The Business Case
Performance appraisal is part of performance management, and plays a critical role in encouraging employees to adopt desirable performances. Virani (2012) defines a performance appraisal as the “systematic and objective way of judging the relative worth or ability of an employee in performing his job” (p. 1). This report analyses the performance appraisal at Samsung Electronics – a Korean company.
As a player in the competitive information technologies (IT) industry, Samsung strives to hire and retain some of the best IT talent available globally. Like most businesses, however, Samsung seeks to retain the best performers, encourage the average performers to enhance their performances, and fire employees who do not perform well (Samsung, 2013). To do the foregoing, the company has a performance appraisal system that involves self-evaluation, competence evaluation and performance evaluation.
One of the main benefits of performance appraisal at Samsung is that, the company is able to adopt a performance-based compensation approach (Samsung, 2013). Performance-based compensation is, however, awarded in bonuses, and/or promotions, because as Samsung (2013) indicates, its payment system is non discriminatory.
As such, employees working in the same position receive equal pay regardless of their nationalities, age, gender or other points of diversity. Samsung (2013) however, underscores the importance of individual performances, because they determine the reward that an employee gets. Such rewards are given in the form of merit-based pay. Bae, Rowley and Sohn (2012) indicate that at Samsung “merit pay increases individual compensation based on competence and performance” (p. 155). In order to determine personal competences and performances among its employees, Samsung conducts annual performance appraisals.
Impact of performance appraisal
Performance appraisal methods used at Samsung
Samsung uses the ‘absolute standards approach’, which, according to Lunenburg (2012), provides a “detailed description of the actual behaviour necessary for effective performance” (p. 3). Specifically, Samsung uses checklists, which are a common method in the ‘absolute standards approach’ of appraisal. Checklists are used in three methods, namely: self-assessment, competence evaluation, and performance evaluation.
Self-assessment
In this method, employees are given the mandate to gauge their own performances. They are required to fill the self-appraisal forms annually, and send them to their supervisors. The supervisors then use an ABCD grading system, where ‘A’ denotes excellent performance, while ‘D’ denotes poor performance (Bae et al., 2012). The results obtained from self-assessment are used in education (specifically in training and development programs), and in job rotations. Through self-assessment, employees understand whether they are meeting job-related expectations.
Additionally, self-assessment enables employees to assess their contribution to a job. Moreover, employees are able to identify their strong areas of performance, while pinpointing areas that could benefit from training programs (Bae et al., 2012). The foregoing is important because it helps employees at Samsung to be self-directed, and much as it benefits the organisation, self-assessment also benefits employees since they are able to plan for their professional development and careers.
Competence evaluation
At Samsung, competence evaluation is done once a year among all employees (Bae et al., 2012). Evaluations are conducted by the supervisors and executives using relevant checklists. The evaluation involves appraising employees on “knowledge, skills, abilities and other characteristics” (Bae et al., 2012, p. 152). Like self-assessment, competence evaluation uses an ABCD grading system with ‘A’ denoting excellent performance, while ‘D’ denotes poor performance. The results obtained from competence evaluation are critical to promotions of employees at Samsung.
Performance evaluation
At Samsung, performance evaluation is conducted twice annually by supervisors and executives in the company. All employees undergo the performance evaluations, since they (evaluations) are used to determine individual performances on “tasks, duties and responsibilities” as indicated in relevant checklists (Bae et al., 2012, p. 152). Once again, the ABCD grading system is used, and as Bae et al. (2012) notes, the results of performance evaluation are critical to the issuance of promotions and bonuses.
The role of human resource (HR) personnel in performance appraisal
The role of the HR personnel at Samsung in relation to the performance appraisal system is perhaps best reflected in the fact that performance appraisal is deemed part of the larger human resource management (HRM) system. Bae et al. (2012) note that the current performance appraisal system, was designed by the HR personnel for incorporation in the new HRM policies.
The HR personnel at Samsung also work with department managers/supervisors to enhance the adoption of the new system by employees. At Samsung, for example, there was a risk of resistance by employees when the new system was put in place, but the HR personnel managed that risk effectively (Bae et al., 2012).
The HR personnel also have a role to constantly assure employees that the performance appraisal system is not meant to prevent them from working together. This is especially critical because of the strong Korean labour unions, which have argued that the new performance appraisal methods are dividing workers along self-interested pursuits, rather than encouraging them to work for collective goals (Bae et al., 2012).
The HR personnel further have a role of ensuring that employees are provided with learning and development opportunities. The content of the learning and development programs is based on the skills gaps, or areas where knowledge is deficient as identified by the HR personnel when analysing performance appraisals. Bae et al. (2012) further notes that, the HR personnel have a role to go through the performance appraisal checklists for purposes of identifying top performers, endorsing them for promotions, and identifying the best incentives that can be used to improve and retain the best talent that the company has.
Overall, it would seem that the role of HR personnel in performance appraisal starts right from the development of an appraisal system, to its administration. Critiquing the results of the performance appraisal and using the results to develop policies and activities that enhance the human resource of the company, is also the role of the HR personnel. They also recommend bonuses and merit-based pay for good performers.
