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Performance Appraisal: Nature and Objectives

 
A performance appraisal is a systematic and objective method of judging the quality of an
employee in performing his job and a part of guiding and managing career development. It is the
process to obtain, analyze, and record the information about the relative worth of an employee to
the organization. Performance appraisal is an analysis of an employee’s recent successes and
failures, personal strengths and weaknesses, and his/her suitability for promotion or further
training.

It is also the judgment of an employee’s performance in a job based on considerations other than
productivity alone.

Performance appraisal is done periodically, but on a continuous basis. It is a part of a larger

performance management system and includes both managerial and non-managerial employees
in its scope.

Objectives of Performance Appraisal

(i) To provide employees feedback on their performance.

(ii) Identify employee training needs.

(iii) Document criteria used to allocate organizational rewards.

(iv) A basis for decisions relating to salary increases, promotions, disciplinary actions, bonuses,
etc.

(v) Provide the opportunity for organisational diagnosis and development.

(vi) Facilitate communication between employee and employer.

(vii) Validate selection techniques and human resource policies to meet regulatory requirements.

(viii) To improve performance through counseling, coaching and development.

(ix) To motivate employees through recognition and support.

Advantages of Performance Appraisal

It is said that performance appraisal is an investment for the company which can be justified by
following advantages:
1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion
programmes for efficient employees. In this regards, inefficient workers can be dismissed or
demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation packages for
employees. Merit rating is possible through performance appraisal. Performance Appraisal tries
to give worth to a performance. Compensation packages which includes bonus, high salary rates,
extra benefits, allowances and pre-requisites are dependent on performance appraisal. The
criteria should be merit rather than seniority.
3. Employees Development: The systematic procedure of performance appraisal helps the
supervisors to frame training policies and programmes. It helps to analyze strengths and
weaknesses of employees so that new jobs can be designed for efficient employees. It also helps
in framing future development programmes.
4. Selection Validation: Performance Appraisal helps the supervisors to understand the
validity and importance of the selection procedure. The supervisors come to know the validity
and thereby the strengths and weaknesses of selection procedure. Future changes in selection
methods can be made in this regard.
5. Communication: For an organization, effective communication between employees and
employers is very important. Through performance appraisal, communication can be sought for
in the following ways:

 Through performance appraisal, the employers can understand and accept skills of
subordinates.
 The subordinates can also understand and create a trust and confidence in superiors.
 It also helps in maintaining cordial and congenial labour management relationship.
 It develops the spirit of work and boosts the morale of employees.

All the above factors ensure effective communication.

6. Motivation: Performance appraisal serves as a motivation tool. Through evaluating

performance of employees, a person’s efficiency can be determined if the targets are achieved.
This very well motivates a person for better job and helps him to improve his performance in the
future.

Techniques of Performance Appraisal
Performance Appraisal Methods: Traditional and Modern Methods

Each method of performance appraisal has its strengths and weaknesses may be suitable for one
organization and non-suitable for another one. As such, there is no single appraisal method
accepted and used by all organizations to measure their employees’ performance.
1. Traditional Methods

(i) Ranking Method

It is the oldest and simplest formal systematic method of performance appraisal in which
employee is compared with all others for the purpose of placing order of worth. The employees
are ranked from the highest to the lowest or from the best to the worst.

In doing this the employee who is the highest on the characteristic being measured and also the
one who is L lowest, are indicated. Then, the next highest and the next lowest between next
highest and lowest until all the employees to be rated have been ranked. Thus, if there are ten
employees to be appraised, there will be ten ranks from 1 to 10.

(ii) Paired Comparison

In this method, each employee is compared with other employees on one- on one basis, usually
based on one trait only. The rater is provided with a bunch of slips each coining pair of names,
the rater puts a tick mark against the employee whom he insiders the better of the two. The
number of times this employee is compared as better with others determines his or her final
ranking.

N (N-1)/2

Where N = the total number of employees to be evaluated.

(iii) Grading Method

In this method, certain categories of worth are established in advance and carefully defined.
There can be three categories established for employees: outstanding, satisfactory and
unsatisfactory. There can be more than three grades. Employee performance is compared with
grade definitions. The employee is, then, allocated to the grade that best describes his or her
performance.
Such type of grading is done is Semester pattern of examinations and in the selection of a
candidate in the public service sector. One of the major drawbacks of this method is that the rater
may rate most of the employees on the higher side of their performance.

