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Introduction

Performance refers to an employee’s accomplishment of assigned tasks and Performance Appraisal is the systematic description of the job relevant strengths and weaknesses of an individual or group. The definition of performance appraisals is not limited to one-on-one situations where a supervisor discusses with an employee areas deserving recognition and areas where improvement is needed. A performance appraisal is any personnel decision that affects the status of employees regarding their retention, termination, promotion, demotion, transfer, salary increase or decrease, or admission into a training program. A properly developed appraisal instrument serves as a contract between the organization and an employee in that it makes explicit what is required of that individual. Appraising performance is necessary because it serves as an audit for the organization about the effectiveness of each employee. Such a control system, based on key job behaviors that serve as standards, enables a manager to specify what the employee must start doing, continue doing, or stop doing. Appraisals and Performance Management Performance appraisal plays a vital role in performance management. Performance Management is the total process of observing an employee’s performance in relation to job requirements over a period of time (i.e. clarifying expectations, setting goals, providing on the job coaching, storing and recalling information about performance) and then making an appraisal of it. Information gained from the process may be fed back via an appraisal interview to determine the relevance of individual and work-group performance to organizational purposes, to improve the effectiveness of the unit, and to improve the work performance of employees. The Key Role of Appraisals Selection, performance appraisals, training and motivation principles are four key systems necessary for ensuring the proper management of an organization's human resources. Of these four systems, an argument can be made that performance appraisal is the most important because it is the prerequisite for establishing the other three. The efficient use of organization's human resources begins with selection, choosing the right person for the job. However, before a selection test can be developed for predicting who will be the right person for the job, the word right must be defined. That is the correct on the job behavior must be defined. The core of performance appraisal process is the definition of effective employee behavior. A valid selection test cannot be developed until the organization agrees upon an acceptable definition of employee behavior. This is because the validity of the test is determined by measuring the performance of the people on the test and measuring the performance of the same people on important aspects of the job. If there is significant correlation between these two measures the selection procedure is valid. 1

Once a person has been selected, the problem becomes one of monitoring and maintaining high level of performance. Again, this is where performance appraisals play a critical role. To the extent that a person has both the knowledge and skill to do the job, but is doing it in an unsatisfactory manner, the problem may be one of motivation. The key components of effective motivation strategies include feedback that allows an employee to learn how well he or she is doing, goal setting that specifies what the person should be doing, team building that allows the employee to participate with peers and the supervisor in solving problems that impede their productivity, and monetary incentives that reward good performance. Performance appraisal lies at the heart of motivation because it is through the appraisal interview that the employees receive feedback from the manager and peers regarding job performance. In addition, goals are set in relation to this feedback, problems that surface are resolved through manager-employee discussions, and monetary rewards can be contingent upon satisfactory performance. In short, performance appraisal is a fundamental requirement for improving the productivity of an organization’s human resources, because it is through an appraisal that each individual’s productivity is evaluated. It serves as a basis for counseling and developing an individual to maintain and increase productivity.

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Purposes of Performance Appraisal
a) Management Development

It provides a framework for future employee development by identifying and preparing individuals for increased responsibilities. b) Performance Measurement It establishes the relative value of an individual contribution to the company and helps evaluate individual accomplishment. c) Performance Improvement

It encourages continued successful performance and eliminates individual weaknesses to make employees more effective and productive so that organizations can successfully implement their strategies, such as quality enhancement. d) Compensation It helps determine appropriate pay for performance and equitable salary and incentives based on merit or results. e) Identification of potential

It identifies candidates for promotion. f) Feedback

It identifies actual levels of performance and evaluates them against what is expected from the employees. g) Communication It provides a format for dialogue between superior and subordinate and improves understanding of personal goals and concerns. It also has a effect of increasing trust between the rater and the rate. h) Training and Development Needs Poor performance evaluation indicates the areas where employees need training and good performance evaluation indicates untapped potential that should be developed.

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i)

Placement Decisions

Promotions, transfers, and demotions are usually based on past and anticipated performance. Often promotions are the rewards for past performance. j) Career Planning and Development

Performance feedback guides career decisions about specific career paths one should investigate. k) Feedback to HRM Poor performance may indicate errors in job analysis information, human resource plans, and other parts of HRM. Reliance on inaccurate information may have led to inappropriate hiring, training, or counseling decisions. l) Other Purposes • Increase motivation to perform effectively • Increase staff self-esteem • Gain new insight into staff and supervisors • Better clarify and define job functions and responsibilities • Develop valuable communication among appraisal participants • Encourage increased self-understanding among staff as well as insight into the kind of development activities that are of value • Distribute rewards on a fair and credible basis • Clarify organizational goals so they can be more readily accepted • Improve institutional/departmental manpower planning, test validation, and development of training programs

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Relationship Of Performance Evaluation With Other HR Functions Performance evaluation provides basis for Judging effectiveness of recruitment efforts. Performance evaluation can be a factor in determining pay. TRAINING AND DEVELOPMENT Training and development aids in the achievement of performance standards. P E R F O R M A N C E E V A L U A T I O N Selection should produce personnel who are best able to meet job requirements. LABOR RELATIONS Evaluation methods and standards may be subject to negotiation. Quality of applicants being recruited determines performance standards that are feasible. Level of compensation can effect evaluation of performance. 5 . COMPENSATION MANAGEMENT Performance evaluation provides basis for defending personnel actions. SELECTION Performance evaluation provides basis for determining trainings need. RECRUTMENT Performance evaluation provides basis validating selection function.

