normal
jobs functions during the review cycle.
New
Appraisal
System
Old Appraisal
System
Performance Appraisal Cycle. 9 days 6-8 weeks
Hours taken to rate 10
employees on 8 rating factors.
1 hour Average 5 hours
Time spent by managers to
prepare summary evaluation
using feedback from direct
reports.
15 - 30
minutes
4 hours
Managers completed appraisal
On planned
time
up to 18 months late. Employees
waited up to two years for pay
increases.

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The Results
 Lower administrative requirements:
 One person in HR can manage the process. He can set
up the system “Specifying participants, grouping ratees,
assigning competencies” in two –three hours.
 It takes 20 hours per week to manage the process
where previously it required full-time.
 HR employees now spend 80% less
time administering and managing
a similar cycle.

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The Results
 Savings cost:
 Save about approximately 300,000$ per
appraisal cycle.
 Save the company paper and photocopying
costs.

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The Results
 Optimize the data collected by TotalPerformance
by producing reports that previously were impossible to generate.
 This give a clear and precise picture of goals attainment at any
given point of time.
 It was able to align rewards and recognition
program with the actual performance results of
The employees.
 Thais contributes to the overall effectiveness
of ALZA organization.

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Case # 2

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Xerox corporation
 In the mid-1980s Xerox corporation was faced
problems with its performance appraisal system:
1. performance appraisal system was not working.
2. Rather than motivating the employees, its
system was leaving them discouraged and
disgruntled.
Xerox recognized this problem
and developed a new system to
eliminate it.

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Previous Appraisal System
 The original system used by Xerox encompassed
seven main principles:
 The appraisal occurred once a year.
 It required employees to document their
accomplishments.
 The manager would assess these
accomplishments in writing and assign
numerical ratings.

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Previous Appraisal System
 The appraisal included a summary written
appraisal and a rating from 1 (unsatisfactory) to
5 (exceptional).
 The ratings were on a forced distribution,
controlled at the 3 level or below.
 Merit increases were tied to the summary rating
level.
 Merit increase information and performance
appraisals occurred in one session.

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New Appraisal System
 Xerox formed a task force to create a new system.
 The members of a task force are: senior human
resources executives, consulted with councils of
employees and a council of middle managers.
 Difference form the new & old one in many key
respects:
1. The absence of a numerical rating system.
2. The presence of a half-year feedback session.
3. The provision for development planning.
4. Prohibition in the appraisal guidelines of the use of
subjective assessments of performance.

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New Appraisal System
 The new system has three stages, as opposed to the
one-step process of the old system.
The first stage:
 Occurs at the beginning of the year when the
manager meets with each employee.
 They work out a written agreement on the employee’s
goals, objectives, plans, and tasks for the year.

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New Appraisal System
The second stage:
 Occurs at a mid-year.
 Mandatory feedback & discussion session between the
manager and the employee.
 Progress toward objectives and performance strengths
and weaknesses are discussed, possible means for
improving performance in the latter half of the year.
 Both the manager and the employee sign an “objectives
sheet” indicating that meeting took place.

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New Appraisal System
The third stage:
Take place at year’s end.
 Both the manager and the employee prepare a written
document, stating how well the employee met the preset
performance targets.
 They then meet and discuss the performance of the
employee, resolving any discrepancies between the
perceptions of the manager and the employee.
 A developmental planning session in which training,
education, or development experiences that can help the
employee are discussed.

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New Appraisal System
 A follow-up survey was conducted the year after the
implementation of the new appraisal system. Results were
as follows:
1) 81% better understood work group objectives
2) 84% considered the new appraisal fair
3) 72% said they understood how their merit raise was
determined
4) 70% met their personal and work objectives
5) 77% considered the system a step in the right direction

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Conclusion
 It can be clearly seen that the new system is a vast
improvement over the previous one. Despite the fact
that some of the philosophies, such as the use of
self-appraisals, run counter to conventional
management practices, the results speak for
themselves.

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Case # 3
HSL Bulgaria Company

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HSL Bulgaria Company
 “HSL Bulgaria is a local company, a subsidiary of
HSL International (multinational company), it has
been established in 90’s with a business strategy to
build a retailer network in Bulgaria.
 The company business plan was to establish a
network of over 100 outlets and today HSL has
exceeded its target and has a leading position in its
industry.
 In 2009 “HSL –Bulgaria has won second place in
the Best Employers survey amongst 91 participants.

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Performance Appraisal Effectiveness
 The company management believes that the
effectives improvement of the individual
performance brings improvement of the overall
business performance of the organization and
creates a performance driven environment.

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Performance Appraisal Effectiveness
 Managers and team leaders confirmed that there
is:
- continuous work with the employees in areas of
communication.
- Inform people about future plans, business
results, new projects.
- Ongoing dialogue between staff and management.
- Employees can ask questions, challenge the status,
come up with suggestions and new ideas.

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Performance Appraisal Effectiveness
 Appraisal system in “HSL Company: combined
methods in their performance appraisal system
- Management by Objectives.
- Behaviors assessment.
- Ranking employees based
on relative comparison.
- Reward decision at the
end of appraisal cycle.

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Performance Appraisal Effectiveness
 Performance Appraisal Structure:
- Identify and formalize the personal
objectives derived from the organization objectives.
- Mid term performance review (review performance
against objectives, identify gaps, discuss strengths
and weaknesses and future opportunities).
- Clear and constructive feed back ( Manager
communicates to staff (Discuss the manager's
observations and outcomes) . .
- Performance Rankings .
- Remuneration review (An effective reward policy
monetary and non-monetary reflects and support the
company’s strategy).

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Performance Appraisal Effectiveness
 HR Specialists in the company believe that in
order to be productive the performance appraisal
should be aligning the interests of the employees
and the organization so they decided to assess and
analysis the appraisal system, Opinions and
attitudes of employees regarding the process
 Data Collection:
-Questionnaires method : 41 employees.
Different types of questions :
-Demographic Information: ( Age, Gender,
Professional level).

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Performance Appraisal Effectiveness
- The employee’s attitude towards work, opinion
of the performance appraisal , clear
understanding of the process and the level
satisfaction and engagement with the company.
- Understanding the clarity of the performance
appraisal and feedback.
Interview Method: Find some information about the
structure of the performance appraisal (Managers,
employees).

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Performance Appraisal Effectiveness
 Summary of findings:
- The Company does a good job to make people
aware of objectives and outcomes of the PA
process.
- The company makes good use of performance
appraisal, links successfully companies-
employees objectives.
- Managers skillfully provide feedback to employees.
- Employees in the company mostly believe that
their manager’s judgments are fair and objective.
- 95% of employee believe that positive performance
appraisal should lead to salary increase.

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Performance Appraisal Effectiveness
- All employees believe that positive performance
assessment should lead to employee promotion.
- 88% of employees believe that their work is
linked to the profitability of the company.
 Recommendations:
- Set goals effectively.
- Preparation is the Key.
- Focus in development.
- Open and honest feedback.
- Line Manager’s role.
- Appraisal discussions.

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Performance Appraisal Effectiveness
- Performance review frequency.
- Proper Performance Recording.
- Ensure ongoing process, Full participation and
success.

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Performance Appraisal Effectiveness
 Conclusion:
- Engaged employees are not only motivated to work
they also know what and how to do more
effectively because they know the strategy and
company objectives
- More engaged to the company people are, the better
financial results are likely to be achieved.
-Raising and maintaining employees engagement lies
in the hands of an organization and requires a
balanced blend of time, efforts, commitments and
investment.

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Thanks