(iv) Forced Distribution Method

This method was evolved by Tiffen to eliminate the central tendency of rating most of the
employees at a higher end of the scale. The method assumes that employees’ performance level
confirms to a normal statistical distribution i.e., 10,20,40,20 and 10 per cent. This is useful for
rating a large number of employees’ job performance and promo ability. It tends to eliminate or
reduce bias.

It is also highly simple to understand and easy to apply in appraising the performance of
employees in organizations. It suffer from the drawback that improve similarly, no single grade
would rise in a ratings.

(v) Forced-Choice Method

The forced-choice method is developed by J. P. Guilford. It contains a series of groups of

statements, and rater rates how effectively a statement describes each individual being evaluated.
Common method of forced-choice method contains two statements, both positive and negative.

(vi) Check-List Method

The basic purpose of utilizing check-list method is to ease the evaluation burden upon the rater.
In this method, a series of statements, i.e., questions with their answers in ‘yes’ or ‘no’ are
prepared by the HR department. The check-list is, then, presented to the rater to tick appropriate
answers relevant to the appraisee. Each question carries a weight-age in relationship to their
importance.

(vii) Critical Incidents Method

In this method, the rater focuses his or her attention on those key or critical behaviours that make
the difference between performing a job in a noteworthy manner (effectively or ineffectively).
There are three steps involved in appraising employees using this method.

First, a list of noteworthy (good or bad) on-the-job behaviour of specific incidents is prepared.
Second, a group of experts then assigns weightage or score to these incidents, depending upon
their degree of desirability to perform a job. Third, finally a check-list indicating incidents that
describe workers as “good” or “bad” is constructed. Then, the check-list is given to the rater for
evaluating the workers.

(viii) Graphic Rating Scale Method

 The graphic rating scale is one of the most popular and simplest techniques for appraising
performance. It is also known as linear rating scale. In this method, the printed appraisal form is
used to appraise each employee.

The form lists traits (such as quality and reliability) and a range of job performance
characteristics (from unsatisfactory to outstanding) for each trait. The rating is done on the basis
of points on the continuum. The common practice is to follow five points scale.

(ix) Essay Method

Essay method is the simplest one among various appraisal methods available. In this method, the
rater writes a narrative description on an employee’s strengths, weaknesses, past performance,
potential and suggestions for improvement. Its positive point is that it is simple in use. It does not
require complex formats and extensive/specific training to complete it.

(x) Field Review Method

When there is a reason to suspect rater’s biasedness or his or her rating appears to be quite higher
than others, these are neutralised with the help of a review process. The review process is usually
conducted by the personnel officer in the HR department.

(xi) Confidential Report

It is the traditional way of appraising employees mainly in the Government Departments.

Evaluation is made by the immediate boss or supervisor for giving effect to promotion and
transfer. Usually a structured format is devised to collect information on employee’s strength
weakness, intelligence, attitude, character, attendance, discipline, etc. report.

2. Modern Methods

(i) Management by Objectives (MBO)

Most of the traditional methods of performance appraisal are subject to the antagonistic
judgments of the raters. It was to overcome this problem; Peter F. Drucker propounded a new
concept, namely, management by objectives (MBO) way back in 1954 in his book.

The Practice of management. The concept of MBO as was conceived by Drucker, can be
described 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 contribution of each its members”.

An MBO programme consists of four main steps: goal setting, performance standard, compari-
son, and periodic review. In goal-setting, goals are set which each individual, s to attain. The
superior and subordinate jointly establish these goals. The goals refer to the desired outcome to
be achieved by each individual employee.

In performance standards, the standards are set for the employees as per the previously arranged
time period. When the employees start performing their jobs, they come to know what is to be
done, what has been done, and what remains to be done.

In the third step the actual level of goals attained are compared with the goals agreed upon. This
enables the evaluator to find out the reasons variation between the actual and standard
performance of the employees. Such a comparison helps devise training needs for increasing
employees’ performance it can also explore the conditions having their bearings on employees’
performance but over which the employees have no control.

Finally, in the periodic review step, corrective measure is initiated when actual performance
deviates from the slandered established in the first step-goal-setting stage. Consistent with the
MBO philosophy periodic progress reviews are conducted in a constructive rather than punitive
manner.

(ii)  Behaviourally Anchored Rating Scales (BARS)

The problem of judgmental performance evaluation inherent in the traditional methods of

performance evaluation led to some organizations to go for objective evaluation by developing a
technique known as “Behaviourally Anchored Rating Scales (BARS)” around 1960s. BARS are
descriptions of various degrees of behaviour with regard to a specific performance dimension.