The strategic role of performance appraisals at Samsung
The effects of performance appraisals at Samsung are wide-reaching. Bae et al. (2012) for example, note that such appraisals form the basis of merit-based pay. The foregoing is significant because Samsung had in the past decade, shifted to a pay system that recognizes and rewards individual performance and effort. Strategically, the company uses performance appraisals to encourage its employees to perform better and as a result, make Samsung a better performer compared to its competitors in the IT, electronics, and device solutions markets (Samsung, 2013).
Specifically, Samsung aims to “secure its position as a global electronics leader through creative business strategies that aspire (sic) future innovation and create opportunity for people around the world” (Samsung, 2013, p. 3). To meet the aforementioned aim, Samsung recognises the important role that its employees have to play, hence the need to appraise them, train them when the need arises, and inspire them to enhance their performances.
The role of performance appraisal on employee motivation and productivity
At Samsung, performance appraisals are used to help employees understand what is expected of them. Additionally, the self-assessment checklist helps employees gauge their skills, and indicate areas where they can benefit from more training. An example in Samsung is whereby, employees are asked to indicate which areas they think/feel they can benefit from further training.
Moreover, through checklists used in both competence and performance evaluations, the HR personnel identify employees whose performance is exemplary, and who have the skills, knowledge and abilities to handle larger roles in the company. Performance evaluation is also used as the basis of awarding bonuses to well-performing employees. For example, Samsung’s HR department uses performance appraisals, as the basis for promoting employees, and awarding bonuses to others.
The foregoing not only encourages competitiveness in the workplace, but also motivates employees to put in more effort in their respective jobs. Performance appraisals also improve productivity by: identifying skills that would benefit from training; encouraging people to work harder in order to benefit from bonuses; and enhancing hard work in view of possible job promotions and career progression. Arguably, performance appraisals also discourage unproductive behaviour because every employee wants his performance to receive good ratings.
Performance appraisal and automated systems
A search through Samsung’s publicly available documents reveals that the company does not go into details about whether it has automated its performance appraisal systems. Being in the IT industry, however, one would expect that the checklists are at least computerised.
How automation helps with performance appraisals
The foregoing means that employees, supervisors and executives do not fill the checklists manually, but via a computer program. Automating the appraisal systems has several advantages. For example, the performance appraisal checklists are standard for all employees holding the same job titles (Cohen & Hall, 2005). The foregoing makes the appraisal systems easy to administer and analyse. Automation can be effected in a manner that enables email notifications to each employee, reminding them to fill their annual self-assessment checklists.
The foregoing is a good way of enhancing accountability and ensuring that every employee fills their checklist. An additional advantage is that automation makes data aggregation easier, and this enhances the supervisors’ and executives’ abilities to review performances effectively and efficiently (Cohen & Hall, 2005).
An easier review guarantees faster issuance of feedback, and targeted development planning (e.g. when developing training programs for employees). Automating the appraisal systems also makes it easier to align employees based on their performances. Additionally, automation makes it easier for the HR department to access appraisal data and use it to forecast future HR needs and plan for the same (Cohen & Hall, 2005).
Challenges of automated appraisal systems
The automation of appraisal systems at Samsung has its fair share of challenges. As Cohen and Hall (2005) indicate, automation of appraisal systems brings about a remote way of gauging how well the employees are performing their duties. It can therefore minimise the face-to-face interaction between employees and supervisors/managers. Automated feedback may also not have the same effect as face-to-face feedback.
Cohen and Hall (2005) also indicate that some employees do not consider automated appraisal systems as trustworthy; hence, they may consider the reviews based on the same as unfair. To remedy such a situation, Samsung might need to ensure that all its employees have full confidence in the automated performance appraisal system.
Reflection
The learning experience
The process of researching and writing this report presented a learning experience, mainly in the form of understanding the importance of appraising job performances. It is now clearer that appraising performance is not only a way through which the organisation ensures that employees are performing as expected; but is also a way through which employees can be motivated to perform better and even stay at the company longer.
It is also clear that automating the performance appraisal systems have several advantages, which include making the appraisal system easier to administer. Additionally, automation makes analysing the appraisal results much easier. Overall, it appears that Samsung has strategically used performance appraisal as part of the larger performance management system, which it uses to ensure that it has the necessary HR capital needed to attain its aims and objectives.
Challenges
One of the main challenges in researching and writing this report was in getting relevant information from Samsung. Understandably, profit making companies like Samsung do not disclose all information to the public due to competitive reasons. Luckily, the book authored by Bae et al. (2012) and the annual report authored by Samsung (2013) provided critical details that were important in understanding how the company conducts its performance appraisals.
A clear understanding of what Samsung does (i.e. using technology in the creation and development of IT solutions and consumer products), made it easier to link the company with automation. Hence, the report argues that even though there are no details about its automation of the performance appraisal systems, it should be expected that the Samsung has in the least, computerised them.
Reference List
Bae, J., Rowley, C., & Sohn, T-W. (2012). Managing Korean business: organisation, culture, human resources and change. New York: Routledge.
Cohen, A. J., & Hall, M.E. (2005). Automating your performance and competency evaluation process.
Lunenburg, F.C. (2012). Performance appraisal: methods and rating errors. International Journal of Scholarly Academic Intellectual Diversity, 14 (1), 1-9.
Samsung. (2013). Samsung electronics 2013 sustainability report.
Virani, S. R. (2012). An analytical study of performance appraisal system of the selected information technology enabled services (ITES) companies. International Journal of Multidisciplinary Research, 2 (5), 135-145.