Performance Appraisal in Service Industry 6000 words












What role does performance appraisal play in innovation and employee turnover in a service industry?



Table of Contents


  1. Introduction. 3

1.1 Aim.. 5

  1. Literature review.. 6

2.1 Types of Performance Appraisal methods. 7

2.1.1 360-degree Feedback. 7

2.1.2 Management by Objective. 8

2.1.3 Strength Based Approach. 9

2.2 The concept of innovation. 11

  1. Research Methodology. 13
  2. Findings and results. 13

4.1 Case study 1; Strength-based Approach at Standard Chartered Bank. 13

4.2 MBO approach at Lewisham College. 15

  1. Conclusion and recommendation. 18

Appendices. 20

References. 27







1. Introduction

Performance appraisal has been one of the most important aspects of human resource management in recent years because of the benefits organisations gain in carrying out the process. This aspect of human resource has been important to organisations in planning, organising, controlling and managing employees in the organisations. Evaluating the performance of employees serves as a planning tool for an organisation to use to be able to provide and manage resources in and organisation.

Performance management has a direct and indirect relationship with other aspects of an organisation. Performance appraisal can play a role in innovation and employee turnover – if not directly, then indirectly. An organisation that learns is an organisation that encourages innovation and creativity. These types of organisations tend to attract and retain their employees. Therefore, evaluating the performance of employees is very much important for an organisation to carry out in order to identify those aspects of an organisation that are being affected by employee performance. Management carry out performance appraisal in order to give feedback and also to identify training needs. Identifying employee needs and putting them in place encourage employees to continue to work in the organisation. An employee’s reward is determined by their performance which makes this tool a very important strategy for management. A lot of organisations today fail because they have ignored the role an employee plays in keeping them in business: any business is its people.

The service industry needs this tool in order to evaluate employees and to find out if there are any problems. Evaluating employees’ performance will help the company to know what they have to do to improve on those aspects that are not going right. Employee training cannot take place without identifying specific training needs. In order to identify training needs, the organisation needs to know employees’ performances and also what area they need to improve on. The training and learning process leads to the employees being creative and reduces the number of employees leaving the company. This is a continuous process that is carried out in a company from time to make sure that everything is going according to plan and runs efficiently. Performance appraisal can be used by managers to decide on empowering of employees. Empowerment is one of the most effective methods companies can use to encourage innovation. The rate at which employees leave the company might be determined by carrying out performance appraisal. Poor performance from an employee may mean they are not satisfied with their roles or they are not well trained. The company will be losing a lot of money in the form wages on employees who have poor performance. This is one of the reasons why the recruitment and selection process should be carried out carefully and with some details.

This report will give an overview of some concepts and overview of performance appraisal. It will also look at three main performance appraisal methods that organisations can use in evaluating employees’ performance. The three main methods the report will be looking at includes: 360-degree framework, Management by Objective, and strength-based approach. The three methods are similar in that they give feedback on employees’ performance and identifying training and development needs.

This resource was carried out using both primary and secondary information. Information from secondary sources will include books, journals and other internet sources. In order to support the literature review on the first part of the report, this report is going to look at two case studies relating to the topic. The first case study with be based on secondary information and research that has already been carried on Standard Chartered Bank. This case study will show how using strength-based performance appraisal method has played a role on employees’ creativity and innovation as well as low employee turnover. The second case study will be looking at a primary research that was carried out in a Lewisham College. A sample size of thirty-one employees in the school will be given questionnaires to fill out. This will be used to give an analysis on how performance appraisal has affected the school’s creative and innovative ability. The conclusion and recommendations will be given at the end of the report.