very importantly. Too many jobs have vague performance standards. on their subsequent performance. Four common sources of information are frequently used by managers regarding how to measure actual performance: personal observation. at some later date. The point of this step is to note deviations between standard performance and actual performance so that we can proceed to the fifth step in the process – discussion of appraisal with the employees. it’s necessary to communicate these expectations. Too often. mutually agree to specific job performance measures. What is “a full day’s work” or “a good job”? The expectations a supervisor has in terms work performance by his employees must be clear enough in his mind so that he will be able to. Immediate action corrects something right now and gets things back on track. a combination of them increases both the number of inputs and the probability of receiving reliable information.” whereas basic corrective action gets to the source of deviation and seeks to adjust the difference permanently. these standards are articulated in ambiguous phrases that tell us little. To determine what actual performance is. and the problem is compounded when these standards are set in isolation and do not involve the employees.The Appraisal Process The appraisal process begins with the establishment of performance standards in accordance with the organization’s strategic goals. The forth step in appraisal process is the comparison of actual performance with standards. oral reports and written reports. Immediate corrective action can often be described as “putting off fires. and the other is basic and deals with the causes. it should not be part of the employees’ job to guess what is expected of them. and appraise their performance against these established standards. Basic action asks how and why 6 . such as “a full day’s work” or “a good job”. Corrective action can be of two types: one is immediate and deals with symptoms. One of the most challenging tasks facing appraisers is to present an accurate assessment to the employees. communicate these expectations to his employees. The final step in the appraisal is the identification of corrective action where necessary. however. We should be concerned with how we measure and what we measure. Conveying good news is considerably less difficult for both the appraiser and the employee than conveying a bad news that performance has been below expectations. Each has its strengths and weaknesses. The impression that employees receive about their assessment has a strong impact on their self-esteem and. Once performance standards are established. These performance standards should be clear and objective enough to be understood and measured. it is necessary to acquire information about it. statistical reports. It is important to note that communication is a two-way street: mere transference of information from the supervisor to the employees regarding expectations is not communication! The third step in the appraisal process is the measurement of performance.

3. Appraisal Process 1. If necessary. Measures actual performance.performance deviated. Discuss the appraisal with the employee. Compare actual performance with standards. Mutually set measurable goals. 4. 6. 5. 2. Establish performance standards with employees. Good supervisors recognize that taking a little time to analyze the problem today may prevent the problem from getting worse tomorrow. 7 . initiate corrective action.

Alternative sources to supervisory appraisals are always needed when the supervisor seldom sees the employee on the job. and being capable of determining whether the observed behavior is satisfactory. and judge the relevance of that behavior to job objectives and organizational goals. Second. frequently observing employee on the job. Supervisor Appraisal It is generally observed that 95% of the appraisals conducted at the lower and middle management levels are performed by individual's immediate supervisor. Despite this logic.Sources of Performance Appraisals There are six alternative sources of performance appraisals: • • • • • • the supervisor the employee peers subordinates a person or persons outside the employee's work environment 360 degree appraisals The key criteria for qualifying as a source for appraising an employee's performance are being aware of the objectives of the employee's job.Appraisals In the self-appraisals the employees complete the appraisal form. An investigation was conducted about the self-rating appraisal process at General Electric Company in which this approach was compared with the traditional managerial appraisals conducted at GE. the management hierarchy of most organizations reinforces the right of the supervisor to make both evaluative and development decisions concerning subordinates. it is logical that the appraisals be conducted by the person who generally administers the rewards. In such appraisals employees' evaluations depends heavily on how each supervisor thinks the work should be performed rather than how well it is actually performed by the employee. it is likely that in many organizations the employees might view appraisal process as having little or no importance. It simply means that managerial evaluations are frequently loaded with subjectivity and bias. There are several reasons for this trend. it is commonly felt that of all the various sources of evaluation. Self. Since performance is enhanced when rewards are based on performance. The results indicated that: (1) the self-appraisals were rated as more satisfying and 8 . the immediate supervisor is in a best position to observe a subordinate's behavior. performance appraisals conducted by supervisors have a drawback. First. the supervisor generally controls the magnitude and scheduling of the rewards and punishments that can be administered to subordinates. Third. If this were not the case.

each will improve. and the like evaluate the individual. (3) the discussions based on self-rating more often resulted in superior on-the-job performance than did the traditional appraisal. These sources include: • assessors in an assessment center • field reviews conducted by people in the personnel department • evaluations from trainers 360 Degree Performance Appraisal Performance appraisal process in which supervisors. as rated by the manager. (2) there was less defensiveness on the part of subordinates regarding the appraisal. As a result of this program: (1) 25% of the subordinates said they had seen lasting changes in their supervisors. Peer Appraisals Peer evaluations are conducted by the employees' coworkers i. and how the manager was rated relative to other supervisors. customers. Subordinate Appraisals There are circumstances when subordinate appraisals can be valuable to an employee and to the organization. employees. a program was started at Exxon in 1959 called "Rate your supervisor.constructive by the managers than the traditional supervisory-prepared appraisals. and (4) low rated employees were especially likely to show an improvement in performance. and (3) 60% of the supervisors and the subordinates agreed that productivity had increased as a result of the program. Questions concerning their reliability and validity have yet to be answered.e. Research on the effectiveness of subordinate appraisals is limited at this time. peers." The program provided each supervisor with a computer printout showing the average anonymous subordinate ratings. Appraisal by Outsiders Some organizations use persons outside the immediate work environment to conduct performance appraisals. For instance. after a self-review discussion. 9 . The main advantages of peer appraisals are that (1) there is a tendency in the coworkers to offer more constructive insight to each other so that. (2) 88% of the supervisors said they had tried to change their behavior after receiving the report. as a unit. people who are explicitly familiar with the behaviors involved in their jobs. (2) their recommendations tend to be more specific regarding job behaviors.

