CONTRIBUTION OF R&D IN BUSINESS COMPANY

In this article we will examine (a) what researchers and managers in R&D company do, and (b) the way we can tell how well they do it. We will also discuss the need for focusing less on “appraisal” (evaluation, judgment) and more on employee contribution to the company. Accepted wisdom would suggest that for a business company to function efficiently and effectively, the employees must work well toward meeting company goals and objectives. From a manager’s point of view, it would seem prudent to reward those employees whose performance contributes to company success.

Logically, performance appraisal systems need to be designed to motivate employees to improve performance and thus contribute to company productivity, effectiveness, and excellence. In practice, there are many problems. Few management activities have challenged and intrigued executives as much as performance appraisal has. To some, appraisal suggests supervisors sitting in judgment as “Roman emperors.” To others, performance appraisal is thought of as a method of manipulating employees and intruding into their lives.

SOME NEGATIVE CONNOTATIONS OF PERFORMANCE APPRAISAL

The problem may lie in the negative connotations of the words “performance appraisal.” Appraisal implies evaluation and making judgments as to the quality and quantity of an individual’s productivity. To make such an evaluation or a judgment, a certain yardstick has to be available to ascertain whether the individual has measured up to the performance level envisioned by the evaluator. How is one to compare the performance of one individual who has clearly exceeded the low standards he set for himself versus another individual who failed to meet the rather difficult standards she set for herself? Dimensions associated with the yardstick are variable, and procedures available to evaluate many of these dimensions are subjective and often not well understood by the employee or the supervisor.

 DIFFICULTIES WITH EMPLOYEE APPRAISAL

When a supervisor appraises a subordinate, the process of appraisal can be analyzed as follows. First, the supervisor must have observed some performances. However, such observations in the case of R&D personnel are unlikely to be sufficiently coherent to be valid. If the supervisor were to observe a simple operation, he might be able to judge it. But R&D work is complex, and doing any one thing well is unlikely to provide a clue to the total performance. Thus, rather than observe an individual’s specific performance, the supervisor is much more likely to observe large chunks of performance, such as the presentation of a research plan or the completion of a project. Usually these are products of groups rather than individuals. It then becomes difficult to know how much the particular scientist has contributed to the group product.

Second, the observations must be integrated into some sort of “schema.” Unfortunately, there are several biases in the formation of such schemata. For example, research has shown that first impressions are extremely important. If the scientist has a good reputation, many acts that are ambiguous will be evaluated positively. Also, recent events tend to be given more weight in the formation of such schemata than events that occurred during the middle of the period of observation.

The fact that negative events are given more weight in such judgments than positive events creates a further bias. If the supervisor has observed ten events, and eight are positive and two are negative, the negative ones will be given more weight because they “stand out” as “figures” against the “background” of the eight positive events. This is because in our own lives we generally encounter few negative events, but when we do they are major negatives (e.g., loss of loved ones). On the other hand, although we encounter mostly positive events, they are seldom major positive events (e.g., getting married, winning a million dollars), and so we become especially vigilant about the negatives.

 PERFORMANCE APPRAISAL AND THE MANAGEMENT SYSTEM

Performance appraisal needs to be linked to the managerial activities and the management system. It  has categorized the management system into two distinct areas: The process of management includes activities such as planning, organizing, controlling, budgeting, and staffing, and the key orientation of these processes focuses on integrating (work activities), making decisions, recording information, motivating, and negotiating. The function of management includes procurement, production, adaptation, and so on. The orientations of these functions are adaptability, productivity, efficiency, and bargaining.

The managerial processes are concerned with the administration of inputs, while the managerial function deals with the way inputs produce outputs (production) that are important and relevant to the organization. Managerial processes respond to day-to-day problems, and primarily involve problem solving. The managerial functions, on the other hand, are concerned with prescribing specific operations, procedures, and standards for achieving a certain level of production or output.

PERFORMANCE APPRAISAL AND ORGANIZATIONAL STAGES

Some of the purposes of performance appraisal relate to management control and to achieving the congruence of organizational and individual goals and objectives. Management control and strategies for goal congruence also depend on (a) the stage of development of the organization, and (b) several other factors such as the technology of the organization. It has defined four stages of corporate development in terms of “the structure of operating units” (dependent variable) and “product-market relationships” (independent variable).

 In a general sense, at Stage 1, the organization has a single operating unit, producing a single line of products on a small scale.

 At Stage 2, operating units increase and production becomes large scale, but the focus is still on a single line of product.