1.1 Aim

The main aim of this report is to;

  • Give a clear understanding of what performance appraisal is about
  • Outline why companies carry out performance appraisal
  • Outline and explain the different types of performance appraisal methods that are most common in organisations today
  • Give the relationship between performance appraisal and innovation.
  • Give the relationship between performance appraisal and employee turnover
  • Find out if performance appraisal can help to retain employees in and organisation
  • Know how to measure employee turnover














2. Literature review

Performance Appraisal is a tool used by management in and organisation to evaluate the performances of employee for feedback and career development (Mullins, 2002). This tool is used by most companies to identify strengths and weaknesses in their human resource and make adjustments where necessary (Mathis et al, 2003; Mullins, 2002). Different companies use it for different purposes. Some companies use it to identify training needs while others use it as a way to allocate rewards and benefit (Mathis et al, 2003). Bonuses of top managers are based on what they have achieved and their contribution to the performance of the company as a whole (Mullins, 2002). This is there for used to determine what percentage of bonuses and types of incentives the employees are entitle to get during a particular period. Performance management helps organisations to set out action plans for the future in order to improve on efficiency in the company. This is used as a guideline in most company to guide and manage career development. In most cases, performance appraisal is carried out by managers and supervisors in a company where information about the value of the employee in the company is obtained, analysed and recorded to determine performance (Marchington and Wilkinson, 2005). Performance appraisal in itself is not performance management but classified as one of the tools that are used by management to manage performances in a company (Marchington and Wilkinson, 2005). Managers should therefore understand the important role performance appraisal plays in performance management and make sure the process is carried out more effectively and efficiently (Armstrong, 2000). The process of performance appraisal should be one where managers are engaged in dialogues about employees’ performance, development and support (Armstrong, 2000). This process is a review of the employees’ past behaviour by looking at past performance. This can be used by the company to create plans for improvement development in order to make the future of the company better than it is (Bratton and Gold, 2001;

The main aim of the performance appraisal is as follows

  • The main aim is to give feedback about employees’ performance and making sure they understand it (Armstrong, 2000; Rothwell and Kazanas, 2003)
  • It can be used to identify training needs for employees and also make sure there are available resources for these needs (Mullins, 2002). These training needs are important for employees self development and also to improve the company’s performance as a whole
  • It is a tool that is used by management to allocate bonuses and other rewards to employees and managers (Armstrong, 2000; Mullins, 2002)
  • It is also used as a tool to encourage communication in a company between the managers and employees (Mullins, 2002; Rothwell and Kazanas, 2003)
  • It can also be used as a tool to encourage innovation through providing training for employees and empowering them to make them more creative


2.1 Types of Performance Appraisal methods

The three main types of performance appraisal methods to be discussed include; 360-degree feedback, Management by Objectives, and Strength-Based Approach.

2.1.1 360-degree Feedback

This is a method of performance appraisal where information about an employee is taken from the employee’s peers, subordinates, supervisors and in some cases customers and stake holders (Hazucha et al, 2006). This method is mostly used by a company to plan for promotion and large rewards (Fleenor et al, 2008). This gives the company an idea of how the employee relates to its peers and customers as well as immediate environment. Most companies use this method of performance appraisal in their management development program. This approach is also used to improve performance in a company and not just the talent of employee (Walker & Smither, 1999). The 360-degree appraisal has been identified as a method that takes detail information about the employee in aspects of talent, skills, knowledge and behaviour; therefore better used to predict future performance than any other performance appraisal method (Maylett & Riboldi, 2007). This method helps the company and employees to know how their peers perceive them and how their behaviour can influence them personally and the company as a whole (Fleenor et al, 2008). This is mostly used to evaluate the performance of managers to show how they relate with their employees, customers and other stake holders (DuBrin, 2009). This method of performance appraisal has become a worldwide tool that has changed management and leadership to build competency in companies (DuBrin, 2009). The main aim of this method is to identify strength and weaknesses of employees as well as development needs that will help in efficiency and effectiveness of jobs (DuBrin, 2009). The 360-degree process of performance appraisal should be carefully implemented by companies by following each step to make sure the best results are obtained (Armstrong, 2003). This method can also be used by employees for self assessment. This allows employees to evaluate and understand how their effectiveness can affect the company and also how the others in the company appreciate their work (Armstrong, 2003). Front line employees need to take part in this method because it serves as a guide for management to nominate employees for management roles in an organisation (Armstrong, 2003).

This method of performance appraisal can be carried out using questionnaires that are being handed to peers and customers; and also by using self rated forms that the employee has to assess themselves (Armstrong 2000; Fleenor et al, 2008).