Absolute Standards Methods This means employees are compared to a standard. some raters are better writers than others. Critical incidents. So a “good” or “bad’ evaluation may be determined as much by the rater’s writing skill as by the employer’s actual level of performance. HRM decisions generally improve when useful quantitative data is obtained because it enables employees to be compared and ranked more objectively. Because essays are unstructured. A behavior-based appraisal such as this should. However. not vaguely defined individual traits. Included in this group are the following methods: The Essay Appraisal Probably the simplest method of appraisal is to have the appraiser write a narrative describing an employee’s strengths. The strength of the essay appraisal lies in its simplicity. and their evaluation independent of any othe1 employee in a work group. (2) relative standards. This method also provides only qualitative data.APPRAISAL METHODS Three different approaches exist for doing appraisals: employees can be appraised against (1) absolute standards. Note that with this approach to appraisal. The Critical Incident Appraisal Critical incident appraisal focus the rater’s attention on those critical or key behaviors that make the difference between 1oin a job effectively and doing it ineffectively The appraiser write down anecdotes describing what the employee did that was especially effective or ineffective. weaknesses. they are likely to vary widely in terms of length and contest this makes it difficult to compare individuals across the organization. And of course. potential. be more valid than trait-based appraisals because it is clearly more job related. judge performance rather than personalities. inherent in this method are several weaknesses. specific behaviors are cited. and suggestions for improvement. past performance. or (3) objectives. Yes No Are supervisor’s orders usually followed? Does the individual approach customers promptly? Does the individual suggest additional merchandise to customers? Does the individual keep busy when not servicing a customer? Does the individual lose his or her temper in public? Does the individual volunteer to help other employees? 10 . with their focus on behaviors.

Rating scales can because to assess factor such as quantity and. and measurable job behavior. 11 . it is usually evaluated by the HRM staff not the appraiser completing the checklist. honesty. integrity. quality of work job knowledge. plans. carries out orders. the assessor goes down the List of factors and notes the point along the scale or continuum that best describes the employee. and Initiative However. they also provide a quantitative analysis that is useful for comparison purpose. the evaluator uses a list behavioral descriptions and checks off those behaviors that apply to the employee. Once the checklist is complete. dependability. executes. loyalty. The checklist appraisal reduces some bias in the evaluation process since the rater and the scorer are different. or handles emergency situations. To use the adjective rating scale. Examples of job-related behavior and performance dimensions are generated by asking participants to give specific illustrations of effective behavior regarding each performance dimension. observable. solves immediate problems. unless they can be defined in more specific behavioral terms. attendance. The Forced-Choice Appraisal The forced-choice appraisal is a special type pf performance am type checklist where the rater must choose between two or more statement Each statement may be favorable or unfavorable The appraiser’s job is to identify which statement is most (or in some cases least) descriptive of the individual being evaluated. cooperation. they are less time-consuming to develop and administer. The results of these processes are behavioral descriptions.The Checklist Appraisal In the checklist appraisal. but the points are examples of actual behavior on the given job rather than general descriptions or trait. such as anticipates. attitudes. The appraiser rates the employees based on items along a continuum. Although they do not provide the depth of information that essays or critical incidents do. The Behaviorally Anchored Rating Scales These scales combine major elements from the critical incident and adjective rating scale approaches. Behaviorally anchored rating scales specify definite. this method is most valid when abstract traits like loyalty or integrity are avoided. The Adjective Rating Scale Appraisal One of the oldest and most popular methods of appraisal is the adjective rating scale.

the organization’s overall objectives are used as guidelines from which departmental and individual objectives are set. Management by objectives is a process that converts organizational objectives into individual objectives. that is. with periodic progress reviews. employees are evaluated on how well they accomplished a specific set of objective that has been determined to be critical in the successful completion of their job. such as “top 20 percent. consistent with the MBO philosophy. In goal setting. So. and the number of times this person is preferred in any Of the nine pairs is tabulated. Finally. It consists of four steps: (1) goa1 setting. (3) self control and (4) periodic reviews. for example. the means are determined for achieving the ends established in goal setting. (2) action planning. Reviews are not meant to degrade the employee but to aid in future performance. realistic plans are developed to attain the objectives. In action planning. raters deal with all their employees has 20 employees. if a rater fifth. of course. These goals are agreed on amid then become the standards by which the employee’s results will be evaluated. one by one. Self-control refers to the systematic monitoring and measuring of performance—ideally. to place employees into a particular when used by appraisers to evaluate in their area. with each of the other nine. the supervisor and employee jointly identify those goals that are critical to fulfilling the requirements of the job. 12 . Paired Comparison The paired comparison method is calculate by taking the total of [N(N-1)] /2 comparison. But employees. by having the employee review his or her own performance. If 10 employees are being evaluated. At the individual level. corrective action is initiated when behavior deviates from the standards established in the goals setting phase. only four can be in the top relegated to the bottom fifth. and. these supervisory employee reviews are conducted in a constructive rather than punitive means. the first person is compared. Again.Relative Standards Methods Group Order Ranking Group order ranking requires the evaluator classification. four also must be How Objectives can be used to evaluate performance Management by Objectives Management by objectives is a performance appraisal method that includes mutual objective setting and evaluation based on the attainment of specific objectives. Here.

a negative leniency error understates performance.” For example. there would he no problem. Based on the perception that evaluators have of themselves.FACTORS THAT CAN DISTORT APPRAISALS A completely error-free performance appraisal is only an ideal we can aim for. The difficulty arises when we have different raters with different leniency errors making judgments. they are making a similarity error. giving the individual a lower appraisal. Halo Error The halo error or effect is a “tendency to rate high or low on all factors due to the impression of a high or low rating on some specific factor. some evaluators mark high. If Jones’s supervisor tends to err toward positive leniency while Smith’s supervisor errs toward negative leniency. if an employee tends to be conscientious and dependable. Leniency Error Every evaluator has his or her own value system that acts as a standard against which appraisals arc made. the evaluator who perceives himself or herself as aggressive may evaluate others by looking for aggressiveness. Similarly. Similarity Error When evaluators rare other people in the same way that the evaluator perceive themselves. For example. If all individuals in an organization were appraised by the same person. Those who demonstrate this characteristic tend to benefit. The former is referred to as positive leniency error. and the latter as negative leniency error. with absolutely identical job performance. while others mark low. most appraisals fall short o this ideal. while others who lack it may be penalized. Low Appraiser Motivation If the evaluator knows that a poor appraisal could significantly hurt the employees futureparticularly opportunities for promotion or a salary increase—the evaluator may be 13 . In doing so. this is often due to one or more actions that can significantly impede objective evaluation. In reality. assume a situation where both Jones and Smith are performing the same job for a different supervisor. we might become biased toward that individual to the extent that we will rate him or her positively on many desirable attributes. it would be applied equally to everyone. we might be confronted with two dramatically different evaluations. the performance is rated higher than it actually should be. they project those perceptions onto other for example. When evaluators are positively lenient in their appraisal. an individual’s performance becomes overstated. Relative to the true or actual performance an individual exhibits. Alth9ugh there wol4ld be an error factor.

