ESSENTIALS OF AN EFFECTIVE PERFORMANCE

APPRAISAL SYSTEM

1. Mutual trust 6. Documentation

2. Clear objectives 7. Feedback and

participation

3. Standardization 8. Individual differences

4. Training 9. Post appraisal

interview

5. Job relatedness 10. Review and appraisal

MODELS OF PERFORMANCE APPRAISAL

PERFORMANCE APPRAISAL

TRADITIONAL METHODS MODERN

METHODS

1. Confidential report 1. Assessment

centre

2. Free form or essay 2. HR accounting

3. Straight ranking 3. Behaviourally

anchored
rating scales

4. Paired distribution
4. MBO appraisal
5. Forced distribution
5. 360-degree
appraisal
6. Graphic rating scales
7. Checklist method

8. Field review

TRADITIONAL METHODS OF PERFORMANCE APPRAISAL

Rating method

The oldest and simplest method of performance appraisal is to

compare one man with all other men and place in a simple rank
order. In this way ordering is done from best to worst of all
individuals comprising the group.
This method has two advantages of simplicity and naturalness. But
it has disadvantages of being subjective and the ranking becomes
difficult when there are even many cases.

Rating scale method

This method provides a kind of scale for measuring absolute

differences between individuals. This is method is of two types-

1) Discrete- the characteristic ‘job knowledge’ may be divided into

five
categories on a discrete scale “exceptionally good”, “above
average”, “average”, “below average” and “poor”. The rater can
tick
mark category, which describes best the person being rated.

2) Continuous or graphic- where just above the category notation an

interrupted line is provided. The rater can tick at any point along its
length.

Checklist Method

This consists of a list consisting of a number of statements about the

worker and his behaviour. Each statement on this list is assigned a
value, which are derived from preliminary research in which the
pooled judgments of person familiar with the job is used. The rater is
asked to place a plus sign or a question mark in front of each
statement depending on whether he feels the description applies,
does not apply or there is doubt. The method has the advantages of
requiring only a report of facts from the rater. Final rating is average
of the scale value of the statement, which the superior had checked.

Forced Choice Method

The forced choice rating form contains a series of groups or

statements. The rater checks how effectively the statements
describe each individual being evaluated. Each statement carries
weight, which is not indicated to the rater.

Critical incident technique

It involves three steps. A list of noteworthy on the job behaviour,

usually of specific instances is first prepared which are vital for success or
failure
on job. A group of experts then assigns scale values to them, depending
upon the
degree of desirability for the job.

Confidential report

It is a traditional form of appraisal used in most government organizations. A

confidential report is prepared by the employee’s immediate superior. It covers the
strengths and weaknesses, main achievements and failure, personality and
behaviour of the employees. But it involves a lot of subjectivity because appraisal is
based on impressions rather than on data.

Straight ranking method

In this technique, the evaluator assigns relative ranks to all the employees
in the
same work unit doing the same job. Employees are ranked from the best
to the
poorest on the basis of overall performance. The ‘whole man is compared
with the
whole man’ without analysing performance. The relative position of an
employee
is reflected in his numerical rank.

Group appraisal method

In this method, a group of evaluators assesses employees. This consists of

the immediate superior of the employee, other supervisors having close
contact with the employee’s work, head of the department and personnel
expert. The group determines the standards of performance for the job,
measures actual performance of an employee, analyses the cause of poor
performance and other suggestions for improvement in future
 MODERN METHODS OF PERFORMANCE APPRAISAL

Assessment centres

An assessment centre is a group of employees drawn from the different

work units.
These employees work together on an assignment similar to the one they
would be
handling when promoted. Evaluators observe and rank the performance of
all the
participants. Experienced managers with proven ability serve as
evaluators. This
group evaluates all employees both individually and collectively by using
simulation
techniques like role playing, business games and in basket exercises.
Employees are evaluated on job related characteristics considered
important for job success.

Human resources accounting method

HR is a valuable asset of the organization. This asset can be valued in

terms of
money. When component and well-trained employees leave an
organization the
human asset is decreased and vice versa. Under this method,
performance is judged
in terms of cost and contribution of employees. Costs of HR consist of
expenditure on. HR planning, recruitment, selection, induction, training,
compensation, etc.
contribution of HR is the money value of labour productivity or value
added by HR.
difference between cost and contribution will reflect the performance of
employees.