It combines the benefits of narratives, critical incidents, and quantified ratings by anchoring a
quantified scale with specific behavioural examples of good or poor performance. The
proponents of BARS claim that it offers better and more equitable appraisals than do the other
techniques of performance appraisal we discussed so far.

(iii) Assessment Centres

The introduction of the concept of assessment centres as a method of performance method is

traced back in 1930s in the Germany used to appraise its army officers. The concept gradually
spread to the US and the UK in 1940s and to the Britain in 1960s.

The concept, then, traversed from the army to business arena during 1960s. The concept of
assessment centre is, of course, of a recent origin in India. In India, Crompton Greaves, Eicher,
Hindustan Lever and Modi Xerox have adopted this technique of performance evaluation.

In business field, assessment centres are mainly used for evaluating executive or supervisory
potential. By definition, an assessment centre is a central location where managers come together
to participate in well-designed simulated exercises. They are assessed by senior managers
supplemented by the psychologists and the HR specialists for 2-3 days.
 Assessee is asked to participate in in-basket exercises, work groups, simulations, and role
playing which are essential for successful performance of actual job. Having recorded the
assessee’s behaviour the raters meet to discuss their pooled information and observations and,
based on it, they give their assessment about the assesee. At the end of the process, feedback in
terms of strengths and weaknesses is also provided to the assesees.

(iv) 360 – Degree Appraisal

Yet another method used to appraise the employee’s performance is 360 – degree appraisal. This
method was first developed and formally used by General Electric Company of USA in 1992.
Then, it travelled to other countries including India. In India, companies like Reliance Industries,
Wipro Corporation, Infosys Technologies, Thermax, Thomas Cook etc., have been using this
method for appraising the performance of their employees. This feedback based method is
generally used for ascertaining training and development requirements, rather than for pay
increases.

Under 360 – degree appraisal, performance information such as employee’s skills, abilities and
behaviours, is collected “all around” an employee, i.e., from his/her supervisors, subordinates,
peers and even customers and clients.

In other worlds, in 360-degree feedback appraisal system, an employee is appraised by his

supervisor, subordinates, peers, and customers with whom he interacts in the course of his job
performance. All these appraisers provide information or feedback on an employee by
completing survey questionnaires designed for this purpose.

(v) Cost Accounting Method

This method evaluates an employee’s performance from the monetary benefits the employee
yields to his/her organization. This is ascertained by establishing a relationship between the costs
involved in retaining the employee, and the benefits an organization derives from Him/her.

Limitations of Performance Appraisal, Potential Appraisal

Bias of Appraiser
 
The presence of ‘Halo Effect’ in evaluation of employees is the biggest weakness of this method.

A high rate is given to favoured employees whereas unfriendly employees are rated low.

2. Ambiguity in Standards

If the standards are not clear, the supervisors may follow different standards for different
employees.
3. Insufficient Evidence

An employee who can impress the boss may get a positive evaluation though his impression in
his own department may be very poor. In such cases, the performance appraisal will be
superfluous.

4. Several Qualities Remain Without Appraisal

Through performance appraisal, only few qualities of employees can be measured. All
individuals differ from each other in terms of background, values and behaviour.

5. Leniency or Strictness Tenancy

Every evaluator has his own valuation procedure which is regarded as his own standard for
evaluation. For example, some teachers are strict in evaluation of answer books whereas others
are lenient. The lenient tendency is known as ‘Positive Leniency Error’ whereas strict tendency
is called as ‘Negative Leniency Error’. The rating may be high or low depending upon the nature
of evaluators.

6. Average Rating Problem

In order to give very low or very high rating, the top managers are required to give reasons to
justify the rating. The most common error committed in performance appraisal is to give average
rating to all employees. Moreover, low rating antagonizes the subordinates.

7. Influence of Man’s Job

There is a tendency to give a high rating to highly paid jobs. So a senior employee may get a
higher rating than a junior employee.

8. Similarity Error

The evaluator tries to look those qualities in subordinates which he himself possesses. Those
who show the similar characteristics are rated high.

POTENTIAL APPRAISAL
The potential appraisal refers to the appraisal i.e. identification of the hidden talents and skills of
a person. The person might or might not be aware of them. Potential appraisal is a future –
oriented appraisal whose main objective is to identify and evaluate the potential of the employees
to assume higher positions and responsibilities in the organizational hierarchy. Many
organisations consider and use potential appraisal as a part of the performance appraisal
processes..

 To advise employees about their overall career development and future prospects
 Help the organization to chalk out succession plans
 Motivate the employees to further develop their skills and competencies.
 To identify the training needs.