2.1.2 Management by Objective

Management by Objective (MBO) was first introduced by Peter Drunker in 1954, and was used to control the process involved from top management to employees in terms of goals and objectives (Odiorne, 1990). This is a method of performance appraisal that is based setting objectives in and organisation and making sure that these objectives are well understood and worked on by both managers and employees (Drucker, 1954; 2007). This method of performance appraisal requires a good level of communication to make sure that employees and managers understand the organisation’s objectives and are working towards them. This means managers have create a strong communication network with employees. This type of performance appraisal method measures employee performance by looking at what they have actually achieved compared to set goals at the beginning of the period (Drucker, 1954). This system allows managers to focus on achieving organisational goals and make maximum use of available resources (Druker, 2007). This method enables the organisation to set actions plans to meet goals and objectives and also gives some direction (Tyson and Schell, 2008). Action plan may include what the organisation wants to achieve, what role employees have to play to meet these objectives and resources needed to reach objectives (Tyson and Schell, 2008). Each objective has to be SMART (specific, Measurable, Achievable, Realistic and Time Bounded) (Richman, 2006). This helps the company to create specific needs for objectives to be achieved. Employees become committed in their role when they have an objective to attain (Tyson and Schell, 2008).  The role of a manager in an organisation using MBO is to delegate tasks and breaking down objectives in to small key results for employees to understand (Odiorne, 1990). This means achieving the objective by taking it one step after another and meeting goals at each step. Everyone in the organisation should have a clear understanding of the organisation, its mission and vision and what they want to achieve (Odiorne, 1990). MBO is good for employee management and leadership skills. This also involves creativity. MBO encourages employee empowerment in order to put aims in to action and achieve objectives (Miner, 2007).

2.1.3 Strength Based Approach

Strength based approached has become a popular tool to evaluate employees performance in a company in the 21st Century. Managers in organisations have taken upon themselves to fix human dysfunction in the organisation by improving personal and organisational performance by focusing on employee weaknesses (, 2007). The main principles for the strength based approach are: ongoing feedback, emotions and development (, 2007). This encourages companies to always give feedback on positive behaviours that can affect the way an employee functions. The strength based approach is a result of positive emotions, culture, relationships and employee engagement (, 2007). The strengths based approach is built on intelligence quotient (IQ), personality, emotional intelligence and other skills which make up the main characteristics of this approach (, 2007). The four main characteristics that can be identified include: autonomy support, role fit, shaping knowledge and skills and balancing competency and complexity (, 2007). This means an organisation has to fit the right person with the right skills and knowledge for the right role; providing continuous support through training and self development programs; and making sure that complex roles are given to those with the right skills to handle them (Rothman, 1994). This approach allows an employee’s role to be customised in a way that they carry out duties they are good at and have with the right knowledge and skills and also where they can develop (Rothman, 1994). This leads to a situation where the employee becomes more efficient within the role.


Performance appraisal involves collecting information that is related to skills and behaviour in order to meet employee training needs in an organisation. Employees are motivated through the process of performance appraisal which then makes in better for the organisation to understand its employees (Murphy and Cleveland, 1995). Motivating employees brings out the best in what they can do. Knowing there is a reward for good performance encourages employees to be creative and innovative in order to achieve the best performance they can (Mullins, 2002). The main aim of performance appraisal is evaluating and development of employees (Murphy and Cleveland, 1995). Management by objective is very important in a knowledge based organisation where employees are allowed to control their work based on feedback (Murphy and Cleveland, 1995; Mullins, 2002). Employees in an organisation need to be empowered in order to create a knowledge-based organisation and self-managed work force (Murphy and Cleveland, 1995). MBO empowers employees not by telling them what to do but letting them do it in a way that is suitable for them to achieve their goals (Murphy and Cleveland, 1995).

Creativity arises from empowering employees in an organisation (Mullins, 2002). This creativity leads to employees being innovative in what they do and what they have to achieve in terms of goals (Murphy and Cleveland, 1995). Training also helps employees to gain more knowledge and skills. Training needs for employees can be identified through performance appraisal. Identifying training needs helps the organisation to determine what types of resources the organisation needs to achieve goals. This shows the relationship that exists between performance appraisal and innovation.

