CHAPTER II

THEORITICAL FRAMEWORK PERFORMANCE APPRAISAL OF

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INTRODUCTION:An organization’s goals can be achieve only when people put in their best efforts. By performance appraisal we can ascertain whether an employee has shown his or her best performance on a given job. Performance appraisal is essential to understand and improve the employee’s performance through HRD. In fact, performance appraisal is the best for HRD. It was viewed that performance appraisal was useful to decide upon employee promotion/ transfer, salary determination and the like. But recent development in human resource management indicates that performance appraisal is the basis for employee development. Performance appraisal indicates the level of desire performance level, Level of actual performance and the gap between these two. This gap should be bridge through human resource development techniques like training, executive development etc.

MEANING AND DEFINITION
 In simple terms, performance appraisal may be understood as the assessment of an individual’s performance in a systematic way, the performance being measured against such factors as job knowledge, quality and quantity of output, initiative leadership abilities, supervision, dependability, co-operation, judgment, versatility, health and the like. Assessment should not be confined to past performance alone. Potentials of the employee for future performance must also be assessed.  It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development.  Performance appraisal is a formal, structured system of measuring and evaluating an employee’s job related behaviours and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization and society all benefit.  Performance appraisal is not job evaluation. Performance appraisal refers to how well someone is doing the assigned job, but job evaluation refers to how much a job is worth to the organization.  Appraisals are arranged periodically to a definite plan.  It is a continuous process in every large scale organization.

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OBJECTIVES OF PERFORMANCE APPRAISAL
The main objectives of performance appraisal are:  Providing basis for promotion, transfer, termination.  Enhancing employee’s effectiveness.  Identifying employees training & development needs.  Aiding in designing training & development programmes.  Removing work alienation.  Removing discontent .  Developing interpersonal relationship .  Aiding wage administration.  Exercising control .  Improving communication .

FACTORS AFFECTING PERFORMANCE APPRAISAL
 Environmental constraints There are several environmental constraints which may be outside the control of worker and to ignore this face in judging his performance would be injustice. Example: the quality of a raw material in an organization may detoriate over a period or the machine may break down unexpectedly. As a result both productivity and quality may suffer. But if the selection of materials and maintenance are done at higher levels in the organization, the performance appraisal of the worker should not be affected.  Organizational leadership The style of top leadership of an organization should also be looked into. It is the nature of leadership at the top which determines to a large extent the loyalty and commitment of employees to the goals of an organization, effective top leadership orients and motivates the entire organization for better performance. Employees at every level become highly performance conscious.

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 Interdependence subsystems Since every organization is a big system composed of a number of interdependent subsystems the success or failure of any one subsystem, has to be interpreted in the context of all other subsystems to which it is related.  Organizational structure Organizational structures are of two types :o Organistic Organistic structures tend to have quite flexible organizational structure. Elaborate organization chart or manual are usually nonexistent. In rapidly changing environments such structures can quickly maneuver themselves into advantage position to confront new situation. This dynamism makes such structures readily responsive to innovations all. o Mechanistic o Mechanistic structures tend to be rigid with clearly defined relationships and responsibilities. A formal awareness of the structural pattern provides such organization as shown by readily available organizations blueprints and the like. By implication, these structures tend to be static and are designed to carry out a nearly fixed strategy in a reliability stable environment.

Who will appraise? 3600 Performance appraisal The appraiser may be any person who has through knowledge about the job content, contents to be appraised, standards of contents, and who observes the employee while performing job. The appraiser should be capable of determining what is more important and what is relatively less important. He should prepare reports and make judgements without bias. Typical appraisers are: supervisors, peers, subordinates, employees themselves, users of service and consultants. Performance appraisal by all these parties is called “3600 Performance appraisal”. 3600 appraisal can be done by using software developed by a number of companies. Organizational universe system sells software and provides discussion on 3600 feedback to managers.

