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How do firms use performance appraisals? What is the difference between a performance appraisal system built on a relative or an absolute judgment format? What are the advantages and disadvantages of each format?
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Managing Human Resources


Edition: 8th
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An honest man in politics shines more there than he would elsewhere - Mark Twain
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Summary of suggested answer -
Firms use performance appraisals for administrative and developmental purposes. They are used for making decisions such as promotions, and terminations. They are also used to provide employees with feedback and to determine training needs.
Relative judgment-based systems evaluate employee performance by comparing employees to one another. Ranking is a common tool. The advantage is that it forces managers to make distinctions. Sometimes supervisors' unwillingness to do this destroys the effectiveness of the performance appraisal process. Most HR professionals see several disadvantages with this system, such as: ratings are not comparable, employees tend to be grouped, and it leads to conflict among employees.
Absolute judgments simply evaluate employee performance on an individual basis against specific criteria. Its advantages are: ratings are comparable, standards are concrete, it avoids creating conflict among employees. But there are some disadvantages: workers tend to receive the same ratings, interpretation of standards varies among managers.
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