Innovation is a process of aiming at commercial success of a new idea or invention by using technology based invention to develop and produce ideas and turn them in to action (Kumar and Phrommathed, 2005). The main different between innovation and invention is that innovation results to economic value (Kumar and Phrommathed, 2005). Invention is just a part of innovation which is only completed after going through the production and market task stage of the innovation process in and organisation (Barnes, 2007). Creativity is also part of innovation and involves generating ideas to come up with something different in an organisation (Kumar and Phrommathed, 2005). Innovation is when companies take advantage of changes in their environment to exploit the different services and products offered (Drucker, 2007). Innovation is a very important topic that is being used in different contents apart from business. It is used in physics, economics, design and many other topics or subject area. Many think of innovation to be just about technology, but this is not the case as incentives play a big role in creativity and innovation (Barnes, 2007). Creativity works hand in hand with innovation meaning, creativity has to occur for innovation to take place (Jolly et al, 2002).

2.2 The concept of innovation

Technology has played a major role in innovation in organisations. Organisations generate their ideas to enhance on innovation by making use of new products and services, new production process, new technology and new organisational structure (Carneiro, 2000).

Performances in companies that have moved from a more traditional way of operating to an innovative way have increased twice in terms of profits from innovated products and services (Tidd, 1997). Most companies have increased their performance by combining technology and knowledge of employees to adapt to any changes in business operations or the organisation’s macro and micro environment (Carneiro, 2000). Companies can create competitive advantage by making use of innovation (Roffe, 1999). This will put the organisation in a position where they will be different from other companies in the industry. The competitive environment in which organisations operate, leave them with no choice but to focus on creativity and innovation in order increase productivity and improve on efficiency, products and services as part of the organisation’s learning process (Roffe, 1999). Managers should be able to adapt to changes in order to be creative and innovative (Handy, 1990). Performance appraisal plays a role in creating training needs for managers to be able to identify changes, take advantage of new technology and make use of employees’ knowledge.

There are four main ways an organisation can carry out innovation (also known as the 4Ps of innovation); Product innovation, Process innovation, position Innovation and paradigm innovation (Francis and Bessant, 2004). Process innovation is carried out by combining the latest technology and improving training in order to improve overall production process and increase employee performance (Stalk, 1993). Training can not be designed without identifying training needs through performance appraisal.

Performance appraisal can also be useful in determining employee turnover. Employee turnover is the rate (percentage) at which employees leave an organisation because of its services and training offered to both customers and employees (Mullins, 2002). It is very important to keep employees because it is more costly to hire a new employee than keeping one (Mullins, 2002). This cost is incurred from expenses when advertising the role, training new employee, lost in production and human resource costs (Mullins, 2002).  Empowering employees help them to be creative and innovative by getting access to the available resources (Kotter, 1996). This helps to retain employees and therefore reduce the rate on employee turnover. Employee appraisal helps organisation to allocate benefits, determine employee performance and allocate wages (Kotter, 1996). These are all factors that can also determine employee turnover. Good organisation benefits can encourage employees to stay in an organisation (employee retention). Benefits given to employees are determined by the employees’ performance in and organisation (DelPo, 2007). Wage increase or decrease also depends, in most cases, on employees’ performances. Employee turnover will increase if employees are not performing well because they either get fired or leave the organisation (Griffeth et al, 2004). On the other hand employees will not want to leave the organisation if they realise an increase in their wages as a result of improved performance (Griffeth et al, 2004). This encourages an employee to remain in the organisation knowing their hard work is being appreciated. One of the main aims of carrying out performance appraisal is to reduce the rate at which employees leave the organisation through providing clear organisation goals to assist objectives and rewarding top performing employees (Millmore et al, 2007). After carrying out performance appraisal process in an organisation, the organisation can then reward those who perform well in the organisation. The organisation can later use the information from performance appraisal to identify where employees are lacking skills and provide training for these employees to gain more skills and knowledge (Millmore, 2007). This can be done by matching low performance employees to learn from high performance employees or by creating special training programs for the under performing employees (Millmore, 2007).