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Supervisors Supervisors include superiors of the employees, other superiors having knowledge about the work of the employee and department head or manager. General practice is that immediate superiors appraise the performance which in turn is reviewed by the departmental head/manager. This is because supervisors are responsible for managing their subordinates and they have the opportunity to observe, direct and control the subordinate continuously. Moreover, they are accountable for the successful performance of their subordinates. Sometimes other supervisors, who have close contact with employee work also appraise with a view to provide additional information. On the negative side, immediate supervisors, may emphasise certain aspects of employee performance to the neglect of others. Also, managers, have been known to manipulate evaluations to justify their decisions on pay increases and promotions. However, the immediate supervisor will continue to evaluate employee performance till a better alteration is available. Organizations, no doubt, will seek alternatives because of the weaknesses mentioned above and a desire to broaden the perspective of the appraisal. Peers Peer appraisal may be reliable if the work group is stable over a reasonably long period of time and performs tasks that require interaction. However, little research has been conducted to determine how peers establish standards for evaluating others or the overall effect of peer appraisal on the group’s attitude. Whatever research was done on this topic was mostly done on military personnel at the management or premanagement level (Officers or officer candidates) rather than on employees in business organizations. More often than not in business organizations if employees were to be evaluated by their peers, the whole exercise may degenerate into a popularity contest, paving the way for the improvement of work relationship. Subordinates The concept of having superiors rated by subordinates is being used in most organizations today, especially in developed countries. Such a novel method can be useful in other organizational settings too provided the relationships between superiors and subordinates are cordial. Subordinates’ rating in such cases can be quite useful in identifying competent superiors. The rating of leaders by combat soldiers is an example. However, the fear of reprisal often compels a subordinate to be dishonest in his ratings. Though useful in universities and research institutions, this approach may not gain acceptance in traditional organizations where subordinates practically do not enjoy much discretion.

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Self appraisal If individuals understand the objectives they are expected to achieve and the stands by which they are to be evaluated, they are to a great extent in the best position to appraise their own performance. Also, since employee development means self development, employees who appraise their own performance may become highly motivated. Users of services, customers Employee performance in service organizations relating to behaviours, promptness, speed in doing the job and accuracy, can be better judged by the customers or users of services. For example, teacher’s performance is better judged by students and the performance of a conductor in passenger road transport is better judged by passengers. Consultants Sometimes consultants may be engaged for appraisal when employees or employers do not trust supervisor appraisal and management does not trust the self appraisal or peer appraisal or subordinate appraisal. In this situation, consultants are trained and they observe the employee at work for sufficiently long time for the purpose of appraisal. In view of limitations associated with each and every method discussed above, several organizations follow a multiple rating system where in several superiors separately fill out rating forms on the same subordinates. The results are then tabulated.

When to appraise? Informal appraisals are conducted whenever the supervisor or personnel managers feel it necessary. However, systematic appraisals are conducted on a regular basis, say for example, every six month or annually.

Team appraisal Organizations have started developing team appraisals to evaluate the performance of a team as a whole instead of appraising performance of individual employees. This development is due to the fact , organizations are assigning the work to teams rather than individuals. Appraising individual performance is almost impossible in a team set up. Companies like Mind Tree, Dr Reddy’s Lab, Boeing, Texas Instrument, Josten and Ralston Foods use team appraisal.
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Companies following Total Quality Management (TQM) principles do not also follow team appraisal as TQM sets standards, measures performance against those standards and identifies opportunities for continuous improvement. TQM sets for the team assignment of the work rather than individual assignment. Therefore, TQM and team appraisal go together. Thus, almost all the companies following TQM principles , also follow team appraisal.

PROCESS OF PERFORMANCE APPRAISAL
a) Select performance factors (based on job description) to be evaluated and set the standards to be achieved. b) Set the performance review period. c) Measure actual performance. d) Compare performance with set standards and rate it within a suitable scale. e) Communicate the rating to the appraisee. f) Use the performance appraisal for the desired purpose.

LINKAGE OF PERFORMANCE APPRAISAL WITH OTHER SYSTEM
Performance appraisal system as described here is linked with training, promotions, salary, reward, administration and research and OD. It is linked with training because the identification of training and other developmental needs partially flow from performance analysis and review. It is linked with promotions in a limited way as performance appraisal ratings do from one of the inputs in promotions. It is linked with reward administration as consistent good performance has to be rewarded some way or other. It is linked with OD because the data generated through appraisal systems can help a great deal in studying several issues related to organizational life.

METHODS OF PERFORMANCE APPRAISAL
There are various methods of merit rating which may be classified in to (1) Traditional methods (2) Modern methods.

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The methods differ for various obvious reasons. First, they differ in the source of traits or qualities to be rated. The qualities may differ due to difference in job requirements, statistical requirements and opinion of management. For instance, ‘cooperation’ may not be considered at all necessary by the management. Then it is difficult also to reliably rate such factors as cooperation. Second, they differ with respect to the coverage who is being rated. Ex- executives, salesman, factory workers. Third, variations may be caused due to the degree of precision attempted in the evaluation. And finally, they may differ with respect to methods used to obtain weightage for the various traits. As far as practicable, merit rating should be based on objective factors; it should be a continuous process and made at regular intervals. Any good method of merit rating should access the following personal qualities of the employee: 1. Knowledge of works 2. Ability to do the work. 3. Quality and quantity of output. 4. Personal qualities like dependability, adaptability initiative, etc. 5. Special qualities like confidence, leadership, etc.