Techniques of potential appraisal

 Self – appraisals
 Peer appraisals
 Superior appraisals
 MBO
 Psychological and psychometric tests
 Management games like role playing
 Leadership exercises etc.

Process of Performance Appraisal

1. The first step in the process is the establishment of performance standards against which the
output can be measured.
2. These standards are them communicated the employees as well as to the evaluators. This step
helps the employees know what is expected from them and the feedback from the employees can
be used for making any require changes in these standards.
3. The next step is to measure the actual performance against these standards a suitable
technique for measurement is selected and the internal and external factors that influence the
performance are also identified. Information on results is gathered and four sources are most
commonly used to measure the actual performance. These are personal observations, Oral
reports, written reports and statistical reports.
4. The results of the appraisal are then shared with the employee so that he become aware of the
deviation in performance and can also identify and analyze the cause behind this deviation. This
help and employee in identifying his strengths and weaknesses and improve future performance.
5. Corrective actions is then undertaken to improve the performance of the employees the
common tools for corrective action are coaching, counseling and training.

 Errors in Performance Appraisals

Structure and Timing

Inconsistency and uncertainty in the performance appraisal system mitigates their effectiveness.
Employees should know when to expect performance reviews, and the manager should plan
ahead and set an appraisal meeting on time. Scheduling and preparing for appraisal meetings
helps your employees take them more seriously. Finding a quiet space to conduct the meeting
and allowing the employee to share feedback or input is helpful as well.

Strictness and Leniency

Some managers offer feedback that is too strict or too lenient. Being too strict means that you
downgrade employees relative to actual performance. Leniency means delivering scores higher
than job performance warrants. Keeping emotions out of your evaluation and using objective
criteria with data to support your reasoning helps ensure the most accurate results. Accurate
ratings improve the ability of your workers to respond in areas where improvement is needed.

The Halo Effect Prevents Objective Evaluations

The halo effect means that you assume because an employee is generally "good", that his work
inallareas is strong. The halo effect prevents a manager from objectively evaluating the employee
on each criterion. Maintaining a professional approach to relationships, treating each worker
equally and carefully scoring each criterion helps protect against haloing.

Likeness and Stereotyping

"Like me" bias and stereotyping are closely related errors in employee appraisal. These errors in
performance appraisal stem from a manager's use of personal perspectives to conduct
evaluations. Liking a particular employee may bias the manager toward more favorable
assessments. Stereotyping employees leads to preconceived expectations and judgments, which
hinder accuracy. Stereotyping also may lead to discrimination.

As with strictness and leniency, the key to protect against these errors in employee appraisal is
an objective and carefully scrutinized appraisals. Data-driven assessments also guard against
high levels of subjectivity.

The Recency Effect

The recency effect is based on a natural inclination to give greater weight to the most recent
events. Therefore, an employee who has performed much lower than normal in recent weeks
may receive an overly condemning evaluation. Some employees recognize the recency effect and
work hard leading up to a performance appraisal to make a positive last impression. Keeping
notes between employee evaluations and tracking performance data for an extended period of
time enables a more thorough employee performance evaluation.

360 Degree Performance Appraisal, Feedback System and its Review

The 360 degree performance appraisal system is a way to make sure the appraisal is done in a
full-fledged way considering all the elements surrounded to the employee. The 360 degree
performance appraisal policy is very complicated and difficult to implement. One may ask why
organization should invest in 360 degree performance appraisal system? Here the answer, is for
long term development of employee and to create a strong leadership front. The 360
degree performance appraisal method provides a holistic approach towards the performance of
employee. It includes very important factors such as collaboration, teamwork and leadership.
Development plan based on the 360 degree performance appraisal system, effectively improve
the overall performance of employee and productivity of organization. There are different steps
which we follow in order to implement the 360 degree assessment. Clarity and effectiveness of
the system is very important for an organization. 

What is a 360 degree performance appraisal?

The 360 degree performance appraisal system is advanced kind of appraisal which is used by 
many organizations where performance of employee is judged using the review of around 7 to 12
people. These people are working with the employee and they share some of their work
environment. The feedback is gathered in the form of reviews in terms of competencies of the
employee. The employee himself or herself also takes part in this appraisal with the help of self
assessment. The 360 degree performance appraisal system is a way to improve the understanding
of strength and weaknesses of employee with the help of creative feedback forms. 

There exist 3 prime reasons due to which organization prefer to go for a 360 degree
performance appraisal.

In order to get a enhance review about performance and prospective of the future leader.

To broaden the insight of manpower development and its needs.

In order to collect feedback from all the employees and to ensure the organizational justice.

