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The following literature review will explore the research, thinking and findings of others in the subject of the Performance Appraisal or Review. These findings will be used in order to support the author in the writing of a management report which is designed to answer the question “What role does the non management performance review play in engaging employees and supporting the delivery of the organisations goals and targets within the store'” The organisation in question is a large retail supermarket chain and the author is looking to identify how the effectiveness of the current non management performance review enables the organisation in delivering the business goals and targets and what role it plays in engaging its employees in the organisations goals and motivating them to deliver at store level. The author will analyse and critically evaluate the literature in order to develop key research areas and define the relevant questions to be asked within the organisation at store level, to understand and answer the research question, provide the business with findings and make recommendations for improvements. The literature surrounding the subject of the Performance Appraisal is vast and suggests that this has been an area of study for many years. According to Gold (2007 p 4) some of the main purposes and benefits of appraisal are: • The Clarification of Performance expectations and standards • The allocation of rewards • The identification of learning and development needs • Career management • Counselling & Discipline • The setting of goals and targets • Improved Morale & Motivation These themes were common throughout the literature, also common were the subjects of reviewer bias,confidence and capability, the author will be interested to understand the schools of thought around the training needed to be an effective reviewer as the training currently used in the organisation is limited and delivered once only to each potential reviewer. For the purpose of this literature review the author will concentrate on the literature surrounding the topic of employee engagement in the appraisal, the setting of goals and targets, reviewer bias and the views on how reviewer capability affects the quality of the appraisal, as these are all areas that underpin the research to be completed. Improving Employee Engagement through the use of the Performance Appraisal would back up the findings in the report “Enhancing performance through employee engagement” which was delivered to the Government by David MacLeod and Nita Clarke in 2008, in this report MacLeod describes “only organisations that truly engage and inspire their employees produce world class levels of innovation, productivity and performance”. An assumption that can be made from the content of this report ,would be that there is a clear link between theories of motivation, employee performance and the Performance Appraisal. Taking Herzberg and his theory of motivation factors and hygiene factors as an example this would demonstrate the validity of the link, for instance, if the performance appraisal content covered recognition for the employees contribution to the performance of the organisation and it’s goals, and provided an opportunity for the individual to have development and career progression, then the motivation factors of the employee would be met. However if career advancement is not an output of the appraisal and the employee, whilst delivering their role to the required level or above, does not get recognised as having the ability to progress, how motivated are they likely to be' Likewise if the appraisal is used as a means of measuring performance to determine rewards, then here the hygiene factors of the individual would be met with potential pay increases and higher job security giving those motivated by these elements a reason to strive to do their best. This raises the question for the author, Is it then possible to gain employee engagement through this process, if other than praise for a job well done, the employee gains no real material benefit' This is an area of strong interest to the author and will be explored within the management report, as within the organisation to be researched the non management review does not link to pay increase or promotion opportunities, whilst the Line Manager who conducts the review is rewarded both financially and with the opportunity to develop, directly on the outcome of their annual performance review. A survey by Henley Management College and the Hay Group, cited in Marchington M and Wilkinson A (2009 p273) showed that 64% of the 400 employee’s surveyed described feeling motivated by the review process and 71% saw the performance review as about motivation. This still highlights that potentially 36% of employees leave a review not motivated and, it could be suggested, disengaged. It is suggested that this could be that the review process they were involved in gave no real rewards and was seen purely as an administration task done to fulfil the requirements set down by the HR function, or it could be that they did not receive the grade they expected from the reviewer and therefore felt disengaged by the process. The Harvard Model proposed by Beer et al (1985) recommends an appraisal system that allows two way feedback between employer and employee, this model is linked to soft HR management, and suggests the appraisal would be an open and participative event where both parties reach a mutual decision on the outcome of the appraisal, with the opportunity for both parties to give and receive feedback ,again here a link can be seen between this method of appraisal and increasing engagement, as Roberts (2003) acknowledges “the participation of employees, functions most effectively in an atmosphere of trust, open communication and equal employee treatment”. The literature suggests that this however could be at risk if the employee did not receive the performance grade they had expected or they believed that the manager conducting the review was treating them unfairly and that their peers had received a more favourable review. If reviewer bias can affect the outcome of the appraisal, what causes this bias' Bias can be seen either in the form of inflated ratings or indeed by the manager awarding a penalty that the employee felt was unfair. Amongst the reason given for the awarding of inflated ratings, managers describe, giving the employee the opportunity to improve before giving them the grade they really deserve, is this the reviewer being fair to the employee and allowing them time to meet the desired standard' Or is it in fact Line managers using this as an excuse to not confront the employee about the current performance issues' Laird and Clampitt identified this when they noted “Managers indicated a disinclination to confront employees” suggesting with this that as long as reviews were positive then employees were content with little explanation or rationale. Personality clashes, disagreements on the perceived performance between the reviewer and employee, and a lack of understanding of the purpose of the appraisal can all lead to the individual receiving what they believe to be an unfair grade. There are also suggestions that the performance appraisal does not always allow for effective communication and the meeting becomes a one sided discussion with the reviewer providing their view on the performance against a performance criteria that has previously not been communicated to the individual. The Michigan model based on hard HRM is typical of this type of review and present an opposing view to Harvard and the two way appraisal system. This model would see a more impersonal process, focused on a subjective assessment of how the employee has contributed to the organisation and the return on investments and productivity. It could be said