Many of these substitutes are well chosen and give a good approximation of actual performance. But enthusiasm may in no way be relevant to effective performance for many accountants. promptness. the inability to distinguish between and among ratees. to find organizations using criteria such as effort.reluctant to give a realistic appraisal. For a salesperson the criteria are affected by factors such as economic conditions and actions of competitors—factors outside the salesperson’s control. positive attitudes. It is not unusual.” Attribution theory attempts to differentiate between those things that the employee controls (internal) versus those that the employee cannot control (external).” and it is even more difficult to get agreement on what criteria will determine performance. if the project is delayed because top management requested that something else be given a higher 14 . employee evaluations are directly affected by a “supervisor’s perceptions of who is believed to be in control of the employee’s performance—the employer or the manager. In many jobs it is difficult to get consensus on what is “a good job. and increased attentiveness and motivation typically lead to increased learning. for example. watch repairers. and congeniality as substitutes for performance. a supervisor may view this negatively if he or she believes that the employee did not manage either the project or his time well (internal control). we call the action central tendency. Obviously. Central Tendency It is possible that regardless of who the appraiser evaluates and what traits and used. the appraisal is frequently made by using substitutes for performance—criteria that. it is believed. There is evidence that it is more difficult to obtain accurate appraisals when important rewards depend on the results. For example. or copy editors. It is also possible that the evaluator’s ability to appraise objectively and accurately has been impeded by a failure to use the extremes of the scale. one or more of these criteria are part of performance. enthusiasm does enhance the effectiveness of a teacher: you are more likely to listen to and be motivated by a teacher who is enthusiastic than by one who is not. When this happens. However. Central tendency is “the reluctance to make extreme ratings (in either direction). Inappropriate Substitutes for Performance It is the unusual job where the definition of performance is absolutely clear and direct measures are available for appraising the incumbent. So example of how one what may be an appropriate substitute for performance in one may be totally inappropriate in another. Conversely. the substitutes chosen are not always appropriate. As a result. enthusiasm. According to this theory. In some jobs. Raters who are prone to the central tendency error are those who continually rate all employees as average. a form of range restriction. neatness. closely approximate performance and act in its place. conscientiousness. Attribution Theory There is a concept in management literature called attribution theory. the pattern of evaluation remains the same. if an employee fails to finish a project that he has had six months to complete.

• When an employee is performing satisfactorily. a supervisor may see the incomplete project in more positive terms (external control). One research study found support for two key generalizations regarding attribution: • When appraisers attribute an employee’s poor performance to internal control the judgment is harsher than when the same poor performance is a attributed to external factors. 15 . appraisers will evaluate the employee more favorably if the performance is attributed to the employee’s own efforts than if the performance is attributed to outside forces.priority.

reviewing records or talking with others who have direct knowledge of the person. For the organization. For the individual. performance evaluation is the information system that provides input into all aspects of human resource management. A performance evaluation program benefits both the organization and the employees whose performance is being appraised. it provides feedback about performance. b) Qualifications of evaluators Managers and supervisors traditionally have served as evaluators of their subordinates. • Having an appropriate point of view: one’s point of view influences which observed performance is considered desirable and undesirable. Development of an Evaluation Program The human resource management has the primary responsibility for overseeing and coordinating the evaluation program. • Understanding of job requirements: a clear understanding of job requirements and standards of satisfactory performance. However. These are: • Opportunity to observe: the appraiser must be in a position to collect relevant information about the person being evaluated through personal observation. In order to be qualified there are certain criteria that they should meet. particularly in helping to establish the objectives for the program. a) Objectives of an Evaluation Program Some of the important objectives are the following: • To provide employees with adequate feedback concerning their performance • To serve as a basis for modifying or changing behavior toward more effective work basis • To provide managers with data which they may use to judge future job assignments and compensation Performance appraisals are most widely used as a basis for making compensation decisions and planning individual performance improvement programs. manager from the operating departments also should be actively involved in it. In most instances they are in the best position to perform this function but not necessarily qualified to do so.Performance Evaluation Programs Performance evaluation is a major function of human resource management in most organizations. 16 .

It was found that the greater the proportion of subordinates manifesting poor attitudes. In selecting performance criteria there are three basic considerations: • Relevance: this refers to the extent to which criteria relate to the objectives of the job. • Freedom from contamination: a comparison of performance among production workers. Studies indicate that a supervisor’s evaluations are influenced by the proportion of workers in the unit who are considered as having “poor attitudes”. the more favorable the performance ratings for those with good attitudes. A training program should also cover ethical considerations in employee appraisal. These criteria must be based on job requirements. d) Selection of Performance Criteria: Before any evaluation occurs. the criteria against which employees are to be evaluated should be clearly defined. Training should also be stressed in development of interviewing skills. Evaluators should be made aware of various factors that may influence their evaluations.c) Training the Evaluators: A weakness of many evaluation programs is that managers and supervisors are not adequately trained for the task of evaluation and provide little meaningful feedback of their evaluations to their subordinates. for example. should not be contaminated by the fact that some have newer machines than others. It refers to the extent to which individuals tend to maintain a certain level of performance overtime. 17 . • Reliability: the reliability of a criterion refers to its stability or consistency.