Usually under 360 degree appraisal system the feedback is collected from peers subordinates
customers managers and the team members of the employee. The feedback is collected using on
job survey based on the performance of employees there exist four stages of a 360 degree
appraisal. The first stages self appraisal followed by superior’s appraisal then subordinates
appraisal and lastly the peer appraisal.

What is a 360 performance review in HR?

The 360 review is a professional opportunity given to the coworkers to provide 360 degree
feedback about the performance of their fellow employee. Traditionally either the HR
department or reporting manager of employee asks the subordinates to provide their feedback. 

Many organizations use an online survey method in order to interact with the employee and
enable them to provide performance feedback. The online survey instrument is very useful in
collecting the feedback and providing a clear understanding about employee’s performance. 

The 360 performance review is mostly focused on the contribution of employee and their skills
along with the competencies. It is a balance way to view the actual performance of employee in
the area of teamwork, leadership, interaction, interpersonal communication, contribution,
management, accountability, work habits, vision, and other things based on the employee’s job
profile.

Here the actual contribution of employee in terms of performance is judge by the manager while
the other aspects of the role are judged by or reviewed by the subordinate, peers and the
customer.

The purpose of collecting feedback from all the employees who work together is to analyze
about how the employee affected the work of their fellow employees. Also it focuses on the steps
organization need to carry out in order to enhance teamwork among the employees. Along with
the formal feedback manager can also request for informal or verbal feedback from the
subordinates in order to get a clear view about behavior and work attitude of employee.

How to implement 360 degree performance appraisal system?

The implementation of 360 degree appraisal method is not an easy task. In order to design an
effective 360 degree appraisal system one has to take care of following things.

Determine the right skill to be assessed.

Proper selection of appraiser.

Proper training should be provided to all the employees about how to use the 360 degree review
system.

The intention of appraisal system should be elucidate.

Design simple and easily understandable process.

Ensure that a follow up is taken after appraisal review

Objectives of 360 degree performance appraisal 

The objective of 360 degree feedback process differs from company to company however the
main objective of 360 degree performance review used to evaluate the performance of employee
in a holistic manner expert of this field often claim that a properly and effectively implemented
360 degree feedback process makes employee more comfortable with the organization and lead
to their overall development along with boosting their performance.

In this Era use of 360 degree feedback system has brought a team oriented meaning to the
organization. Organization is not restricted to bunch of people but it has become a bigger team.
In a traditional way the appraisal was the responsibility of human resource management only, but
now the objective of 360 degree performance appraisal is to collect anonymous feedback about
the employee from their superiors, colleagues and peers also from the customer. This holistic
approach helps to evaluate performance and well-being of employee who is working for the
organization.

360 Degree Performance Appraisal Process 

The steps of 360 degree feedback process may slightly vary from organization to organization.
However the schedule of the 360 degree feedback process remains quite same. A timeline has
been identified for 360 degree performance review which includes different steps which
organization has to follow. The step starts with the communication about 360 degree
performance appraisal method and it ends at the re-evaluation of participants.

1. Communicating the 360 degree performance review- It is very crucial to communicate the
entire process to the stakeholders of the organization. The purpose and objective of 360 degree
performance appraisal process should be clearly mentioned and explained to each and every
participant. Also the process through which the feedback will be gathered and how the feedback
will be utilized should be clearly conveyed to the stakeholders.

Time required- This process could take 2-3 weeks to communicate about the appraisal system.
This can be done through in personal meeting with supervisors, managers, leaders and
employees. Also it can be communicated through emails and employees should be encouraged to
come forward if they have any queries related to 360 degree performance appraisal process.

2. Selection of raters- The selection of rater is one of the most important steps in 360 degree
performance appraisal system. We have to choose enough number of participants in order to
receive data which is relevant and comprehensive. The number of raters will depend on the
employee’s job profile and working relationship.

Time required- This process generally takes one to two weeks. The rater will include supervisors,
direct reports, peers and perhaps some customers or clients.

3. Distribution of survey- Organizations can use online 360  degree feedback system which will
allow a quicker distribution of questionnaire among the employees. The participants will receive
an email with the link of questionnaire and notification. They can click on the link, start and
complete the 360 degree review. 

Time required- This may take one week in order to distribute survey among all the employees.
4. Submission of questionnaire- Once the survey is distributed, the participant will complete the
survey online. The completed review will be provided to the evaluator. This process can take the
longest time. The time required to submit a questionnaire depends on the number of raters which
are involved, the job profile of employee and organization. It is highly recommended that a
particular deadline should be assigned to the participant in order to quickly finish the process.

