Performance measurement and evaluation
Tools for measuring and evaluating performance can be found in almost every large organization. However,performance evaluation is time-consuming and expensive. So, why are performance evaluation systems that important to organizations? How useful are they and who should play a role in the evaluation? Performance evaluation is an important managerial instrument and sends a signal for both, employees and managers. Here it is important, that these signals are consistent with the organizational culture and that both the process and results of the evaluation are viewed as fair by the people evaluating and those being evaluated. When this occurs performance evaluation systems can help analyzing the employees’ competences and abilities, as well as communicating organizational goals and strategies to the work units. But if the individual or group performance is not evaluated accurately, then this has been proven to have negative consequences for the individual employee and for the entire organization. In organizational units that are being assessed by their performance, managers have an incentive to overestimate their employees’ performance to present their team as performing especially well. But in case the manager feels threatened by his/her employees’ competence, this can be a reason for presenting their performance in an evaluation as worse than it actually is. To successfully integrate an evaluation system into an organization it is therefore important to give incentives to the managers so that they evaluate their employees accurately. This has been shown by our research.
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- Friebel, G., & Raith, M. (2004). Abuse of Authority and Hierarchical Communication. The Rand Journal of Economics 35, 224-244.