Employee turnover rate can be calculated by dividing the number of employees that have left the company during that period over the total number of employees at the mid of that period (Bohlander and Snell, 2009)


Number of separations during the month x 100

Total number of employees at mid month



3. Research Methodology

This part of the report will be divided in to two main sections. There will be the secondary research and primary research. The secondary research is secondary data that has been taken from other sources from the internet and books in order to back the literature that has been explained in the first part of the report. The secondary data will include case studies from companies that will be used to explain the relationship that exists between performance appraisal, innovation and employee turnover.

The primary research will be a combination of answers to questionnaires taken from both employees and Management at Lewisham College. One of the limitations to this is that the employees and managers did not actually have enough time for some questions that needed detail answers. A one on one interview could not be carried out with the management in order to get more information.

4. Findings and results

4.1 Case study 1; Strength-based Approach at Standard Chartered Bank

This case study is based on information taken in 2007. Strength-based performance appraisal is the best tool that has been used by Standard Chartered Bank to evaluate its employees and create a competitive and innovative environment. This method of performance appraisal was implemented in the bank in 2001 and has until today served as one of their main competitive advantage in their talent management program (, 2009). Before the introduction of the strength-based approach, the organisation focused on the weaknesses of employees (, 2007). Since the introduction of the strength-based approach in 2001, the organisation has undergone two main faces. The first face was between 2001 and 2004 when the organisation changed its human resource to a more proactive way by eliminating competency framework and job evaluation (, 2009). The second face, between 2004 and 2007 was to help managers to efficiently manage the strength based approach by using the Great Managers Program (, 2009).

The strength based approach was introduced in the organisation in 2000 and followed two faces; 2001-2004 where the organisation changed human resource was more of a proactive use of strength with the elimination of job evaluation and competency framework. 2004-2007 was for helping managers to manage the strength based approach using the Great Managers Program. The strength based approach of performance appraisal looks at what the employee is good at to reward them on their special skill

The Bank carries out this approach by identifying employees’ talents and turning them into strengths in order to create a working environment in which employees can used their talents of what they are good at on a day to day basis to excel (, 2009). This approach is carried out by using online tests to assess employees’ strengths and allocating experts who can develop plans that can be used to improve on effectiveness at work (). So far more that 7,000 employees have taken the test (, 2009). On the other hand, managers undertake a leadership and development program designed on gaining knowledge on how to handle market growth (, 2009)

Standard Chartered Bank has a team of 200 strength coaches all over the world who are to attend ten coaching sessions in a four month period (, 2009). These strength coaches are all human resource managers (, 2009). These coaches also help by using other assessment methods of performance evaluation like workshop and interviews in order to analyse employees’ strengths (, 2009). Every coach has to complete an audio-recording session, a four day training course and commit to a continuous professional training in order to become full strength coaches (, 2009). There are about 34 team coaches that provide supervisory support for three to seven coaches (, 2009). The team coaches are expected to meet face-to-face with each other in a two hour session over a three month period (, 2009). One of the main aims of using the strength based approach is to identify and develop future junior and middle management personnel in the Bank (, 2009). There are more than 250 leadership roles in the organisation that can be identified as being succession roles (, 2009). This means those are junior management level can take over the role of middle management (, 2009).

The bank has defined strength to mean a combination of skills, talent and knowledge in the organisation (, 2007). Skills are the techniques the employees have and use; knowledge is the employees’ awareness; and talents are recurring feelings, behaviour and thoughts that can be put in to productive use (, 2007).




Over the years, the bank has experienced massive growth, and success in managing growth by attracting, engaging and managing talents in their Talent management program (, 2009). There is no doubt that this approach of performance management has been a success in the talent management program given the time and money invested in it and the outcome of the approach. This approach focuses only on the positive aspects of the employees. This approach brings out the positive attitude of employees and encourages them to be better in what they do best (, 2007). It also helps the Bank to retain its employees because of the positive feedback they get from managers. Positive feedback to employees motivates them to have a more positive attitude towards work and treat the organisation as if it were their own. The strength based approach in Standard Chartered has encouraged the organisation to empower their employees and helping them to discover new things about themselves without relying on the human resource for guidance (, 2007). This approach also helps in the development of employees to become managers and also teaches them how to make decision on their own.  The management at Standard Chartered Bank realised that strengths are easier and quicker to enhance than weaknesses (

As an organisation that trains employees to become managers, strength based approach is the most effective way of performance appraisal in Standard Chartered Bank because it bring out the creative nature in employees. Work load become less stressful because employees perform the same task for a long time and therefore become used it what their roles (, 2007). This has also created a kind of new way for managing employees and tasks to overcome difficulties in a constructive manner (, 2007). The company experienced a 251% increase in pre-tax profits till 2007 (Dempsey, 2007).