Time required- This process should take to 2-4 weeks in order to get completed feedback from
the participant.

5. Completion of report- Once the review is been collected through the questionnaire method a
confidential report is being produced. It depends on the delivery plan of organization sometimes
once the report is ready it is directly sent to the participants or the result is been given through
one-one feedback session.

Time required- if you are using an online system this very quick to produce the report,
sometimes it takes 1 to 2 days.

6. Facilitation of feedback- It is recommended that the feedback should be given in a confidential

manner by arranging the meeting with employee’s manager or coach. This meeting will allow a
great understanding about the feedback report and also provides an opportunity to discuss the
strength of the employee and areas which need to be improved.

Time required- It depends on the in depth of the feedback session generally a meeting can last
for 1 to 2 hours for each employee.

7. Completion of development plan- Once review is done the development plan should be

created for each of the participant based on the feedback reviews received through 360
degree evaluation. It is important to develop an actionable plan which will help to improve the
employee. The areas where the improvement is required should be identified as key areas based
on which a training programs, workshop, coaching, conferences or mentoring should be arranged
for the employee. The development of such plan helps employees to improve quickly. 

Time required- Generally completion of development program could take one to two weeks

8. Re- evaluating- 360 degree feedback system is not one of event; once you start the process it is
important to see the consequences of the process. Specific goals and opportunities are outlined in
the development program; it does make sense to check the progress. The re-evaluation of
participant will enable the organization to see the changes and the area in which the employees
are actually improved.

Time required- This process should be carried out after 8 to 12 months of 360 degree
performance appraisal.  

360 degree feedback questionnaire

The questionnaire for 360 degree feedback depends on the job profile of employee. However
there are some topics such as leadership, interpersonal skills, problem solving attitude,
motivation and efficiency of employees which can be judged by the colleagues, peers, supervisor
as well as client. For such points there are few questionnaires which can be used. Check out the
sample 360 degree feedback questionnaire-

 Leadership 

Do you think this employee exhibit the quality of leadership in the role which he or her play for
the organization?

How positively this employee contributes through his leadership skills?

Do you think the employee should improve his leadership quality?

  Interpersonal skills

When you interact with this employee do you think the interpersonal skills which were
demonstrated were satisfactory?

Do you experience any sort of problem while interacting with this employee?

Do you recommend any improvement in the interpersonal skills and relationship development
skill of the employee?

 Problem solving attitude

Do you observe that this employee effectively solved problem?

What are the skills which this employee has demonstrated in order to solve the problem?

Do you think this employee has less problem solving skills and the employee need to work to
improve the skills?

 Motivation 

Do you observe that this employee appeared motivated towards his work-related task, job or
relationships?

How committed and motivated do you think this employee is with regards to success of the
organization?

Have you ever experienced any issues related to the motivation level of the employees?

 Efficiency 
Do you think the work method and approach used by the employee are effective, efficient and
improving?

Do you suggest any areas of improvement for this employee?

These are some areas in which the questions can be raised in order to improve the effectiveness
of 360 degree feedback system. These questions will help the employees to respond about their
issues and things which they appreciate about their colleagues and peers. These questions will
promote ease of sharing of information among the employees.

The significance of 360-degree performance appraisal 

The immediate benefits of 360 degree feedback system can be observed in terms of
teamwork, development of leadership and improved productivity of organization. It provides
safe, confidential and reliable way for colleagues to provide feedback. It also provides
organization valuable insights about the current leadership, how team mechanics works and
overall culture of the organization. 360 degree performance appraisal system provides powerful
knowledge to the leaders and hence helps them for the development of employees. The
effectively used 360 degree performance appraisal system boosts the confidence of employees
and helps them to improve in their performance. It also helps employee to become better leader
and contributor for the organization.

360 degree performance appraisal advantages and disadvantages

Similar to every system 360 degree performance appraisal also has some pro and cons. Let's take
a look at advantages and disadvantages of 360 degree performance appraisal system.

 Advantages of 360 degree assessment

This system provides a comprehensive view towards the performance of employees.

It improves the credibility of the performance appraisal system

The feedback from colleagues helps to strengthen the self development process of the employee

It also increases the responsibility and alertness of employee towards their clients.

The different ideas coming from different raters combined provide more accurate 360 degree
assessment.

More persuasive opinions can be gathered from different participants.

Here not only manager but colleagues are also responsible for assessment of staff performance
which empowers them.

Employees get motivated who generally undervalue themselves. 

Honest culture can be established among the organization using 360 degree performance
appraisal system.

