Employee performance appraisal practices depend strongly not only on the type of management but the industry and size of the organization where they are applied. Manufacturing companies may measure production output basis, service-oriented companies value customer satisfaction ratings, while sales measure performance through sales totals. A relatively universal employee performance measurement is performance ratings, assigned by a manager or using a combination of ratings from peers and supervisors. It provides a quantifiable number that is used for comparison to other employees and can be tracked over time.
Organizations commonly rely on line managers to directly implement performance management systems and engage in setting goals, feedback, and performance appraisal. The effectiveness of performance appraisal by line managers depends on three major factors of ability, motivation, and opportunity (AMO). Managers must have the ability to enact relevant performance management, be motivated to perform said activities, and be provided an opportunity to fulfill them without conflict from other organizational activities. This approach has been found to be associated with increased satisfaction from employees on performance measurement.
Traditional performance appraisal has come under much criticism in recent years, and there is dissatisfaction with some aspects, such as bureaucratic methods and the use of ratings of appraisal mechanisms. Administrative and bureaucratic controls manifest in traditional performance appraisal through means of evaluating measurable outputs (such as sales) and connecting them with an economic incentive. However, work settings are dynamic, and it may be difficult to apply controls to every action by an employee, in addition to the scope of whether an employee is working alone or in a team – may assist or harm managerial priorities. HRM should be more innovative, but rather than abandoning traditional elements altogether, and the process should evolve. The primary change that should occur is making employee performance appraisals not once a year event with symbolic significance but rather a continuous dialogue between employees and line managers. This will undoubtedly affect the quality of managerial skills and redefine the roles of HRM in terms of appraisal and organization.