The appraiser should share with the employee both expectations and disappointments on a frequent basis. There are things that can be done to make performance appraisals more effective. Provide Ongoing Feedback “The best surprise a no surprise. For example. Use Behavior-based Measures The evidence favors behavior-based measures over those developed around traits. we can find others who are excellent performers b do not score well on traits such these.” and consolidates her cash drawer at the end of her work day. D.” But when asked to rate ‘her in terms of specific behaviors. courage. she “frequently says ‘Good morning to customers. reliability. Any traits often considered to be related to good performance may. and selfexpression are intuitively appealing as desirable characteristics in employees. Students get an absolute grade-—A. This dual method of appraisal. Combine Absolute and Relative Standards Use appraisal methods that combine both absolute and standards. B. or F—and next to it is a relative and showing how this student ranked in the class. has been instituted at some universities to deal with the problem of grade inflation. because we are evaluating specific behaviors. We know that there are employees who rate high on these characteristics and are poor performers. Because they deal with specific examples of performance—both good and bad—we avoid the problem of using inappropriate substitutes. A second weakness in traits is the judgment itself. C. Traits like loyalty. Behavior-derived measures can deal with both of these objections.” “willingly gives advice or assistance to coworkers. Yet. What is “loyalty”? When is an employee “reliable”? What you consider loyalty.CREATING MORE EFFECTIVE PERFORMANCE MANAGEMENT SYSTEMS The fact that evaluators frequently encounter problems with performance appraisals should not lead us to throw up our hands and give upon the concept. Employees like to know how they are doing. have little or no performance relationship. You might consider a given employee as “friendly” while we might perceive her as “standoffish. we increase the likelihood that two or more evaluators will see the same thing. we might both agree that in terms of specific behaviors. initiative. Additionally. So traits suffer from weak inter-rater agreement. Our conclusion is that traits like loyalty and initiative may be prized by appraisers. By providing the 18 . in fact.” This phrase clearly applies to performance appraisals.” we may not. incidentally. you might want to use the adjective rating scale and the individual ranking method. but. But the relevant question is: Are individuals who rate high on those traits higher performers than those who rate low? Of course we can’t definitively answer this question. there is no evidence to support the notion that certain traits will be adequate synonyms for performance in a large cross section of jobs.

The main advantage of peer evaluation is that (1) there is a tendency for coworkers to offer more constructive insight to each other so that. and (2) their recommendations tend to be more specific regarding job behaviors. where ongoing feedback has been provided the formal sitting down step shouldn’t be particularly traumatic for either party. Upward appraisals permit employees to offer frank and constructive feedback to their supervisors on such areas as leadership and communication skills. we recommend that. then ‘we must investigate what went into that one. we can increase the inter-rater agreement and make the evaluation a more valid process. in terms of organizational level. In fact. nine of whom rated him or her excellent one poor. or an area to be avoided in future job assignments. the evaluator levels separating the evaluator and employee. These stem from having more accurate feedback empowering employees. as a unit. reducing the subjective factors in the evaluation process and developing leadership in an organization. there will be no ‘surprises at the time of the formal annual review. to discuss performance before any reward or punishment consequences occur. dimensions for which they are in a good position to rate. we increase the probability of achieving more valid and reliable evaluations Peer Evaluations Peer evaluations (Peer evaluations are conducted by the employees’ coworkers— people explicitly familiar with the behavior involved in their jobs. In general therefore. A slight deviation from peer assessments is a process called the upward appraisal. by moving employee about within the organization to gain a number of evaluations. If raters make evaluations on only those.employee with repeated opportunities. Rate Selectively It has been suggested that appraisers should rate only in those areas in which they have significant job knowledge. Have Multiple Raters As the number of raters increases. 36O-Degree Appraisals Research studies into the effectiveness of 360-degree performance appraisal are reporting positive results. appraisers should be as close as possible to the individual being evaluated: Conversely. the probability of attaining more accurate information increases. If a person has had 10 supervisors. each will improve. Therefore. May be this rater was the one who identified an area of weakness where training is needed. the less opportunity the evaluator has to 19 .

Common errors such as halo and leniency can be minimized or eliminated workshops where supervisors can practice observing and rating behaviors. decreasing productivity. These negative effects can manifest themselves as demoralizing employees. Why should we bother to train these individuals? Because a poor appraisal is worse than no appraisal at all. Evidence indicates that the training of appraisers can make them more accurate raters. 20 .observe the individual’s work behavior and. and making the company “liable for wrongful termination damages. Train Appraisers If you cannot find good raters the alternative is to make good raters. not surprisingly. the greater the possibility for inaccuracies.

Components of Appraising Employee Performance Other HR Activities Job analysis Selection Compensation Training & development Last Consideration Job Requirements Performance Standards Performance Appraisal Purposes Feedback Improvement Research Promotion Training Transfer Termination Layoff Compensation Planning Internal Environment Top management goals & values Organizational strategy Corporate culture Performance Criteria Employee Behavior Legal Consideration External Environment Competitors Performance Appraisal Approaches Appraisal Process & Data Gathering Sources Interview & feedback errors 21 .

Donnelly. In other words. particularly for students or others with restricted time and resources. Thus. such standardized answers may frustrate users. However. do not require as much effort from the questioner as verbal or telephone surveys. However. I have made questionnaires containing close ended questions. National Bank of Pakistan and Muslim Commercial Bank and asked for filling in the questionnaires whoever was willing to do so. Questionnaires have advantages over some other types of surveys in that they are cheap. Questionnaires are also sharply limited by the fact that respondents must be able to read the questions and respond to them. a shop. and often have standardized answers that make it simple to compile data. a restaurant. asking people you meet whether they will answer your questions. I studied several books in which useful material was found with the help of which I have been able to prepare this report. A few of them are: • Increasing productivity through performance appraisal by Gary p. Wexley • Managing Human Resources by Randall S.e. The questions are pertinent to topic of this research i. Library Research: Since it is a basic research I have taken major from the books available in the library of our department. and Gibson • Employee Development Practice by Jim Stewart Questionnaires A questionnaire is a self-administered statistical survey. I have been able to receive response from 12 respondents. a theatre or whatever. “Role of Performance appraisals in managing and 22 . Convenience sampling is used when the population and the sample are chosen on their relative ease of access. Latham and Kenneth N. this method is often the only feasible one.e. or when you wander round a business. Schuler • Managing for Performance by Ivancevich.RESEARCH METHODOLOGY Sampling A convenience sample is used when you simply stop anybody in the street who is ready to respond. I visited two organizations i. the sample comprises of subjects who are simply available in a convenient way to the researcher. I have used convenience sampling for the purpose of doing the surveys. for some demographic groups conducting a survey by questionnaire may not be practical. and can legitimately be used provided its limitations are clearly understood and stated.

