Student Name: Hoang Vu Le

Student ID: 7635722

Table of Contents
1. Introduction....................................................................................................................2
2. Performance Appraisal Concept.....................................................................................2
3. The Importance of Performance Appraisal....................................................................2
4. Common Methods and Processes of Performance Appraisal.........................................3
5. Best Practices and Emerging Trends in PA....................................................................4
6. Common Problems and Solutions in Performance Appraisal........................................4
7. Company Background: BlueScope Steel........................................................................5
References..............................................................................................................................6

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 1. Introduction

Performance appraisal (PA) is a fundamental HRM function aimed at evaluating employee

performance and aligning individual contributions with organisational goals. This preliminary
report draws on HRM theories and literature to explore the theoretical foundations and practical
implications of PA. The objective is to critically assess what PA is, why it matters, what methods
are commonly used, what trends and best practices are emerging, and the issues organisations
face in implementing effective PA systems.

By referencing key frameworks such as Goal-Setting Theory, 360-Degree Feedback, and

Performance Management Systems, this report provides a conceptual framework to later evaluate
PA practices at BlueScope Steel. The essay will serve as the theoretical backbone for the final
analysis.

2. Performance Appraisal Concept

PA refers to a formalised process through which organisations assess, document, and provide
feedback on an employee’s job performance. As Armstrong and Taylor (2020) point out, PA
forms a critical element of wider performance management systems, within which individual
objectives are aligned to the overall intentions of a business. The process would contain the
assessment of output relative to established goals, competencies, and behavioural expectations.

The conceptual framework of PA is rooted in several fundamental concepts of HRM. As

previously stated, Goal-Setting Theory propounded by Locke and Latham (1990) asserts that the
establishment of specific, challenging goals for the employees is coupled with timely feedback
and comes together to aid in the performance improvement of the employees. This theory is
supportive of the appraisal process as it highlights setting performance expectations and
assessing progress. Expectancy Theory also pertains to the PA, where Vroom (1964) states that
what will motivate employees to put forth the highest efforts is the belief that their contributions
will be very important in determining future outcomes. These theories account for understanding
appraisal systems as purely evaluative and at the same time motivational instruments that have
the potential to influence future behavior and outcomes.

PA also contributes to role clarification, as well as feedback and career progression. It is an

informal retrospect-repelling horizon evaluative device by assessing past performance and
directing future development (Dangol 2021). In the apostolic organization such as BlueScope
Steel, where it is a matter of accuracy, safety and trained practice (BlueScope Steel Annual
Report 2022), PA allows managers to create accountability systems and identify training needs
with the high operational standards.

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 3. The Importance of Performance Appraisal

The strategic value of performance appraisal lies in its ability to enhance both individual and
organisational effectiveness. As noted by DeNisi and Murphy (2017), effective PA systems
support a variety of HR functions, including promotions, salary adjustments, succession
planning, and employee development initiatives. In reality, an investigation conducted by Idowu
(2017) revealed that 71% of the HR use PA outcomes for promotions while 62% attach appraisal
with its compensation decision. Besides, it forms part of safety standards and operational
discipline besides being important for high-risk operations and regulatory compliance such as
steel manufacturing.

A well-designed PA system reinforces the psychological contract between employer and

employee. It facilitates open communication about expectations, achievements, and areas for
improvement, which in turn fosters trust and engagement. Moreover, performance appraisal can
be used to promote meritocracy and fairness in decision-making, contributing to employee
satisfaction and retention (Al-Baidhani & Alsaqqaf 2022).

In the context of strategic HRM, performance appraisal helps organisations align their human
capital with long-term objectives. Boxall and Purcell (2016) also argue that those that mange
performance well become more adaptable to changes in business opportunities and hence gain
competitive advantage. For BlueScope Steel, where innovation and sustainability core strategic
pillars, PA systems must not just assess; they should inspire continual learning and improvement.

4. Common Methods and Processes of Performance Appraisal

Over time various PA methods emerged, each with its own advantages and disadvantages.
Among the more traditional methods is the graphic rating scale, in which employees are rated on
defined traits like punctuality, communication, or teamwork. While this is easy to administer, it
is very much open to subjectivity and rater bias (Pulakos 2009).

A more sophisticated approach is the Behaviourally Anchored Rating Scale (BARS), which
combines quantitative ratings with specific behavioural examples for each performance level
(Jacobs et al. 2006). This method enhances clarity and reduces ambiguity in evaluations. Another
prominent model is Management by Objectives (MBO), introduced by Drucker (1954), which
aims to set individual goals that align with organisational objectives and to measure performance
based on the outcomes attained.

The 360-degree feedback system is one of the most important innovations in appraisal.
Performance data are collected from several sources including supervisors, peers, subordinates,
and the employees themselves. According to Zenger (2016), more than 85% of Fortune 500
companies are using 360-degree feedback for the perception of improved accuracy and fairness.
On the other hand, Bracken and Rose (2011) argue that although entailing large expenditures of
resources-time, power, and money-this comprehensive approach produces a more balanced and
more credible assessment.

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A typical PA process consists of setting performance objectives, continuous monitoring of
performance, formal evaluation based on performance objectives, performance feedback
discussions, and development planning. While there are various other performance appraisal
systems, it is likely that in industries like steel manufacturing, where the performance metrics are
often in tandem with quantitative outputs and qualitative behaviours, a combination of MBO and
BARS might be appropriate. These methods allow organisations like BlueScope Steel to
combine technical performance metrics with behavioural indicators such as teamwork and safety
compliance.

5. Best Practices and Emerging Trends in PA

The traditional annual appraisal is being replaced more and more by dynamic, employee-centric
performance management practices (Rivera et al. 2021). One of the main trends in modern PA is
the movement toward continuous feedback and ongoing performance dialogue (Verma & Mishra
2024). This allows for adjustment in real time, promotes agility, and relieves the mental pressure
associated with formal evaluations.

Another emerging practice is the integration of PA with learning and development systems.
Through this linking of appraisal outcomes to training opportunities, it personalizes the
employee development within organizations while narrowing process skill gaps (Mustafa et al.
2024). Nowadays, technology is an important accompaniment to contemporary PA systems.
Workday, SAP SuccessFactors, and BambooHR work as digital tracking, automated workflows,
and analytics systems that enhance accuracy and efficiency by 25% (Nyathani 2023).

Employee-centric approaches are also gaining ground. These focus on development rather than
judgement, framing appraisals as opportunities for growth rather than as evaluative hurdles. As
Culbert (2010) asserts, organisations that reframe PA as a coaching dialogue rather than a
grading exercise are more likely to foster engagement and long-term performance improvement.

Furthermore, best practices include aligning performance expectations with organisational values
and culture. For example, if BlueScope Steel prioritises innovation and safety, its PA system
should evaluate employees not only on output but also on adherence to these values.
Incorporating rater training is another key practice that improves reliability by helping
supervisors understand rating errors and how to avoid them (Levy & Williams 2004).

6. Common Problems and Solutions in Performance Appraisal

Despite the theoretical robustness of performance appraisal systems, their implementation is

often flawed. One common issue is rater bias, where managers allow personal preferences, recent
events, or the "halo effect" to distort evaluations. This undermines fairness and can lead to
demotivation among employees. Rater training and the use of multi-source feedback can help
mitigate this issue by introducing more objectivity and transparency (Yustina & Gudono 2017).

Another major problem is the lack of managerial commitment. In some organisations, managers
may treat PA as a box-ticking exercise, failing to engage meaningfully with the process. This

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devalues the system and reduces its effectiveness (Dappollone 2021). Gallup (2023) claims that
only 14% of employees strongly agree that their performance reviews inspire them to improve.
Overcoming this requires a cultural shift that positions PA as a strategic tool for business
success. Engaging senior leadership in the design and communication of PA systems can foster
buy-in at all levels.

The third challenge is a lack of explicit performance criteria. When expectations are vague or
misaligned to a job role, appraisals will be inconsistent and unhelpful. Job analysis and
competency frameworks can address the problem, for performance would be evaluated against
relevant and measurable standards (Lingaraj, 2023).

Additionally, traditional appraisal systems often suffer from being too infrequent. Annual
reviews fail to capture the dynamic nature of modern work. Introducing regular check-ins and
continuous feedback mechanisms helps keep performance management aligned with current
priorities and encourages ongoing development.

Another challenge concerns employee anxiety and resistance. Negative behavior can occur when
appraisals are perceived as punitive or too critically angled, especially toward disengagement.
Empowering a developmental mindset wherein appraisals denote an opportunity for progress can
positively alter the employee's perspective on appraisals (Lam et al. 2002). This is particularly
necessary in an industrial environment such as BlueScope Steel, where psychological safety is
necessary for free conversation and successful teamwork.

7. Company Background: BlueScope Steel

BlueScope Steel is a leading global manufacturer of steel products, headquartered in Australia

and operating across North America, Asia, and Oceania. With a workforce of over 14,000
employees, the company produces high-quality steel materials for infrastructure, automotive,
construction, and other industrial sectors (BlueScope 2024). BlueScope is recognised for its
emphasis on innovation, sustainability, and workplace safety—values that shape its operational
culture and people strategy.

The company’s guiding philosophy, “Our Bond,” reflects its commitment to respect, integrity,
and excellence (BlueScope, n.d.). These values are deeply embedded in its people management
practices. Although detailed insights into BlueScope’s current PA systems will be explored in the
final report, it is reasonable to assume that performance management plays a critical role in
maintaining the company’s high standards, particularly in safety, efficiency, and leadership
development.

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