Assignment of INDUSTRIAL PSYCHOLOGY on:

Submitted To: Submitted By:

Dr. Navjot Kaur Robindeep Singh
Roll No: 6331
MBA II (D)
INTRODUCTION TO PERFORMANCE APPRAISAL
Performance appraisal is the process by which an employee’s contribution to the organization
during a specified period of time is assessed. Performance appraisal is integral to the successful
operation of most organizations. During this process, employees are evaluated formally and
informally to determine the nature of their contributions to the organization. Appraisal occurs
during time periods and in meetings that are scheduled to produce reasoned consideration of
contributions, but it also occurs informally as employee contributions are observed, or when an
evaluation is brought to the attention of others.

Performance appraisal is treated as an evaluation and development tool, as well as a

formal legal document. Appraisals review past performance – emphasizing positive
accomplishments as well as deficiencies and drafting detailed plans for future development.
The performance evaluation also serves a vital organizational need by providing the
documentation necessary for any personnel action that might be taken against an employee.

It is an outgrowth of management controls whose purpose is to ensure that work is progressing

according to the organization’s plans. Controlling is the management function concerned with
monitoring performance to ensure that it conforms to plans. Control is accomplished by
comparing actual performance with predetermined standards or objectives and then taking
action to correct any deviations from the standard. The three basic requirements of the control
process are:

Establishing performance standards – Standards are used to set expected performance levels
for machines, tasks, individuals, groups of individuals and the organization as a whole.

Monitoring performance and comparing it with those standards – The primary purpose of
monitoring performance is to provide information on what is actually happening in the
organization.
Taking necessary corrective actions – Corrective action can be taken after the actual
performance has been assessed and compared with performance standards.

Introduction to Hewlett-Packard
Hewlett-Packard (HP) is a technology solutions provider to consumers, businesses and
institutions globally. The company’s offerings span from IT infrastructure, personal computing
and access devices, global services and imaging and printing for consumers, enterprises and
small and medium businesses.

The HP Culture
Hewlett Packard has a pay-for-performance plan. In order to make this plan
successful, the company embraces an organizational culture that embraces pay for
performance. Such a culture emphasizes goal setting, rating and/or ranking of performance,
and performance dialogue between supervisors and subordinates.

Hewlett Packard operates in more than 178 countries. The company has a performance-
based culture. Employing more than 140,000 people, Hewlett Packard is known as a great place
to work. The company values every employee from all levels and they are viewed as important
individuals with unique ideas, skills, experiences and perspectives that they bring in their jobs.
The employees are encouraged to share and express their ideas and skills. Hewlett Packard is
an organization that provides employees with opportunities to learn grow, and develop their
skills. Goal setting is an important process in the organization. In this process, the employees
coordinates with their supervisors in setting up their individual development paths. Learning
within the organization is intended to be flexible, fast and rewarding. The culture that Hewlett
Packard has empowers people and allow them, to make the most of their skills, personality and
career. Goal setting is also important in performance appraisal.
PERFORMANCE APPRAISAL AT HP

Management by Objectives
The activities of HP employees were guided by a comprehensive system of management
by objectives (MBO). The performance appraisal system starts with the establishment of long-
and short-range objectives derived from company and group objectives. At each company level,
overall objectives were communicated and subunit objectives were negotiated. HP lets the
employees decide on how they would accomplish the goals that they have set. The goals were
made to interconnect horizontally and vertically throughout HP. The management by objective
process is part of the company’s strategic planning which defines the objectives and
responsibilities that a job entails. Although the top management is the one who initiates the
process, every employee is given opportunity to influence the setting of objectives. Employees
are encouraged to suggest on how they can contribute to the success of the business unit. In an
MBO system an employee meets with his or her manager, and they collectively set goals for the
employer for a coming period of time. These goals are usually quantifiable, they are objective,
and they are usually written. During the specified timeframe, the manager and the employee
periodically meet to review the employee’s performance relative to attaining goals. At the end
of the specified period, a more formal meeting is scheduled in which the manager and
employee assess the actual degree of goal attainment. The degree of goal attainment then
becomes the individual’s performance appraisal.

HP combined MBO with the paired-comparison approach. The paired comparison

approach,, measures the relative performance of employees in a group. A manager lists the
employees in the group and then ranks them. HP managers invested considerable time and
energy ensuring that an individual’s pay level within their salary range reflected their
performance when compared to others. Performance was judged by the immediate supervisor
but adjusted based on a ranking process, conducted by managers in face-to-face meetings,
which compared employees in different departments with similar responsibilities.
1. Goal Setting
In Hewlett Packard, there has been a long tradition of targets being determined by both boss
and employee. This reflects not only the longstanding policy of decentralization within the
organization but also the difficulty of imposing performance targets on employees who are
facing changing demands and working in fast-changing markets. These conversations are
participative. The discussions attempt to cover the diversity of situations the employees would
face. In the monthly formal meetings as well as in informal settings, manager and employee
have the opportunity to revise these targets in light of new information about the environment
of client behavior. The revisable nature of the performance targets, together with the degree of
influence employees have over their goal setting, means that perceptions of fairness are high in
terms of the targets being realistic and achievable.

