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What are the modern methods of

performance appraisal?
Posted in Performance Planning and Potential Appraisal |

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Apart from earlier techniques of appraisals mentioned here, we now have modern
methods too. Some of these are:1. Assessment centre method: This method was used for the first time in 1930 by the
German army and then in 1960s by the British army. This method tests a candidate in
different social situations using a number of assessor and procedures. The performance of
an employee an also his potential for a new job is evaluated in this method by assessing his
performance on job related simulations. Characteristics that the concerned managers feel
are important for the success of a particular job are included in these simulations.
Techniques like business games role playing and in basket exercises are used in this
method. The employees are evaluated individually as well as collectively on job related
characteristics. Personal interview and projective tests help in assessing the motivation,
career orientation and dependence on others of an employee. To measure the intellectual
capacity written tests are used. The evaluators in this method consist of experienced
manager working at different levels who prepare a summary report for the management as
well as for the employees. This technique usually measures the planning ability
interpersonal skills and organizational skills of an employee.
2. Human Resource Accounting Method: Human resources are a valuable asset for any
organization and it can be valued in monetary terms. This method evaluates the
performance of an employee in terms of costs and contributions. HR costs include expenses
incurred on HR planning recruitment selection induction and training. The difference
between this costs and the contribution by an employee reflects the performance of that
employee. This method is still developing hence is not very popular at present.
3. Behaviorally anchored rating scale (BARS): This method combines the graphic rating
scale and the critical incident method. It determines in advance the critical areas of the
performance and the most effective behavior to achieve the results. Then the actual job
behavior of an employee is evaluated against the predetermined behavior.








1. Supervisor and other persons well acquainted with a job are asked to described specific






2. Then these persons categorized the incidents into sets of performance dimensions and





3. These people then reallocate the original critical incidents. They are given the cluster

definition and critical incidents and are asked to re-design each incident to the dimensions
that describes it the best. A critical incidents is retain only a some percentage that is usually
between 50 80 percent of this group assigns the incidents to the same cluster as was





4. The second group then rates each incident on a 7 9 point scale where the rating is done
on the basis of how well the behavior described in the incidents represented the





5. A sub set of incidents is used as behavior anchors for the performance dimensions.
4 Appraisal through management by objectives (MBO): This concept was introduced
by Peter Drucker in 1954 who named it management by objectives and self control. It is an
effective way it is also known as goal setting approach to appraisal .In this process the
supervisor and subordinate members jointly identify the common goals of the organization
and set the areas of the responsibility of each individual in terms of results expected from
that person. These measures are use for operating the unit as well as for appraising the
performance of the employees.
5 The 360 degree appraisal: The 360 degree method of performance appraisal is used to
make the appraisal process more transparent, objective and participative. It introduced the
concepts of self appraisal subordinates appraisal, peer appraisal and appraisal by customers.
It is called a 360 degree method because it involves the evaluation of an employee by
persons above him, below him and alongside him. Structured questionnaires are used to
collect information from the seniors, subordinates and peers. The employee to be evaluated
thus acquires a central position and everyone around him participates in the appraisal
process in the 360 degree method. The following four are the main components of 360
degree appraisal :
Self appraisal: It allows an employee complete freedom in accessing his or her strengths
objectively and identifying the areas of development. The employees get a chance to share
the development areas with their seniors based on their self appraisal and jointly worked
out a plan in tune with the organizational realities like the availability of resources and time.
It also gives a chance to the employee to express his career plans which is in the interest of
the organization as it knows beforehand the aspirations of its employee.
Appraisal by superiors: An appraisal by superiors involves providing constructive,
feedback about the performance of any employee as well as his development areas during
the review period. It helps in setting goals for the employees that help in achieve the
organizational goals and improve the performance of the employee. The career aspirations
of an employee are also put in proper prospective.

Appraisal by subordinates: This is a unique feature of the 360 degree method of

appraisal. As the subordinates play an important role in the performance of the employee.
The feedback by the subordinates gives firsthand account of how they look at their superior
in terms of working style. The capability of a superior in motivating, delegating the work,
building a team and communicating with them effectively form the basis of appraisal by the
Peer appraisal: It also plays an important role in 360 degree appraisal as the role of peers
is quite important in life of an employee. Selecting the right peers is very important and
peers from the departments that are directly related with the department of the employee
should also be included. It mainly focuses on feedback about the style of functioning of the
employee under review and can also include his ability to work as team leader besides his
co-operation and collaboration.
Potential appraisal: It is different from performance appraisal as it refers to the abilities of
the employees that are not being used at the time of appraisal. It searches for the latent
abilities of the employee in discharging higher responsibilities in future. The potential of the
employees is judged on the basis of his present performance, personality traits, past
experience and age and qualification. It also looks at the unused skills and knowledge of an
employee. It aims at informing the employee their future prospectus and helps the
organization in drawing your suitable successions plan. It also requires updating the training
efforts regularly and advised the employees on things which they can do to improve their
career prospectus.