TRADITIONAL METHODS:Traditional methods are very old technique of performance appraisal. They are based on trait-oriented appraisal. Evaluation of employees is done on the basis of standards of personal traits or qualities such as attitudes, judgement , versatility, initiative, dependability, leadership, loyalty, punctuality, knowledge of job etc. There are seven traditional methods of performance appraisal. These are as follows1. Unstructured appraisal 2. Employee ranking 3. Forced distribution 4. Graphic rating scale 5. Check-list 6. Critical incidents 7. Field review

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Unstructured appraisal method Under this, the appraiser is required to write down his impression about the person being appraised in an unstructured way. However, in some organizations, comments are required to be grouped under specific headings such as quality of job performance, reasons for specific job behaviors, personality traits, and development needs. This system is highly subjective and has got its merit in its simplicity and is still in use especially in the small firms.

Ranking method To compare one man with all other men and place him in a simple rank order is the oldest and simplest method of performance appraisal. In it ordering is done from best to worst of all individuals comprising the group. Though this method is both simple and natural, it has following disadvantages    It is highly subjective. People are compared as a whole. Comparison of the various components of a person’s performance is not done. The magnitude of difference in ability between ranks is not equal at different position. Its use is difficult in large groups as the rater cannot compare several people simultaneously. The paired comparison method of ranking has been evolved as an answer to this problem. In it the rater compares each man with every man in his group, with the final ranking of each worker determined by the number of times he was judged better than the others. The number of comparisons involved in this method is very large. It can be determined by the following formula.

Number of comparisons= N(N-1)/2 where N stands for the number of men to be rated. For a 50 man group, for example, there would be 1225 separate comparisons which is obviously far too great to permit expedient use of the method.

Forced distribution method Some appraisers suffer from a constant error, i.e., they either rate all workers as excellent, average or poor. They fail to evaluate the poor, average or excellent employees clearly. The forced distribution system is devised to force the appraiser to fit the employees being appraised into predetermined ranges of scale. It has an advantage
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over the paired comparison system in that two or more employees can be given equal ratings. This system is based on the presumption that employees can be divided into five points scale of outstanding, above average, below average and poor. In this system, the appraiser is asked to distribute the employees into these categories in such a way that about 10% of the men are in group ‘outstanding’, 20% ‘above average’, 40% ‘average’, 20% ‘below average’, and 10% ‘poor’. This method obviously eliminates the room for subjective judgement on the part of supervisors. Besides this, the system is easy to understand and administer. Graphic –rating scales method Under this method, scales are established for a number of specific factors and qualities. Five degree are established for each factor and general definitions appear at points along the scale. Generally, the rater is supplied with a printed form, one for each person to be rated. The selection of factors to be measured on the graphic rating scale is an important point under this system. These are two types: (i) characteristics, such as initiative and dependability, and (ii) contributions, such as quantity and quality of work. Since certain areas of job performance cannot be objectively measured, it is likely that graphic scale will continue to use a mixture of both characteristics and contributions.

Check-lists method It also consists of two techniques: (a) Weighed check list (b) Forced choice. Weighed check list Under this method, various statements are prepared in such a manner that they describe various types and levels of behaviours for a particular job. Each statement is attached with a scale value. At the time of rating the employees, the supervisor just collects and checks all the statements. After the weights or values are attached to the individual traits, the rating up to this level is gathered on the rating sheet. Then the weights are averaged and employee is evaluated. The weighted check-list should be prepared by the persons thoroughly acquainted with job and perfect at preparing and weighing statements. When this process is over, rating is placed on separate cards. Then these cards are sorted by raters who actually observed the accomplishment of the work. They rank the employees from poor to excellent. Weights are then assigned to the statements in accordance with the way they are ranked by the raters. Under this method, the supervisor is not allowed to accumulate vague impressions as a basis of rating. Because of this, it compels the supervisors to think in terms of very specific kinds of behaviour. This method involves a lengthy procedure of evaluating employees. It requires certain qualifications to be met on the part of the supervisor regarding the job he is assigned to look after. Moreover, this method is a
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relatively costlier affair. It puts more strain on the financial resource of the organization particularly in terms of personnel developmental time. Financial burden is further increase when diverse jobs are evaluated as a separate procedure must be established for each job. Forced choice This method is used particularly with the objective of avoiding scope for personal prejudices. Under this method, the rater is forced to choose between descriptive statements of seemingly equal worth describing the person in question. Statements are chosen of both the sides (favourable as well as unfavourable). For example, the following two pairs of statement may be given to the rater and the may be asked to select one statement from each pair that is represented by supervisor.     Gives clear instructions to his subordinate. Can be depended upon to complete any job assigned. Makes promise that he knows he cannot keep. Shows favouritism to some employees.