I have avoided wordy questions and the response options are uniform throughout the questionnaire as to facilitate quick responses. A sample of the questionnaire is annexed with report. 23 .improving employee performance” I have included 15 questions in the questionnaire and I have tried to be to the point while asking the questions.

1949 in order to cope with the crisis conditions. MCB soon earned the reputation of a solid and conservative financial institution managed by expatriate executives.7 billion. MCB was privatized in 1991. whereas in 1960 financing under this head was only Rs. Eventually. utilizing its extensive branch network. the Bank has concentrated on growth through improving service quality. During the last fifteen years.300 billion. 52. 24 . In 1974. The Bank acts as the agent to the State Bank of Pakistan for handling Provincial/Federal Government Receipts and Payments on their behalf. Today the Bank finances import/export business to the total of Rs.54 billion. Muslim Commercial Bank MCB is one of the leading banks of Pakistan with a deposit base of about Rs. which were developed in1949. This led to deterioration in the quality of the Bank’s loan portfolio and service quality. Incorporated in 1947. The Bank has also played an important role in financing the country’s growing trade. developing a large and stable deposit base and managing its non-performing loans via improved risk management processes.INTRODUCTION to ORGANIZATIONS National Bank of Pakistan National Bank of Pakistan (NBP) was established on November 9. The nature of responsibilities of the Bank is different and unique from other banks/financial institutions. 1. 230 billion and total assets of around Rs. 1949 under the National Bank of Pakistan Ordinance. MCB was nationalized along with all other private sector banks. investment in technology and people.

of Respondents 8 6 4 2 0 A B No.Data Representation Q. At MCB 100% of the respondents were in strong agreement that they recognize appraisal system as an important management function and show no doubt on the usefulness of the appraisal system 25 .no. of Options C NBP MCB NO.1) Do you value performance appraisal system? a) Yes b) No c) To some extent. as is the case in ACR system. OF OPTIONS A 5 4 B 0 0 C 1 2 Analysis: As shown in the diagram 83% of the respondents at NBP strongly agreed that performance appraisal is an important management function. Respondents at NBP asserted that performance appraisal is more effective than the traditional ACR system and that through an appraisal system management is in a better position to control and manage employee performance since performance is being evaluated at short intervals of time rather than once in a year. BANK NAME NBP MCB No.

it is concluded that positive evaluations increase employee performance and negative evaluations adversely affect employee performance.2) Is employee performance affected by performance evaluation? a) Yes b) No c) To some extent. So. BANK NAME NBP MCB No. People at MCB strongly agreed that performance is affected by the regular check and control from the management side and is usually kept at high level and the response was 100% in strong agreement.no.Q. 26 . of Options C NBP MCB NO. of Respondents 8 6 4 2 0 A B No. OF OPTIONS A 5 6 B 0 0 C 1 0 Analysis: 83% of the respondents at NBP strongly agreed that performance evaluations have an impact on employee performance whereas 16% were agreed to some extent.

67% of the respondents at MCB strongly agreed that performance evaluations have a positive impact on performance but for the few of the respondents it is just the measurement of actual performance and it may or may not increase employee performance. 27 . it is concluded on the basis of the above analysis that performance appraisals have a positive impact on employee performance. OF OPTIONS A 5 4 B 0 0 C 1 2 NBP MCB Analysis: At NBP since the management has recently switched from ACRs to appraisals. of Respondents 6 5 4 3 2 1 0 A B No. a) Yes b) No c) To some extent. of Options C NO.Q. so 83% of the respondents strongly agreed that performance is better managed and controlled through appraisals whereas 16% ere agreed to some extent.3) Performance appraisals have a positive impact on employee performance.no. So. BANK NAME NBP MCB No. the impact of this development has been very positive.

4) Performance evaluations make the workers more responsible in their jobs.no. of Options C NBP MCB NO. OF OPTIONS A 5 6 B 0 0 C 1 0 Analysis: 83% of the respondents at NBP strongly agreed that a continuous check on employees through the appraisal system makes them more responsible in their job whereas 16% of the respondents were agreed that this is the case to some extent. of Respondents 8 6 4 2 0 A B No. At MCB 100% of the respondents were in strong agreement that performances evaluations make employees more responsible in their jobs. Q.Q. it is concluded that performance appraisals keep the employees on the track and they do no deviate from what is expected of them. So. If the actual performance of an employee lags behind the standard performance his status of performance is instantly discovered by the management through the appraisal process and he is made answerable to the management for the situation.no.5) Do performance appraisals affect employee motivation? 28 . BANK NAME NBP MCB No. a) Yes b) No c) To some extent. Since the employee performance is continuously measured again performance standards the employees are not in a position to deviate from or lag behind the set targets.

So. 29 . OF OPTIONS A 5 6 B 0 0 C 1 0 Analysis: 83% of the respondents at NBP strongly agreed that positive feedback from management increases employee motivation whereas negative feedback decreases motivation to work. of Options C NBP MCB NO. BANK NAME NBP MCB No. it is concluded that performance appraisals directly affects motivation of employees. At MCB the response was 100% in agreement with the statement that employees motivation can be kept high by reinforcing the things done right. of Respondents 8 6 4 2 0 A B No.a) Yes b) No c) To some extent.

of Options C NO. The respondents at MCB were in the level of strong agreement to the extent of 83% while 17% were of the opinion that it gives employees a sense of importance to some extent. a) Yes b) No c) To some extent.Q. it is concluded that appraisal gives employees a sense of recognition and importance.6) Performance appraisals give employees a sense of importance that the management realizes their contribution and pays attention to the work they do.no. BANK NAME NBP MCB No. So. OF OPTIONS A 4 5 B 0 0 C 2 1 NBP MCB Analysis: 67% of the respondents at NBP were strongly in agreement with the statement that Performance appraisals give employees a sense of importance that the management realizes their contribution and pays attention to the work they do and 33% were in the middle of the two extreme responses that appraisals give a sense of recognition to the employees to some extent. 30 . of Respondents 6 5 4 3 2 1 0 A B No.