Behaviourally anchored rating scales (BARS)

In this method combines graphic rating scales with critical incidents

method. BARS are description of various degrees of behaviour relating to
specific performance
dimensions. Critical areas of job performance and the most effective
behaviour for
getting results are determined in advance. The rater records the
observable job
behaviour of an employee and compares these observations with BARS. In
this way,
an employee’s actual job behaviour is judged against the desired
behaviour. The steps involved in constructing BARS are as follows: -

a) Identify critical incidents

b) Select performance dimensions
c) Retranslate the incidents
d) Assign scales to incidents
e) Develop final instrument

Appraisal by results or MBO

MBO has been defined as “a process whereby the superior and

subordinate
managers of an organization jointly identify its common goals, define each
individual’s major areas of responsibility in terms of results expected of
him and use
these measures as guides for operating the unit and assessing the
contributions each of its members.

The main steps involved in performance appraisal through MBO are as

follows: -

a) Set organizational goals

b) Defining performance targets
c) Performance reviews
d) Feedback

MBO is superior to other methods of performance appraisal. It offers the

following
benefits:

 Ends-means chain

 Role clarity

 Objective appraisal
  Motivation and commitment

 Management development

 Coordination

MBO suffers from the following drawbacks:

 Difficulty in goal setting

 Problem of participation

 Lack of understanding

 Time consuming and expensive

 Inflexibility

The 360-degree appraisal technique

A 360-degree appraisal is a type of employee performance review in which subordinates,

co-workers, and managers all anonymously rate the employee. This information is then
incorporated into that person's performance review.

SUPERIOR

PEER EMPLOYEE PEER

SUBORDINATE

FOUR INTEGRAL COMPONENTS OF 360-DEGREE APPRAISAL

LIMITATIONS OF PERFORMANCE APPRAISAL

Errors in rating
Performance appraisal may not be valid indicator of performance and
potential of
employees due to the following types of errors:

a) Halo effect- it is the tendency to rate an employee consistently high or

low
on the basis of overall impression. One trait of the employee influences
the
rater’s appraisal on all other traits.

b) Stereotyping- this implies forming a mental picture of a person on the

basis
of his sex, age, caste or religion.

c) Central tendency- it means assigning average rating to all the

employees
in order to avoid commitment or involvement. This is adopted because the
rater has not to justify or clarify the average ratings.

d) Constant error- some evaluators tend to be lenient while others are

strict in
assessing performance. In first case, performance is overrated while in
second case it is underrated.

e) Personal bias- performance appraisal may become invalid because the

rater dislikes the employee. Such bias may arise on the basis of regional
or
religious beliefs and habits or interpersonal conflicts.
f) Spill over effect- this arises when past performance affects assessment
of
present performance.

Lack of reliability

Reliability implies stability and consistency in the measurement. Lack of

consistency
over time and among different raters may reduce the reliability of
performance
appraisal.

Incompetence

Raters may fail to evaluate performance accurately due to lack of

knowledge and
experience. Post appraisal interview is often handled ineffectively.
 Negative approach

Performance appraisal loses most of its value when the focus of

management is on
punishment rather than on development of employees.

Multiple objective

Raters may get confused due to too many objectives or unclear objectives
of
performance appraisal.
Resistance

Trade unions may resist performance appraisal on the ground that it

involves
discrimination among its members.

Lack of knowledge

The staff appraising performance of employees might not be trained and

experienced enough to make correct appraisal.

Hypercritical or ‘Horns’ effect

It is the tendency of the superior to rate people lower than their

performance justify.
Other problems of Performance Appraisal reported by various studies are:
-

1) Relationship between appraisal rates and performance after promotions

was not
significant.

2) Absence of inter-rater reliability.

3) The situation was unpleasant in feedback interview.

4) Most part of the appraisal is based on subjectivity.

PERFORMANCE APPRAISAL OF MANAGERS

Appraisal of managers is very important. But it is more difficult because it

cannot be
measured in quantitative terms. Managerial appraisal should measure
therefore, both performance in accomplishing goals and performance as a
manager

Performance in accomplishing goals

A manager is responsible for achieving the targets of his work unit. The
extent to
which these targets are achieved is a good criterion for evaluation.

Performance as managers

Although an impressive record of setting and accomplishing goals is an

indicator of a
manager’s performance, this standard cannot be used in all cases.
Managers
achieve organizational goals by performing the basic managerial
functions.
Therefore, a manager can be appraised on the basis of how well he
understands and
undertakes these functions of planning, organizing, staffing, directing and
controlling.
Each of these functions involves a series of activities. These activities can
be taken
as standards of performance. A five-degree rating scale can be used to
rate the
performance of managers. Weights to the scale can be assigned for those
activities,
which are clear and adequately known.
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