4.2 MBO approach at Lewisham College

This was carried out using questionnaires to both managers and employees in the company. Questionnaire for employees was carried out in a service company using a sample size of thirty-one employees in the company. These questionnaires were carried out in a school by using teachers and other staff together with managers. Lewisham College is based in Lewisham and provides tuition for short and long term courses. The method of performance appraisal used in the company is Management by Objective (MBO).

The research shows that about 61.2% of the employees understand the importance of performance appraisal in the company while just about 42% of the sample size do find it relevant for the company to carry it out. Out of this only 32% agree that performance appraisal in the company is being carried out in the most effective way while about 68% do not agree with this. Just 35% agree with the fact that performance appraisal has some effect on innovation. 22% are not quite sure if innovation is as a result of performance appraisal and the remaining 43% do not agree with this statement. Just over 22% of employees are satisfied with the method of performance appraisal carried out in the company. 78% of the employees think MBO method of performance appraisal is not favourable and encouraging for employees because of constant changes that occur in the company as well as the business environment. These factors hinder employees and managers from achieving their goals. This 78% of the employees think they are not empowered enough to carry out duties by themselves in order to encourage creativity. They think managers are more empowered than employees. Just 32% of the employees think performance appraisal helps them to be motivated. They think feedback from the managers will help them to improve on what they are not good at and excel in what they are best at. On the other hand 68% think managers focus mostly on what they want to achieve and care less on employees’ self achievement. More than 55% of employees think the company does not encourage a leaning environment and employee development. Despite this disagreement, more than 67% of employees like working in the company. Almost 55% of employees understand that innovation is very important in the company. Most employees leave their jobs because they are not satisfied with what they do or the company’s policies. More than 96% of employees leave their jobs because they are not satisfied with their jobs. Employees in the organisation think staying in the organisation will limit their self development plan to move to higher levels and be innovative. Only 12% think that employees get fired because of poor performance. Employees are not satisfied with their jobs because they are not given the opportunity to be creative. Just over 51% think their skills and knowledge are well used in the company. The rest think they are not well utilized in the company and not given enough opportunity to be creative. More than 60% say the company does not involve employee in decision making of the company. This goes back to say employees are not empowered. Just fewer than 10% think employees are empowered in the company while 90% disagree with this. More than 50% think the company does not have enough resources to help employee development in the company.

Another survey taken from ten different company managers indicates that the school considers performance appraisal to me very important and communicates with employees to let them know how important this is to their career as well as the school as a whole. This is carried out to help managers identify employees’ strengths and weaknesses in order to determine what kind of training they need. Staffs are also allowed to assess themselves as a way of self development. There are quarterly meetings held in the school and also half a year and yearly performance review carried out. In order to improve on innovation in the school, staffs are allowed to drop some suggestions in the suggestion boxes. Most employees are satisfied with their job. In order to know this management checks the number of people who are absent everyday and also carries out a survey to determine if employees are satisfied with where they are and what they do. This can also be determined by the number of staffs that leave the school every year to take on the same type of job in another school. In order to keep employees, the school assists in attaining higher qualification for teachers and also customer services course for front desk staffs. They also provide online training programs via the intranet. The general programs designed for employee development includes work shops for each course and department. Specific training includes assisting employees to take a course to increase the level of their qualification. This is to make sure that the employees have the right materials for self and company development. They also give employee two hours are week as study hours. Books and other training materials for learning are made available by the school to employees.


The research carried out at Lewisham College shows that some staff think there is not enough communication due to the fact that they lack internet access and also because of the nature of their job. Most of the communication is carried out with teachers. This is the level where most of the self development programs are focused. Office assistants and others working at the back office think they are no motivated enough or given the opportunity to develop and move to another level. Management has discovered staffs are more willing to work and improve on their teaching skills since implementing the MBO approach.

5. Conclusion and recommendation

This report has looked at performance appraisal in the service industry and has described it as a process that is very important in human resources management in many organisations today. One of the most important aspects that were described in the report was how this could be used by organisations to give feedback to employees and also determine training needs that may lead to innovation and low employee turnover rate. The report gave an overview of performance appraisal and how this is being seen by different companies. It mentioned three most used performance appraisal methods; 360-degree approach, management by objective and strength-based framework. This report gave an overview of these three main appraisal methods and how important they can be to an organisation.

The report also gave an overview on how the research will be carried out and what sources will be used in carrying out the research. The two main research types used were primary and secondary research. Primary research was based on answers to questions collected from employees in the form of questionnaires. The case study for the primary research was Lewisham College. A sample size of 31 employees answered the questionnaires. An analysis was drawn from the answers given. The second case study was base on secondary information. This case study was based on Standard Chartered Bank and how the company has used the strength-based framework. This information from the two case studies was based on proving the effect of performance appraisal.

There are some aspects in a company that are important and performance appraisal is one of those aspects. Company carry out this method one way of any, formally or informally. This is done to make sure that everything is going as planed and that the company hired the right person to do the right job. In order to make this process more effective and efficient to encourage innovation and lower employee turnover, the following suggestions could be made.

  • The company should look at communication to be one of their key aspects to transfer concrete information to employees with out any misinterpretation. The way to do this is via email.
  • The company should also make sure that performance appraisals are carried out to get feedback that will make help in creativity and innovation.
  • The process of performance appraisal should be taken seriously by both managers and employees to avoid lack of information.
  • Companies should also relate performance appraisal to innovation in order create a competitive environment.
  • When carrying out performance appraisal companies should be able to let employees know what kind of method or methods they will be using and how results are seen. It could be a point based system or just analysis given.
  • Companies should be consistent with the method they use. A company that uses 36-degree approach should used that for some time. Changing often will get the company more confused and might cost a lot more.
  • Companies should also know what kind of resources is needed to carry out training needs. The company in this case, should know if they can afford these resources or can not.















Strongly disagree




Not sure




Strongly agree

Every body in the organisation understands the importance of performance appraisal255136
Performance appraisal plays an important role for the company58549
Performance appraisal is carried out in the most effective way in the organisation911182
Performance appraisal has a direct and indirect effect on innovation112792
Performance appraisal methods used by the organisation are most effective610843
Motivation in the organisation is a result of performance appraisal811291
Employees understand how innovation can affect the company and the employees as well.095125
Employees are satisfied working for the organisation046147
The organisation cares about employee development and encourages learning87295
Employees leave the organisation because they are not satisfied with their jobs0101416
Employees leaving the organisation is as a result of poor performance816340
The organisation supports new ideas from employees582115
Employees are involved in the decision making of the company6121102
Employee empowerment is part of the organisation’s policy1113430
The organisation has available resources that can be used by employees to help them develop811291

Questionnaire for Employees



Questionnaire for Managers

  1. How important is performance appraisal to the company and why?
  • Very important, to communicate with employees
  • Important as it allows employees to establish relationships and aids managers in identifying and addressing employees strengths and weaknesses.
  • Very important as it is used to measure performance
  • Vey important to analyse employees and get feedback
  • Quite important as can be used to develop staff
  • Very important as used to justify pay grades
  • Not very important as small company and not many staff


  1. Do employees in the organisation understand the importance of performance appraisal in the company? If so, in what way?
  • Yes staff are advised to record progress so it can be viewed during appraisal
  • Yes staff are informed appraisals effect pay rates
  • Yes staffs are encouraged to appraise themselves as part of personal development.
  • Yes staffs are asked about personal goals which can be linked into the appraisals.
  • Yes staffs are provided information pack detailing benefits to the company and personal benefits such as personal development, pay rises and promotions.






  1. What Methods of performance appraisal are carried out by the company? Please give details.
  • The main method is MBO
  • Monthly 1 to 1 meetings reporting progress on pre agreed targets and setting new targets. Minutes taken as record for next meeting.
  • Bi-weekly meetings reporting progress and addressing issues that have arisen. Results from meeting kept on employee file.
  • Detailed job description breakdown with list of competences required to complete job effectively. Half yearly review of all competences and evidence of these being carried out. All recorded in appraisal log.
  • Half yearly review partially completed by employees and managers detailing achievements, goals, strengths and weaknesses. Notes recorded and kept on employee appraisal log.
  • Setting targets for employees to meet.
  • Irregular 1 to 1’s for managers to provide feedback address any issues and inform of any up and coming changes. Notes taken during meeting.
  • Informal catch up sessions when possible to follow progress. Not recorded
  • Quarterly meetings addressing personal development, employees provide evidence of progress.


  1. What, if any, difference can be identified between performance evaluation in a manufacturing industry and that in the service industry?
  • No one interviewed had worked in both industries therefore were all unable to answer.


  1. Is there a link between performance appraisal and innovation in the company? If so, please specify and give details.


  • Yes allows employees to communicate ideas
  • Yes during appraisal staff are for ideas
  • Yes staff are encouraged during appraisals to be innovative in meeting their targets
  • Yes staff are asked if the service we provide can be improved


  1. In what ways does the organisation link the two? As specified during answers above


  1. How are employees encouraged to be innovative?



  • Staff are encouraged to follow processes
  • Suggestions box for ideas
  • Staffs are regularly asked for their views and if they feel changes could be made for the better.
  • Section during appraisals for innovation as well as personal development.
  • Through leading by example
  • Creating an environment where employees know there thought and ideas will be welcomed.
  • Dependant on position held staffs are encouraged through regular meetings with line managers.



  1. Are employees satisfied with their role and tasks? How do you know this?


  • Majority are happy, found through staff feedback in general conversation
  • Believed people were happy but were a general guess as staffs are not asked.
  • Yes due to low rate if employee turnover.
  • Yes as per feedback from appraisals.
  • Yes as staff issues are addressed during regular meetings.
  • Yes as employee opinion survey is carried out.
  • Yes as absenteeism is low.
  • Yes employees are asked during regular meetings with line managers so concerns can be addressed.


  1. What method does the organisation use to assess the rate of employee turnover?


  • The number of staff leaving the company is measured against previous years
  • All other companies didn’t have a method for measuring this as it was not a real concern.


  1. Does the organisation have training programs for employees to develop their skills? If so, please give details.


  • Yes many online training programmes for typing, presentations, recruiting and data entry.
  • Yes work related NVQ’s
  • Yes NVQ’s in customer services and team leading.
  • Yes online admin training course.
  • Currently funding managers to complete work related diplomas.
  • Yes work related NVQ’s


  1. Is high employee turnover a result of poor performance of an employee or the company’s lack of employee satisfaction?



  • answered Both


  1. Are the training programs designed for specific skills and personalised for employees or are they more general?


  • specific and General


  1. What other methods does the organisation use to reduce the rate of employee turnover?


  • Regular appraisals to address concerns.
  • Employee opinion survey to identify employee problems.
  • Interaction with staff making directors accessible when possible.
  • Attractive salary and benefits as well as opportunities for promotion.
  • Offering role diversity to alleviate boredom.
  • Providing bonus scheme designed to reward hard work.
  • Consistent communication with staff.
  • Coaching of staff to ensure they are skilled to complete tasks required.
  • Managing staff work loads so they do not feel overwhelmed.
  • Good salary and pension scheme.



  1. Does the organisation have available resources to encourage employee development? If so, what are they?


  • Companies believed the resources were the training courses provided which included use of company equipment.
  • Employees are given 2 hours a week to focus on training courses
  • Employees are encouraged to use office equipment for training courses
  • Management makes a conscious effort to encourage staff.
  • Budget for training courses.



  1. What are the effects, if any, of a high employee turnover on the company?


  • Poor customer experience due to lengthy period it takes staff to get up to speed.
  • Increased work load on remaining staff leading to de-motivation.
  • Lack of continuity and stability in dealings with students
  • Added pressure on remaining staff.
  • Lower level of service provided to customers.
  • Increased cost in training and recruitment.
  • Reduction in productivity as it takes time for new staff to be trained.
  • The loss of managers can result in a loss of knowledge and expertise.
  • Increased customer complaints as regular service will not be maintained.
  • Additional training resources required which in turn affects the service provided.









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