What are the techniques of Performance

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The techniques of appraisal have been divided into two categories: The modern and the
traditional techniques. While the traditional methods base their findings on the personality
trades of an individual like creativity, responsibility, and leadership, the modern techniques
laid more stress on the evaluation of work results. The traditional methods or techniques
1. Confidential report: It is used for promotion and transfer of an employee and is
prepared by the immediate superior who describes in detail the strength and weaknesses
along with major achievements and failures of the employee. The personality and behavior
of the employee also find mention in this report.
2. Essay or free form method: As the name suggests the appraiser write a short essay
detailing the performance of the employee. It is a very time consuming method and is prone
to buys also as specific performance dimensions are not considered. The quality of appraisal
also depends on the writing skills of the appraiser. It is also difficult to compare two Essay
appraisals as there is no common criterion for the appraiser.
3. Strayed ranking method: This is the old and simplest method of performance
appraisal. In this method ranks are assigned relatively to all the employees working in the
same unit and doing the same job without analyzing their performance. The method biased
as the ranking is not based on the specific performance measures of a job. It can be
cumbersome if the number of employees is very large. The other limitations of this method
are that it only tells how an employee stands in comparison with other employees.
4. Forced distribution method: In this method the evaluator is required to distribute his
rating in the form of normal frequency distribution. Employees are shown in categories that
range from poor to excellent by the evaluator. This method was evolved by Joseph Tiffin but
it also suffers from certain limitations as the performance criteria related to a job are not
used and the reasons for assigning a category to particular employee are not clear.
5. Graphic or linear rating scale: In this method a numerical scale is used which
indicates different degrees to a particular trait. These traits can be initiative dependability
creativity attitude loyalty emotional stability and co-ordination. The evaluator gives a
particular ranking on each trait to every employee. Two types of rating scales are used:
Continuous and discontinues. In first type degree of a trait is measure along a continuum
like 0 1 2 3. IN discontinues rating scale boxes are used to show the different degrees of the

traits like (I) no interest (II) indifferent (III) Interesting (IV) enthusiastic (V) very
6. Critical incident method: This method was developed after a research by the armed
forces of United States of the 2nd world war. It is based on a principal that there are some
significant acts in the behavior and performance of every employee which can lead to the
success of failure on the job. The supervisor keeps a record of these events which can be
good or bad and also records the behavior of the employee during such an event. The
ratings of the employee depend on the positive or negative behavior during these events.
This method also has certain limitations like it is cumbersome and time consuming and a lot
of important information is lost while coating the incident after a considerable gap of time.
Continues record keeping is also not possible as such events keep on happening frequently.
The bios by the supervisor in reporting these incidents can also not be ruled out completely.
7. Group appraisal method: Employees are rated by a group of people comprising the
immediate supervisor of the employee and other supervisor who have the knowledge of the
employee work along with the concerned head of the department and a personnel expert.
This group determines the standards and then measures the actual performance of the
employee. It suggests creative measures after analyzing the causes of poor performance.
Though it is a time consuming method, it is free from bias.

What is Performance Planning?

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Performance planning is a process in which it is determining that how a job has to be done
and how the success of the job is to be defined as measured. Performance planning for the
employees close from the organizational goals and is jointly undertaken by the employee
and his supervisor. It is different from performance appraisal as it is more concern with what
and how to appraise as against the need for appraisal in performance planning. The process
of performance planning is a under:
1. The job objectives of an employee are formulated by him in consultation with his
supervisor keeping in mind the organizational objectives. This helps the employee
understand the results expected from him.

2. During this process each and every objective and its contribution in the fulfillment of the
organizational objectives is discussed in detail. The method of determining the success of
each objective is also determined.
3. The need for any developmental activity which might be useful in preparing the employee
for the successful discharged of his new responsibilities are also worked out.
4. After the performance plan is prepared it becomes the responsibility of the employee to
successfully carry out the plan and achieve the objectives/targets decided in the plan. The
supervisor now assumes the role of a coach and counselor.

How Planning is Linked with Performance?

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Planning is generally done for the performance. The planning starts firstly from the stage of
the dreaming, which mainly involves the time when one is working conceptually on an idea.
For the implementation of such dreams, planning is a dire necessity.
The performance is a very action oriented concept involving the planning of the actions for
the implementation. Certain objectives in the plans are kept in the mind and then it is made
sure that the performance is made according to the various objectives.
The planning is a very purposeful activity and just dreaming is not enough for fulfilling the
planning, the planning is very much needed for fulfilling these dreams. And after this, the
implementation is also needed and then following this step with the process of the
The evaluation of the process of the performance is very much necessary as it helps a lot to
have an idea of the time, the cost and also the efforts that are being made. It is very
important that the performance is very efficient and at the same time very effective in the
nature. And for the achievement of such a performance, the performance should be
according to a certain plan and should be at the least possible cost and the most important
thing to remember here is that it should be able to fully satisfy the customers.

What is the role and the position of the cost

in the process of the planning?
Posted in Principles of Management|

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It is very important that the planning is done in the particular framework of the time, the
performance and the cost. The importance of the time has been explained above and now
we will try to understand the importance of the cost in the process of the planning. Money
value of any type of the plan is referred to as the cost. The cost in the process of the
planning largely depends on the competition, the various products that are to be used and
the types of the services that are to be provided. The cost of the planning can be adjusted
at the different stages of the process with the help of the various alternatives or the
substitutes that are available for the various products and the services.

One important point that must be remembered during the process of the implementation is
that the cost must remain between the planned margins. And if the costs at any time cross
the margins, the whole process of the planning is very greatly affected.
For keeping the planning within the planned costs, it is very necessary to keep the control
over the resources and its use as the actions depends a lot on the resources that are

Modern Methods of Performance Appraisal

An assessment centre is a place to evaluate an individual potentiality and performance, so as to position
he/she in the core functional areas. normally, organisations outsource assessment centres instead of
making them by their own.
[This method of performance appraisal is being opted by the RBI (Reserve Bank of India) for assessment
of its officers]

An assessment center typically involves the use of methods like social/informal

events, tests and exercises, assignments being given to a group of employees to
assess their competencies to take higher responsibilities in the future. Generally,
employees are given an assignment similar to the job they would be expected to
perform if promoted. The trained evaluators observe and evaluate employees as
they perform the assigned jobs and are evaluated on job related characteristics.
The major competencies that are judged in assessment centers are interpersonal
skills, intellectual capability, planning and organizing capabilities, motivation, career

orientation etc. assessment centers are also an effective way to determine the
training and development needs of the targeted employees.
Nearly 30% companies seek assessment center services while moving an employee
from executive position to managerial position. 20% companies said they use the
center's services when seeking a position on senior management level.
As per the TJinsite, the premium research website promoted by
survey, more than 80% of the surveyed employers predict an increased use of
assessment centres in near future because of their expertise and unbiased in
assessing an individual fit and biggest limitation comes from the lack of skilled
assessors to perform the assessment task effectively.
Facts [+]
AssessPeople Ltd. is a workforce assessment company, based at Chennai, India, and having wings at all
metros across country. They are a pioneer in India to use internet as a platform to design, administer, and
provide the results to organizations.
What they do?

Pioneer in workforce assessment services since 1999

Assessment services for


High School Students to Senior Managers

Individual and team assessments

Assessment of aptitudes, abilities, skills, behaviours, competencies, knowledge, morale, attitude

and work values

Multilingual Assessments

Biometrics, Photo, Phone2web

End2End Assessments

Organisation-wide Surveys


Behaviorally Anchored Rating Scales (BARS) is a relatively new technique which combines the graphic
rating scale and critical incidents method. It consists of predetermined critical areas of job performance or

sets of behavioral statements describing important job performance qualities as good or bad (for eg. the
qualities like inter-personal relationships, adaptability and reliability, job knowledge etc). These statements
are developed from critical incidents.
In this method, an employees actual job behaviour is judged against the desired behaviour by recording
and comparing the behaviour with BARS. Developing and practicing BARS requires expert knowledge.
A behaviorally anchored rating scale is an employee appraisal system where raters distinguish between
successful and unsuccessful job performance by collecting and listing critical job factors. These critical
behaviors are categorized and appointed a numerical value which is used as the basis for rating


Human Resource Accounting is a method to measure the effectiveness of personnel management

activities and the use of people in an organization.HRA is the process of Assigning, budgeting, and
reporting the cost of human resources incurred in an organization, including wages and salaries and
training expenses.

Human resources are valuable assets for every organization. Human resource accounting method tries to
find the relative worth of these assets in the terms of money. In this method the Performance appraisal of
the employees is judged in terms of cost and contribution of the employees. The cost of employees
include all the expenses incurred on them like their compensation, recruitment and selection costs,
induction and training costs etc whereas their contribution includes the total value added (in monetary
terms). The difference between the cost and the contribution will be the performance of the employees.
Ideally, the contribution of the employees should be greater than the cost incurred on them.


The definition of MBO, as expressed by its foremost proponent, Dr. George S. Odiorne,
Management by objectives is a process whereby the superior and subordinate managers of an
organisation jointly identify its common goals, define each individuals major areas of responsibility in
terms of the results expected of him, and use these measures as guides for operating the unit and
Much of the initial impetus for MBO was provided by Peter Drucker (1954) and by Douglas McGregor
(1960). Drucker first described management by objectives in 1954 in the Practice of Management.
Drucker pointed the importance of managers having clear objectives that support the purposes of those in
higher positions in the organisation. McGregor argues that by establishing performance goals for

employees after reaching agreement with superiors, the problems of appraisal of performance are
clearly defined goals of an employee in agreement with his superior. Carroll and Tosi (1973), in an
extensive account of MBO, note its following characteristics:

1. The establishment of organisational goals.

2. The setting of individual objectives in relation to organisational goals.
3. A periodic review of performance as it relates to organisational goals. Effective goal-setting and
planning by top management.
4. Organisational commitment.
5. Mutual goal-setting.
6. Frequent individual performance reviews.
7. Some freedom in developing means of achieving objectives.

MBO is, thus, a method of mutual goal-setting, measuring progress towards the goals, taking action to
assure goal attainment, feedback, and participation. It is a resultoriented philosophy, enabling an
employee to measure progress toward a goal which the employee often has helped to set. In the goalsetting phase of MBO, a superior and subordinate discuss job performance problems and a goal is
agreed upon. Along with mutual goal-setting, a major component of MBO is the performance review
session between the superior and subordinate, which takes place regularly to evaluate progress towards
specified goals.
The key features of management by objectives are as under:

1. Superior and subordinate get together and jointly agree upon .the list the principal duties and
areas of responsibility of .the individuals job.
2. The subordinate sets his own short-term performance goals or .targets in cooperation with his
3. They agree upon criteria for measuring and evaluating .performance.
4. From time to time, as decided upon, the superior and .subordinate get together to evaluate
progress towards the .agreed-upon goals. At those meetings, new or modified goals .are set for
the ensuing period.
5. The superior plays a supportive role. He tries, on a basis, to help the subordinate
achieve the agreed upon .goals. He counsels and coaches.

6. In the appraisal process, the superior plays less of the .role of a judge and more of the role of one
who helps the .subordinate attain the organisation goals or targets.




MBO as a mutual goal setting exercise is most appropriate for technical, professional, supervisory, and
executive personnel. In these positions, there is generally enough latitude and room for discretion to
make it possible for the person to participate in setting his work goals, tackle new projects, and discover
new ways to solve problems. This method is generally not applied for lower categories of workers
because their jobs are usually too restricted in scope. There is little discretionary opportunity for them to
shape their jobs.

MBO may be viewed as a system of management rather than an appraisal method. A successful
installation of MBO requires written mission statements that are prepared at the highest levels of top
management. Mission statements provide the coherence in which top-down and bottom-up goal setting
appear sensible and compatible. MBO can be applied successfully to an organisation that has sufficient
autonomy, personnel, budget allocation, and policy integrity. Managers are expected to perform so that
goals are attained by the organisation. Too often MBO is installed top-down in a dictatorial manner with a
little or no accompanying training. If properly implemented, it serves as a powerful and useful tool for the
success of managerial performance.
MBO is a tool that is inextricably connected with team building so that the work commitment of team

members can be increased and their desire to excel in performance can be inspired. It is important to
have effective team work among a group of managers or a group of subordinates. The group of
employees or subordinates must be looked upon as a team that needs to be brought together. Goals
should be set by manager-subordinate pairs, and also by teams. The basic superior subordinate
relationship in an organisation is in no way undermined in this concept of team goal setting. Lines of
responsibility, authority, and accountability remain clear.

Customer feedback method

This method is truly one of the modern methods of performance appraisal system. Customer feedback
method is used, especially for sales staff who deal with sales activity in the organisation. Under this
method of appraisal system, customer feedback is directly linked with employee performance. This
method of assessment could be unbiased and reliable since customers who are outsiders may give
correct judgement about employee performance than the insiders who are superiors.
Companies like Cognizant and Wipro software solutions are using customer feedback method to assess
the performance of their sales staff in order to hike salaries.
Some industry experts say placing a higher weightage on customer feedback may fail to motivate
employees because customer feedback may vary from customer to customer. Depending on the current
state of mind, psychology and perception of the customers may give different feedback for same degree
of sales service.