So. However. of Options C NBP MCB NO. of Respondents 8 6 4 2 0 A B No. 31 .7) Do performance appraisals have an impact on compensation? a) Yes b) No c) To some extent. OF OPTIONS A 5 6 B 1 0 C 0 0 Analysis: 83% of the respondents at NBP strongly agreed that performance evaluation has an impact on compensation while 16% strongly disagreed.no.Q. on the basis of majority of responses it is concluded that performance appraisals have an impact on compensation. If the employees perform well he is paid more than the one whose evaluation is poor. BANK NAME NBP MCB No. at MCB the level of strong agreement was 100% that the compensation packages are designed after evaluating the performance of the employees.

of Respondents 6 5 4 3 2 1 0 A B No. it is concluded that at NBP increment are some times based on evaluations and sometimes they are not while at MCB increments are based on evaluations. So.8) Are the increments in pay based on performance evaluation? a) Yes b) No c) To some extent. 32 . At MCB 83% of the responses were in strong agreement with the statement while 16% of the responses were agreed to some extent. BANK NAME NBP MCB No.no. OF OPTIONS A 3 5 B 2 0 C 1 1 NBP MCB Analysis: 50% of the respondents at NBP strongly agreed that increments are given when the evaluations are favorable and 33% strongly disagreed with the statement while 16% responded that to some extent increments are based on performance evaluations. of Options C NO.Q.

9) Are performance appraisals good indicator of employee efficiency? a) Yes b) No c) To some extent. OF OPTIONS A 5 3 B 0 0 C 1 3 NBP MCB Analysis: 83% of the respondents at NBP strongly agreed that performance appraisals are good indicator of employee efficiency while 16% were agreed to some extent. of Options C NO. At MCB 50% of the respondents were in strong agreement of the statement and 50% were agreed to some extent.no. it is concluded that performance appraisals indicate explicitly how good an employee is performing and where is he lacking. None of the respondents in both the organizations strongly disagreed that performance appraisals are not good indicator of employee efficiency.Q. BANK NAME NBP MCB No. of Respondents 6 5 4 3 2 1 0 A B No. 33 . So.

of Respondents 8 6 4 2 0 A B No. 34 .10) Does positive feedback on employee performance increase employee efficiency? a) Yes b) No c) To some extent.no. So. OF OPTIONS A 5 6 B 0 0 C 1 0 Analysis: At NBP 83% of the responses were in strong agreement that the positive feedback from the management motivates the employees to perform even better which eventually increases their efficiency while 16% of the responses were in favor of the statement to some extent. it is concluded on the basis of majority of responses that when the management gives positive reinforcement on the things done right it further boosts employee efficiency. At MCB 100% of the responses were in strong agreement that whenever there is positive feedback from the management it increases employee efficiency. BANK NAME NBP MCB No. of Options C NBP MCB NO.Q.

no.11) Are training decisions made after evaluating employee performance? a) Yes b) No c) To some extent. So. of Respondents 6 5 4 3 2 1 0 A B No. of Options C NO. 35 .Q. OF OPTIONS A 4 5 B 2 0 C 0 1 NBP MCB Analysis: At NBP 67% of the respondents expressed strong agreement that training is imparted after the evaluation of the employees in the areas where they are lacking and are in need of training to perform well. While 33% of the respondents were in strong disagreement that training decisions are made after evaluating employee performance. BANK NAME NBP MCB No. While 16% were agreed with the statement to some extent. The areas in which the employees are lagging behind as shown in the appraisals they are given training in those are so that there performance may meet the set performance standards. At MCB 83% expressed strong agreement that training decision are made after evaluating employee performance in the areas where they are not doing up to the mark. on the basis of majority of responses it is concluded that training decisions are mostly made as per the evaluation of the employees.

of Options C NBP MCB NO. OF OPTIONS A 2 2 B 2 3 C 2 1 Analysis: At NBP 33% of the respondents were in strong agreement with the statement that employees are transferred from job to another if their evaluation in the current job is not good enough. While 33% strongly disagreed with this statement and 33% were agreed to some extent. of Respondents 4 3 2 1 0 A B No. 36 . BANK NAME NBP MCB No. So.no.Q. it is concluded on the basis of the above analysis that transfer of employees from department to another is not made on the basis of performance evaluation.12) Are transfer decisions made after evaluating employee performance? a) Yes b) No c) To some extent. At MCB 33% respondents were in strong agreement while 50% were in strong disagreement and 16% were agreed to some extent.

So. BANK NAME NBP MCB No.no. At MCB 100% of the respondents were in strong agreement that promotion decisions are made by the management for those whose evaluation is favorable.13) Are promotion decisions made after evaluating employee performance? a) Yes b) No c) To some extent. OF OPTIONS A 5 6 B 1 0 C 0 0 Analysis: 83% of the respondents at NBP were in strong agreement that promotion in entirely based on employee evaluation and 16% were strongly disagreed. it is concluded on the basis of majority of responses that promotion is given to those employees who are rated high performers in evaluation. of Respondents 8 6 4 2 0 A B No. 37 .Q. of Options C NBP MCB NO.

38 . BANK NAME NBP MCB No. of the organization.14) Are termination decisions made as per evaluation of employees? a) Yes b) No c) To some extent. While in private organizations a poor performer is readily terminated. of Respondents 6 5 4 3 2 1 0 A B No. as elucidated by the V.Q.no. At MCB 83% of the respondents strongly agreed that if an employee is consistently rated as a poor performer he may be terminated from the organization while 16% were agreed to some extent. is that the termination in government organization is a very difficult and lengthy process so on the basis of poor evaluation we cannot terminate the employee from the organization. The reason for the disagreement. So.P. it is concluded on the basis of the above analysis in public organization termination is not possible on the basis of poor evaluation very easily but sometimes when employees stop doing well they are terminated. OF OPTIONS A 3 5 B 3 0 C 0 1 NBP MCB Analysis: 50% of the respondents at NBP were of the opinion that if the evaluation is poor an employee is terminated from the organization and 50% were in strong disagreement on this statement. of Options C NO.