2. Performance Evaluation
In HP, the performance appraisal is used primarily as a development tool. Formal meetings
between manager and employee are held every quarter, culminating in a full annual appraisal.
Employee voice in the evaluation was strong. Self-assessment exercise are strongly encouraged
in HP. Managers devote a great deal of time not only to discussing problems and identifying
areas for improvement, but also to giving feedback. This occurred not only in formal meetings,
but also on an ongoing basis. This informal process helped to cement new organizational values
by correcting and reinforcing behaviors and attitudes. In order to achieve a rounded picture of
employee performance, the company has introduced socially based measures of evaluation
such as 360-degree appraisal.
FINDINGS
Hewlett-Packard has an effective and efficient performance appraisal system. The performance
appraisal system is effective and efficient because it is aligned with the rewards and the goals
and objectives of the organization. The performance appraisal is also an effective tool in
measuring the contributions of each employees, including their strengths and weaknesses. It
also gives a clear view of the training needs o the employees. However, the fact that there are
problem areas or that the performance appraisal system used has weaknesses cannot be
discounted. It is of utmost importance that the sources of possible problems and challenges in
the performance appraisal are identified in order to avoid mistakes.

RECOMMENDATIONS
MBO is the primary tool that HP uses in appraising employee performance. The company
was able to establish as effective MBO system that is able to measure the performance of the
employees against the goals that they have set. However, relying on MBO alone can lead to
different problems and difficulties. MBO has both strengths and weaknesses. In order to
maximize the strengths of MBO and minimize its weaknesses, the company must make use of
other performance appraisal tool.

Recommended Appraisal Tools

Other than MBO, the company can also make use of performance tools to make sure
that the performance appraisal system is effective and efficient. The following are the
recommended tools for HP:

1. Rating Scales

One of the most widely used performance appraisal method is some form of a rating
scale. The use of rating scales is popular among organizations because it is simple and easy to
use. With rating scales, employees are evaluated according to a set of predetermined factors,
such as quantity of work, quality of work, absenteeism, or the like. Each evaluation factor is
ranked from the lowest level of performance to the highest in as many as fifteen categories.

2. Checklists

Performance appraisal checklists provide the evaluator with a series of statements,

phrases, or adjectives that describe employee performance. These statements may be
subdivided into specific factors such as quantity of work, quality of work, and so forth, with the
descriptors listed under each category. Occasionally, the phrases or adjectives are simply listed
without categorization. The appraiser marks the statement or adjective considered to be most
descriptive of the employee’s performance during the period covered by the appraisal.

Other Recommendations

1. Flexible Job Descriptions/ Employee Influence in the Process

Job descriptions should not be written and imposed on job holders from above. The
responsibility of designing the job description should remain with the manager and the job
holders. The contents of the job description should be agreed by both the job holder and the
manager. Getting employees’ commitment is a key to setting effective goals. Employees should
participate fully in the setting of objectives for their own jobs, and have an opportunity to
contribute to planning the objectives of the work group, the department and the organization
as a whole. Each individual’s goals must fit in with those of the wider work group or workplace.
How much you involve employees in setting their targets will depend on the organization’s
approach to performance management and on its style and culture generally. At the very least,
managers should ensure that the person responsible for achieving a particular objective
understands and accepts it. Employees will not feel committed to targets that are just handed
down to them by management .
2. Rater Training and Employee Education

One approach to performance appraisal training is to alert managers to common errors

of judgment so they can spot them in how they evaluate others and guard against them.
Appraisal methods that have clear performance dimensions are likely to reduce rating errors .
For any appraisal system to be effective, training must focus on helping managers develop
specific skills and confidence in their ability to effectively evaluate others. These skills should
include goal setting, communicating performance standards, observing subordinate
performance, coaching, giving feedback, completing the rating form, and conducting appraisal
review. Appraisals without training is a sure route to ineffectiveness, frustration and
dissatisfaction. It is also important to make employees understand the appraisal system.
Everyone in the organization needs to understand why appraisals are being conducted and how
the system operates. The more clearly stated the organization's purpose for appraisals, the less
confusion and ambiguity surrounding the process. The goal should be that everyone knows why
you are conducting appraisals.

3. Ensure the Validity and Reliability of the Performance Appraisal

Establishing the validity of performance appraisal begins with job analysis, the process
wherein job performance factors are clearly identified. These factors may include such items as
quantity of work, quality of work, meeting deadlines, and adhering to prescribed procedures.
The factors must be quantifiable and specifically defined so as to reflect expected outcomes.

4. Ensure that Communication is Open

All employees have a strong psychological need to know how well they are performing.
An effective performance appraisal system ensures that feedback is provided on a continuous
basis—not in an annual written evaluation, but in the form of daily, weekly, and monthly
comments from a supervisor. The annual evaluation and its accompanying interview or
performance discussion must be devoid of surprises. While the interview presents an excellent
opportunity for both parties to exchange ideas in depth, it is not a substitute for day-to-day
communication about performance.

CONCLUSION
Hewlett Packard has one of the best performance appraisal systems around. The
performance appraisal system used by Hewlett-Packard supports the company’s culture,
objectives and philosophies. The primary tool used in the performance appraisal process is
MBO. MBO as a performance appraisal tool is considered effective and efficient. The
performance appraisal system at HPO starts with the establishment of short-term and long-
term goals derived from the company and group objectives. The advantages of MBO for HP is
that it empowers employee. It lets employees decide on how they would accomplish the goals
that they have set. Employees are also encouraged to suggest on how they can contribute to
the success of the company. MBO is truly an effective performance appraisal system. The
effectivity of every performance appraisal system lies in how it is used and expertise of the ones
who uses it.
 APPENDICES
Appendix 1: HP’s MBO Appraisal Form

Name of the Employee:

Designation:

Date of Joining:

Date of Last Appraisal:

Department:

Reporting Officer:

______________________________________________________________________________

Current Responsibility:

Accomplishments:
Goals for the Next Appraisal Period:

Areas for Improvement:

Employee’s Perceived Training Needs:

Problems Faced:

Solutions Tried: