Regardless of an organization's specific needs for performance appraisal, five general requirements must be met by an appraisal system if it is to accomplish its objectives: reliability, validity, practicality, fairness, and impact.
Reliability is the consistency of a measure over time and across different raters. Consistency over time means that at any two points in time, an instrument should yield the same findings or results. This form of reliability is not too appropriate to performance appraisal since one would expect to see changes in performance across time. Consistency between raters is a more important requirement of same employee. Generally, research shows that well-trained raters become quite consistent in their ratings. Highest degrees of consistency should occur when raters are in the same position to observe a given employee. It is generally believed that an immediate superior is in the best position to evaluate the performance of a subordinate, though in practice this is not always the case. Reasonably high reliability is necessary for validity.
Validity is the degree to which a measure measures what it is supposed to measure. The major aspect of validity in performance appraisal is content validity. An appraisal instrument has content validity to the extent that it includes most of the important job behaviors and/or results of the job.
In order to meet the practicality requirement, an appraisal system must be acceptable to both evaluators and evaluatees. If an appraisal system is unacceptable, its use will be resisted, and resultant appraisals or appraisal decisions will be discounted. Practicality also means that an appraisal system must be able to measure something that is significant to individuals and to the organization's goals, or it will have little utility to employees or to the organization.
Employees must feel that appraisals are conducted fairly and that the consequences of appraisals (raises, promotions, etc.) are fair. A system perceived to be unfair will likely prove unacceptable to employees.
An appraisal system must have significant impact. Without it, the system loses its credibility. If a system is able to measure something significant to individuals and to organizational goals, then it stands a better chance of having impact.
Ref: Thomas H. Stone
Ref: Thomas H. Stone