15) Performance appraisals help the human resource management to define and identify what is expected of the employees? a) Yes b) No c) To some extent. of Options C NBP MCB NO. BANK NAME NBP MCB No. At MCB 100% of the employees agreed that human resource management through the appraisal system set the standard performance. Research Findings 39 . OF OPTIONS A 5 6 B 0 0 C 1 0 Analysis: At NBP 83% of the respondents strongly agreed that performance appraisals help the human resource management to identify and define and define what expected employee performance is while 16% agreed to some extent. it is concluded that performance appraisal assist the human resource management in defining and identifying the expected standard performance.no.Q. of Respondents 8 6 4 2 0 A B No. So.

HR specialists need to monitor the results of the organizations performance appraisal process.” MCB has a very effective system of performance appraisal. certain performance standards are established by the management or mutually by both the management and the employees. If the appraisal process indicates that poor performance is wide spread many employees are excluded from the placement decision. questionnaires in the head offices of National Bank of Pakistan and Muslim Commercial Bank. Performance appraisals are used both to review the past performance and to anticipate performance in future. Bibliography 40 . actual performance is measured directly and objectively against the set performance standards.Concludingly. These standards are based on the job related criteria that best determine successful job performance.P with the employee i. although promotion. the decisions of HR that are made on the basis of performance evaluations. demotion. Performance is managed and improved through training. specialists select the methods that most effectively measure employee performance against the previously set standards. etc.e.V. promotion. Since it is a private organization the performance evaluations can even lead to the termination of a poor performer but that is not the case at NBP. All the questions asked from the respondents support the study that performance appraisal plays an important role in managing and improving employee performance. Wherever the problem lies. bonus. NBP has recently introduced the system back in 2005 but the management seemed very much satisfied from the new system in comparison with the traditional annual confidential report system.e. The organizations have a well established system of performance appraisal system. training. From a wide variety of appraisal techniques. increased motivation. rewards. however. wherever possible. To further support the study i. etc.e. the standard performance and we measure each employee’s actual performance against these standards and if there are any weaknesses being pointed out in the appraisal sheet i.e. lay off. we have set a list of tasks to be accomplished by each employee i. incentives. they are later discussed by the S. pay raise. quality control.e. They are used as “the quality control check.e. transfers. These results serve as the barometer of the entire human resource functions i. In the performance appraisal system. The conclusions that I drew from both the organizations were very much similar. “Role of Appraisals in managing and improving employee performance” I also conducted a survey i. the appraisal interview. demotion. training decisions are based as per the evaluation of the employee but termination can not be justified just on the basis of performance evaluation. Its goal is to provide an accurate picture of past and future employee performance. it can be said that Performance Appraisal is a critical activity of Human Resource Management.” Many HR decisions are made after evaluating employee performance. the performance activity report. While talking to the Senior Vice President of NBP Muhammad Ishaque Abbasi I recorded him saying that “now the management is in a better position to evaluate employee performance at regular short intervals of time. To achieve this.

1999. 82-112 • Noe. 226. Keith & Werther. Employee Development Practice. 1994... Human Resource Management. Wesley Publishing Company. PP. PP. Pitman Publisher. Jim. QUESTIONNAIRE 41 .• Davis.. London. David A. Raymond A. 231-243. PP. • Graham. 179-185. India. • Decenzo. McGraw Hill. London. Gary P. New York University Press. & Robbins.. 1998. New York. PP. Increasing Productivity Through Performance Appraisal. 1996. 1994. 382-390. Prentice Hall of India. Human Resource Management. PP. New York. • Latham. Human Resource Management. • Stewart. Pitman Publisher. 3-11. Human Resource and Personnel Management. 341. New York. 368-370. & Bennett. 1996. H. 2000.. 1982. Stephen P. Managing for Performance. Roger. Philippines.344. Replika Press. 79-96. & Wexley. PP. Gary. 272-288. Training and Development. New Dehli. Randall S.T. William B. Kenneth N. • Schuler. McGraw Hill. • Dessler. PP.

Dear Respondent. 42 . I am a student of MPA (Final) in the Department Of Public Administration. University of Karachi. Instructions: Mark one of the options given below each question. I am conducting a research on: “Role of Performance Appraisals in managing and improving employee performance” I need your co-operation in this study. This is purely an academic research and the information provided by you shall be kept secret. Respondent’s Identity Name: __________________________________________________ Designation: ______________________________________________ Organization: _____________________________________________ Signature: _______________________________________________ M. ZAKIR HUSSAIN MPA (Final) previous University of Karachi.

no. d) Yes e) No f) To some extent.6) Performance appraisals give employees a sense of importance that the management realizes their contribution and pays attention to the work they do.4) Performance evaluations make the workers more responsible in their jobs.no.2) Is employee performance affected by performance evaluation? d) Yes e) No f) To some extent. Q.5) Do performance appraisals affect employee motivation? d) Yes e) No f) To some extent.no. d) Yes e) No f) To some extent. Q.no. d) Yes e) No f) To some extent.no.no.no.Q. Q. Q. Q.3) Performance appraisals have a positive impact on employee performance. Q.7) Do performance appraisals have an impact on compensation? 43 .1) Do you value performance appraisal system? d) Yes e) No f) To some extent.

12) Are transfer decisions made after evaluating employee performance? d) Yes e) No f) To some extent. Q.no.no.d) Yes e) No f) To some extent.no.13) Are promotion decisions made after evaluating employee performance? 44 . Q.11) Are training decisions made after evaluating employee performance? d) Yes e) No f) To some extent.10) Does positive feedback on employee performance increase employee efficiency? d) Yes e) No f) To some extent. Q.no. Q.no.8) Are the increments in pay based on performance evaluation? d) Yes e) No f) To some extent.9) Are performance appraisals good indicator of employee efficiency? d) Yes e) No f) To some extent. Q. Q.no.

14) Are termination decisions made as per evaluation of employees? d) Yes e) No f) To some extent.no. Q. Q.d) Yes e) No f) To some extent. THANK YOU FOR YOUR SUPPORT 45 .15) Performance appraisals help the human resource management to define and identify what is expected of the employees? d) Yes e) No f) To some extent.no.