The rater may feel that neither of the statements in a pair is applicable, but he must select the one that is more descriptive. Only one of the statements in each pair is correct in identifying the better performance and this scoring key must be kept secret from the raters. In this way, bias is removed from the appraisal process. The main advantages of establishing this system of performance appraisal is that it has greater objectivity than most other methods. Forced choice method is also not free from drawbacks. Firstly, it is very expensive to install this system. Secondly, the procedure involved is very lengthy and hence more time-consuming. Thirdly, it is difficult for a supervisor to discuss rating switch subordinates because the items are scored by the personnel department. Critical incidents method In this method one draws up for each job a list of critical job requirements which are vital for success or failure on the job. For example, the following critical factors may be identified in the job of a sales man.     Following up: complaints, requests, orders. Planning ahead. Communicating true information to managers and customers. Carrying out promises.

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     

Persisting on tough accounts. Pointing out uses for other company products besides the salesman’s own line. Using new sales technique and methods. Preventing price-cutting by dealers and customers. Knowing customer requirements. Initiating new selling ideas.

Limitations    It is difficult to identify critical factors. It requires the supervisor to jot down incidents regularly. It is hardly desirable to confront an employee with a misdeed or mistake which he committed six months or a year ago.

Field review method Under this method, the supervisors are interviewed by an expert from the personnel department. The expert questions the supervisor to obtain all the pertinent information on each employee and takes notes in his note book. Thus, there is no rating from with factors or degrees, but overall ratings are obtained. The workers are usually classified into three categories as outstanding, satisfactory and unsatisfactory. The interviewer questions the supervisor about the requirements of each job in his unit and about the performance of each man in his job. He probes to find out not only how a man is doing but also why he does that way and what can be done to improve or develop him. The supervisor is required to give his opinion about the progress of his subordinates, the level of performance of each subordinate, his weaknesses, good points, outstanding ability, promotability, and the possible plans of action in cases requiring further consideration. The questions are asked and answered verbally. The success of field review method depends upon the competence of the interviewer. If he knows his job, he can contribute significantly to accurate appraisals. Field review method relieves the supervisors of the tedious writing work of filling in appraisal forms. It also ensures a greater likelihood that the supervisors will give adequate attention to the appraisals because the personnel department largely controls the process. Superficial judgement can be eliminated if the appraiser probes deeply.
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MODERN METHODS:There are two important methods of performance appraisal which are used by the modern concerns. 1. Management by objective 2. Behaviourally- anchored rating scale

Management by objective It was Peter Drucker who proposed goal setting approach to performance appraisal which he called ‘management by Objectives and self control’. This approach was further strengthened by Douglas Mc. Gregor. Goal setting approach or “management by objective” is the same as behavioural approach to subordinate appraisal, actually called “work planning and review” in case of General Electric Co., U.S.A under this approach, an employee is not appraised by his reasonable traits, but by his performance with respect to the agreed goals or objectives. Thus, the essential feature of this approach is mutual establishment of job goals. The application of goal setting approach to performance appraisal involves the following steps:      The subordinate discusses his job descriptions with his superior and they agree on the contents of his job and the key results areas. The subordinate prepares a list of reasonable objectives for the coming period of six to twelve months. He sits with his superior to discuss these targets and plans, and a final set is worked out. Check-points are established for the evaluation of progress, and the ways of measuring progress are selected. The superior and the subordinate met at the end of the period to discuss the results of the subordinate’s efforts to meet the targets mutually established.

The goal setting approach is based on clear and time bound objectives from the corporate level to the operative level. This approach can be applied with great success if the performance appraisal programme consists of the following elements :i. Good job descriptions are available to help setting of goals for different positions.
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ii. iii.

Superiors have trust in the subordinates to establish reasonable goals. There is emphasis on problem solving rather than criticism of the performance of the subordinates.