that this appraisal would be based more on facts and figures, the delivery of key performance indicators and results, and less on the more emotive measures such as personal or behavioural traits. Could this be the process that helps eliminate reviewer bias' As the manager would be presenting the facts in the form of results from measured targets, it is a school of thought amongst some; however others believe that unless the employee fully understood the performance criteria there could still be an element of surprise and disagreement at the final grade issued. As cited in Kondrausak,J,N (2012) Grote states that the ideal performance appraisal should consist of a five step process 1. Employee performance planning – the manager meets with the employee at the start of each year to discuss goals for the year 2. Employee performance execution- employee performs his job, at the middle of the year the manager and employee meet to discuss progress 3. Employee performance assessment - the manager fills out an appraisal form and discusses it with his boss before discussing with the employee 4. Employee performance appraisal- a one hour meeting where the manager and employee discuss the both of their performance appraisals and agree how to improve 5. They set a date to reconviene to set the next years objectives If step one of Grote’s suggested process does not occur it could be argued that the individual has little or no chance of achieving a positive review as they are unclear on the targets, goals and standards expected of them. This is validated by Latham et al (2007) cited in Marchington M and Wilkinson A (2008 p276) when they conclude that “ The performance review relies on clarity in terms of the standards expected, particularly when they determine retaining, rewarding, training, transferring, promoting, demoting or terminating an individual” Grote also suggests that there should be more responsibility on the employee to seek feedback and coaching and self evaluating performance periodically, however the author would challenge, is an employee, whose performance appraisal is nothing more than a grade sharing exercise and does not influence pay or progression, likely to take the time and effort to seek feedback and coaching' Davis and Landa (1999) argue that the practice of informal, regular, communication and feedback sessions between the manager and employee are far more effective than the formal performance appraisal process. If this policy were to be adopted by Line Managers then it could be said that there would not be a point where the employee was unclear on what they were expected to achieve or indeed how they were performing against those expectations. Objective setting, according to the CIPD is done by 62% of organisations, and as described earlier by Grote this is seen to be the first step of the performance appraisal process and is designed to ensure employees are clear on the goals they are expected to achieve, this is backed up by Kondrasuk (2012) when he states “ for performance appraisals to be effective for an organisation, employees individual goals must work to achieve the bigger goals of the organisation”. It is also evident throughout the literature that the key to this is to ensure these objectives align with and support the organisations goals and strategy. This can be done by ensuring that there is vertical and horizontal integration between the organisational strategy and the human resource strategy relating to the activities that feed into the performance appraisals structure. By looking at job and person specifications, to identify if they contain the relevant content to ensure the organisation goals will be met by recruiting the individual with the relevant skills or training someone to these criteria, reviewing the training programme to understand if it is designed to deliver the correct level of skill to each individual, by asking ,is the employee engaged through the induction process in how they will be measured and monitored' Are clear, measurable objectives, that link to the overall aim of the organisation, discussed and targets agreed with the employee' Finally, is the performance appraisal designed to effectively measure the goals and objectives that the two parties have agreed' In the authors experience the fact that an employee may not understand the review system prior to being subject to it can cause distress for both the reviewer and the individual if the grade is less than favourable. It is also identified through the literature that some difficulties can arise, when deciding what to measure. Often due to the variety of jobs in large organisations it is asked can one performance appraisal system fit all. An area that the author will explore through analysis of the current material available in the organisation. Using the Michigan model in designing the appraisal can be sometimes be simpler, if key performance indicators can be identified, targets can be set and the individual will be measured against these, providing a clear structure for both parties, this system would be more challenging in a role where there were very few measurable outputs and the appraisal needed to be based around key behaviours and leadership. Utilising the 360 degree review and involving others in the appraisal it is said can be a benefit in this case, agreeing the grade with other managers, colleagues of the individual or indeed seeking feedback from customers to allow for a balanced assessment of their performance. Line Manager capability and confidence in delivering the appraisal process forms a key enabler to the meeting being a success, it is said by many that if those conducting the appraisals do not have the correct skills then the results will be less than ideal and the reviewer and individual could be affected both in the sense of time wasted to carry out the process and the level of engagement gained from the content delivered. The majority of authors stated that the reviewer must be trained both in observing and gathering data for the appraisal and also in how to deliver the feedback and agree and set objectives. Kondrasuk et al (2012) also suggest that appraisal training should be frequently updated and should involve aspects such as giving and receiving feedback, personal bias, active listening skills and approaches to deal with conflict resolution. Reviewers it is noted may have difficulty addressing issues relating to personal or behavioural traits and where the weak performance issue identified could lead to a grade which affects either a pay award or job security then avoidance can often be the route taken. This brings back the subject of different managers awarding different grades which could lead to inconsistency across different areas of the organisation and ultimately lead to grievance and appeals from employees dissatisfied by the grade they are given and disengaged by the performance appraisal process. Summary The literature draws the author to the conclusion that to gain employee engagement through the review process then, as many of the studies in this field suggest, it is first key to have the relevant performance appraisal system in place. Employees need to be involved in a clear objective setting process where both the individual and the manager are clear on what the performance appraisal will review and how this will be measured and graded. Regular feedback systems in place enhance the performance review process and prevent the issues relating to grade disagreements. Key to the performance review being a success it is also evident from the literature that the reviewer needs to be trained and confident to deliver and has the ability to conduct a two way process which involves both the giving and receiving of feedback. These are the key areas the author will now research within the organisation to understand how the current Performance Appraisal system is working.