Disadvantages of 360 degree assessment 

The process is very lengthy, complex and takes a lot of time.

If the feedback got exchange among the employees it can create trouble and tension among the
staff.

A lot of effort has to be placed in order to train the employee to effectively use the 360 degree
appraisal system.

It is very difficult to figure out the results.

Some feedbacks are useless and need to be deleted carefully.

A suspicious environment can be created in the organization as the information is not available
to everybody. 

POTENTIAL APPRAISAL

Without the proper management, monitoring, analyzing, and evaluation of their performance,
skills, and potentials—the company suffers wasted opportunity to nurture a suitable employee,
while the employee itself suffers the loss of opportunity to develop his full potential.

This is the reason why more and more companies are now paying attention to carefully include
and execute potential appraisal as part of their performance appraisal processes.

The use of a potential appraisal is very significant to promote employee development. It also
encourages a culture of better accountability and higher productivity. It assists the employee on
how to better do his job, and how to do it such that he’ll be considered for a possible promotion
or be given an added responsibility.

Potential appraisal allows both the employee and the company to identify areas for improvement.
And then develop materials and come up with training to enhance performance. Thus,
incorporating this appraisal may significantly open real opportunities for employees to
demonstrate their abilities, or for the management to pinpoint which particular skills to nurture.

With the aid of potential appraisal, the management can effectively and fairly evaluate whether
the employee is suitable to be given added responsibilities or promotion. It can also assess if
added training is necessary, or if its time to move the employee to do work that’s more fitting for
his skills. And if the employee shows no improvement at all, the potential appraisal can help
managers to decide when an employee needs to be let go.

Potential Appraisal Defined:

To better understand potential appraisal, its purpose, objectives, advantages, its steps,
andcharacteristics—let us first define the term.

A potential appraisal is a part of the performance appraisal process. It is a future-oriented

appraisal in which the term implies the identification and evaluation of the employee’s untapped
talents or undeveloped skills. It aims to identify and evaluate these potentials to determine if the
employee is fit to accept a higher position or added responsibilities.

It is possible that the employee is not fully aware of his potential—his existing yet dormant
abilities. Hence, a potential appraisal is the tool being used to track hidden talents, skills and
abilities of an employee. This is a holistic approach in which in the process, the employee’s
strengths and weaknesses are deeply identified.

Consequently, this helps the management provide more succinct feedback to their employees
which may help improve their performance and shape them to be better equipped for future
positions.

Potential Appraisal Vs. Performance Appraisal:

Potential appraisal should not be confused with performance appraisal as the former is a part of
the latter.

Performance appraisal:

A performance appraisal is a method used to document and evaluate the job performance of an
employee. It is a systematic process and usually done periodically. It is also known as a
performance review, performance evaluation, or employee appraisal.

This process includes an assessment of an employee’s periodic job performance and productivity
to pre-established criteria and objectives set by the company. It also includes an assessment of
the employee’s overall behavior, accomplishments, areas for improvement, and among others.

The process also includes providing feedback to employees, and one-on-one coaching or career
development plan to further enhance performance. It may also entail discussion about a possible
 salary increase (should the performance be highly satisfactory), a possible promotion, or
feedback about job status.

However, it could also become a venue for laying down disciplinary actions or warning to move
the employee to better perform otherwise it may result to force resignation or possible
termination.

Performance appraisal is needed for the employee to know what is expected from him, and
whathe can do to meet those expectations. This method helps better manage and align all the
company’s efforts and resources to reach the most effective and efficient performance from their
employees.

Potential appraisal:

While on the other hand, as mentioned above, a potential appraisal is a part of performance
appraisal. This method is used to identify and evaluate the “potential” of an employee. Potential
appraisal searches for latent abilities of the employee that are, during the appraisal, are not being
used.

It aims to reveal the dormant abilities of an employee in the hope of career advancement in the
future. It identifies the employee’s possible position or suitable roles in the future within the
organization. While at the same time, during the evaluation, it also helps carve paths to guide the
employee or develop ways to prepare him for higher responsibilities in the future.

A potential appraisal is a forward-looking process to see whether an employee will be suitable or

flexible for new working conditions and challenges. Simply, it is a process in which the main
objective is to assess the employee in his present role, drafting ways to improve his performance,
and then ultimately move to evaluate to see his suitability for higher responsibility.