The goal setting approach suffers from the following limitations: i. This approach can be applied only when the goal setting is possible by the subordinates. It is doubtful if such a procedure can be applied for the blue collar workers. This approach is not easy to administer. It involves considerable time, though and contact between the superior and subordinate. If the span of supervision is quite large, it will not be possible for the superior to have discussion with each and every subordinate for setting up mutually agreed goals. This approach mainly emphasizes counseling, training, and development. It is argued that critical evaluation and modification to improve are incompatible. But in practice, it is not possible to forego the critical aspects of performance appraisal. This approach is appropriate for the appraisal of executives and supervisory personnel who can understand it in a better way. Operative workers cannot understand this approach and moreover, a vast majority of them do not want to take initiative in setting their own goals.

ii.

iii.

iv.

Behaviourally anchored rating scales Behaviourally anchored rating scales are designed to identify the critical areas of performance for a job, and to describe the more effective and less effective job behaviour for getting results. Performance is evaluated by asking the rater to record specific observable job behaviours of an employee and then to compare these observations with a “behaviourally anchored rating scales”. As a result, the supervisor is in a position to compare the employee’s actual behaviour with the behaviour that has been previously determined to be more or less effective. Proponents of BARS claim many advantages of this approach. They argue that such a system differentiates among behaviour, performance, and results, and consequently is able to provide a basis for setting developmental goals for employee. Because it is job –specific and identifies observable and measurable behaviour, it is a more reliable and valid method for performance appraisal.

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BENEFITS OF PERFORMANCE APPRAISAL SYSTEM
1) FOR THE APPRAISEE  Better understanding of his role in the organization- what is expected and what needs to be done to meet those expectations.  Clear understanding of his strengths and weaknesses so as to develop himself into a better performer in future.  Increased motivation, job satisfaction and self esteem.  Opportunity to discuss work problems and how they can be overcome.  Opportunity to discuss aspirations and any guidance, support or training needed to fulfill these aspirations.  Improved working relationship with the superiors. 2) FOR THE MANAGEMENT :  Identification of performers and non-performers and their development towards better performance.  Opportunity to prepare employees for assuming higher responsibilities.  Opportunity to improve communication between the employees and management. 3) FOR THE ORGANISATION :  Improved performance throughout the organization.  Creation of culture of continuous improvement and success.  Conveyance of message that people are valued.

USE OF PERFORMANCE APPRAISAL
Performance appraisal has several uses. The important among them are: 1. Performance improvement- Performance feedback allows the employee, manager, and personnel specialist to intervene with appropriate actions to improve performance. 2. Compensation adjustments- Performance evaluations help decision-makers determine who should receive pay raises. Many firms grant part or all of their pay increases and bonuses based upon merit, which is determined mostly through performance appraisals.
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3. Placement decisions- Promotions, transfers, and demotions are usually based on past or anticipated performance. Often promotions are a reward for past performance. 4. Training and development needs- Poor performance may indicate the need for retraining. Likewise, good performance may indicate untapped potential that should be developed. 5. Career planning and development- Performance feedback guides career decisions about specific career paths one should investigates. 6. Staffing process deficiencies- Good or bad performance implies strength or weakness in the personal department’s staffing procedures. 7. Informational inaccuracies- Poor performance may indicate errors in job analysis information, human resource plans, or others parts of the personnel management information system. Reliance on inaccurate information may have led to inappropriate hiring, training or counseling decisions. 8. Job design errors- Poor performance may be a symptom of ill-conceived job designs. Appraisals help diagnose these errors. 9. Equal employment opportunity- Accurate performance appraisals that actually measure job-related performance ensure that internal placement decisions are not discriminatory. 10. Feedback to human resource- Good/bad performance throughout the organization indicates how well the human resource function is performing.

Problems of performance appraisal
The major problem in performance is1. Rating biases- the problem with subjective measures has an opportunity for bias. The rater biases include halo effect, the error of central tendency, the leniency and strictness biases, personal prejudice and the recency effect. 2. Failure of the superiors in conducting performance appraisal interviews. 3. Most part of the appraisal is based on subjectivity. 4. Less reliability and validity of the performance appraisal techniques. 5. Negative ratings affect interpersonal relations and industrial relations system. 6. Influence of external environmental factors and uncontrollable internal factors.

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7. Feedback and post appraisal interview may have a setback on production. 8. Management emphasizes on punishment rather than development of an employee in performance appraisal. 9. Some ratings particularly about the potential appraisal are purely based on guess work.

The other problems of performance appraisal reported by various studies are1. Relationship between appraisal rates and performance after promotions was not significant. 2. Some superiors completed appraisal reports within a few minutes. 3. Absence of inter-rater reliability. 4. The situation was unpleasant in feedback interview. 5. Superiors lack that tact of offering the suggestions constructively to subordinates. 6. Supervisors were often confused due to too many objectives of performance appraisal.

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