 At Stage 3, operating units may be at different locations and decentralized, each producing different or related products using multiple channels of distribution.

 At Stage 4, the number of autonomous units producing different products increases. Basically, as organizations move from Stage 1 to Stage 4, the number of autonomous operating units increases, these units become geographically decentralized, and the operating units produce technologically different product lines or research outputs for diverse markets using multiple channels of distribution. As this development progresses the number of variables related to organizational products, operational centers, and market relationships increases. This would also point to the organization increasing in size (number of employees and volume of sales or the size of the research budget); it may, in some cases, lead to an increase in assets and profits. Management control at each of these four development stages is different. At the earlier stages, the organization is small, and one owner or director can oversee most of the activities. At later stages the organization grows in size and in number of products and may also be geographically dispersed.

 As authority becomes decentralized, performance elements need to be designed differently, depending on the development stage of the organization. For example, performance elements could be less formal during the early stages of development and more structured and quantitative later. This approach was successfully used by Salter for four high-tech electronic firms. It should be used also by managers whenever they are setting up an appraisal system. Start by analyzing your situation. In what stage is your laboratory? Then design a system that fits your stage.

 PERFORMANCE APPRAISAL AND COMPANY PRODUCTIVITY

Company productivity can be defined as the ratio of outputs to inputs. Inputs can be determined by the level of resources invested. Outputs can be conceived as income minus costs. For a profit-making organization, profitability can provide a good measure of the organization’s productivity. We must keep in mind that behavior is shaped by its consequences. If we want specific behaviors to occur, we need to use an appraisal system that rewards them when they occur. Output measures for a research organization can be subjective or objective, quantitative or non quantitative, and discrete or scalar and can include some measure of quality. While the measurement of quality requires extra effort and, at times, human judgment, this dimension of output should not be ignored. Since R&D organizations have multiple objectives and their outputs are often incommensurate, the output measures are usually non quantitative and subjective. Quantitative measures for the output elements are usually in different units, thus defying precise comparison between different quantitative outputs. It suggests that it might be feasible to combine a multidimensional array of indicators into aggregate units, which could then provide trends, indicators, and patterns of the individual (and organizational) output measures. One suggested categorization of output measures includes the following:

  • Process measures (related to activities carried out in an organization; useful for the measurement of the current, short-run performance)
  • Result measures (stated in measurable terms; end-oriented)
  • Social indicators (stated in broad terms, related to overall objectives of the organization rather than specific activities; useful for strategic planning)

PERFORMANCE APPRAISAL AND MONETARY REWARDS

Giving monetary rewards to those who perform well seems logical enough. In an acquisitive and consumption-oriented modern society, higher pay satisfies basic human needs and more. For an individual, receiving monetary remuneration above what is required for basic human needs can also provide security, autonomy, recognition, and esteem. The motivation model, generally referred to as the expectancy model, suggests that high performance is likely to occur if the individual feels capable of achieving it, if pay is closely tied to performance level, and if the individual finds pay to be important (this would of course vary across individuals). In a research and development organization, indeed in most complex professional organizations, a number of reasons make tying pay inexorably to performance appraisal an imprudent approach:

  • Significant accomplishments in an R&D company often require input by many individuals. Singling out one person for a monetary reward creates the problem of inequity for others.
  • The purpose of performance appraisal shifts, on the part of the supervisor, to justifying the pay decision already made, and, on the part of the employee, to comparing himself or herself to others and shaping his or her performance data to outdo others.
  • Cooperation among peers is reduced because of competition for pay for performance, where total monetary rewards are viewed as a zero-sum game.
  • During performance appraisal the employee is likely to exaggerate (some might suggest falsify) his or her performance to gain higher monetary rewards. This would not create the proper environment for counseling and feedback—two of the important purposes of performance appraisal.

IMPLEMENTATION STRATEGY WITH EMPHASIS ON EMPLOYEE CONTRIBUTION

The preceding discussion identified some of the underlying issues associated with the performance appraisal system. Commenting on performance appraisal,  states that “few things have been more baffling to managers than the results of their attempts to develop workable performance measures and controls, thus channeling the energies of their employees towards the firm’s objectives.” Recognizing that many complex issues are involved in implementing a meaningful performance appraisal system, it is nevertheless useful to focus on three items:

  • What an individual’s performance depends on
  • Why performance appraisal is needed
  • A suggested strategy

Happy birthday to me:

Amran Issa Bhuzohera-MDE

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