The purpose and objectives of the potential appraisal:

 Since a potential appraisal aims in identifying future possibilities, it can help in such a way as
to guide the employee to grow professionally. It also allows the company to better achieve its
goals.
 The prime objective of a potential appraisal, therefore, is to help employees move upwards in
the organization. It positions the employee to see its future prospectus, while it also helps the
company draft a suitable succession plan.
 To sum up, the main purposes of a potential appraisal are:
 to inform employees about their possible career path or future prospects
 to help the company chalk out succession program
 to regularly update the training efforts and enhance recruitment
 to motivate employees to further develop their skills and competencies or overall
performance
 Advantages of performance appraisal as a whole:
 Majority of employees wants to advance their career. Understandably, every employee would
like to be allowed to work at a higher level of competence either in their current position or
 other types of work they particularly excel in. So, a good performance appraisal system,
which ideally should include a potential appraisal, will help point out areas where an
employee needs to improve.
 Although there are some minor drawbacks, there are undeniably many advantages of a good
performance appraisal system. The following are some of its well-known benefits:
 1) It encourages superior performance:
 It helps guide the employee since a regular performance appraisal lets the employee know
what is expected from him and what he can do to meet those expectations. Thus, it motivates
him why he should perform better and what he should do to deliver superior performance.
 2) It helps the management to decide if a salary raise is deserved by an employee:
 Most organizations believe in pay for performance, and employees also do expect to be well
compensated for doing a good job. A periodic performance assists the management to better
decide whether such an employee deserve a raise based on the set performance criteria.
 3) It helps support manpower planning:
 By regularly conducting performance reviews, the management can better assess who can be
given future assignments or a higher position.
 4) It allows room for better communication and an enhanced relationship with
the management and the employee:
 It allows the employee and his immediate supervisor time for a focused one-on-one
discussion of work activities, goals, and issues. The appraisal interview, when done properly,
allows better communication or identification of existing problems and how to address it.
 5) It encourages accountability, as well as adds motivation and satisfaction:
 Performance appraisal empowers employees because it provides recognition for their work
efforts. It reminds employees that the company is interested in their performance and career
development. With this appraisal, the employee may be influenced to be more accountable,
genuinely interested to perform better.
 6) It helps identify training and development needs:
 Performance appraisal provides an avenue for the management to recognize relevant training
and development needs.
 7) It helps monitor and enhances recruitment and induction practices:
 The data from performance appraisal can guide Human Resources and the management to
see the effectiveness or what needs to improve in their recruitment process.
 Additionally, specific to a good potential appraisal, it’s known benefits are:
 it helps identify employees who can take higher responsibilities
 it helps employees know that they are not working on dead-end jobs
 it identifies employee potential to ensure manpower availability

Characteristics and techniques of potential appraisal

Reviewing the performance of the employee forms the basis of potential appraisal since he is
assessed based on the targets he accomplished and the skills he possesses and uses. The results of the
performance review act as indicators on the employee’s aptitude to handle extra responsibilities.
Nonetheless, it’s important to note that this is not a fool-proof way to know whether the employee
will be successful in managing higher responsibilities in the future.
It’s also good to remember that a potential appraisal cannot be applied to all—at the same level. This
is because there will be employees who may have potential but do not perform well due to
behavioral problems. Also, there are chances that some employees may be productive doing routine
tasks but cannot perform on higher-level jobs.

Although it is recommended to take place within six months, potential appraisal time isn’t fixed. The
reason being is that it should be under the discretion of the management to hold the assessment. A
certain milestone achieved by an employee like seniority, or other reasons and factors should be
considered before exercising such activity.

A potential appraisal also should start and end with a meeting between the employee and the
management. The first meeting should consist of the listing of abilities required for additional
assignments or higher position, as well as development plan to attain them. The next meeting should
then include the assessment results—whether the necessary skills have been acquired or not, as well
as feedback and an action plan.

Additionally, the following are the common techniques of a potential appraisal:

Self–appraisals

Peer appraisals

Superior appraisals

MBO

Psychological tests

Psychometric tests

Management games

Leadership exercises, and etc.

Steps of Potential Appraisal System:

While the following are some of the general requirements and steps when introducing a potential
appraisal system:

1) Role Description:

A clear role description is required to have a good potential appraisal system. There should be clarity
of roles and functions—which means extensive job descriptions and various functions involved to
perform the job.

2) Smart time management:

The perfection of the performance evaluation system also requires smart time management. Proper
time management skills are crucial in keeping employees focused on their assigned tasks.

Using a productivity tracker like integrating a free time clock software to track employees working
hours have been proven effective in boosting performance.

3) Qualities Required:

Besides clear descriptions of roles and functions, it is also important to have a detailed list of
qualities required for the employee to perform and deliver. These qualities are usually broadly
divided into four categories, which are listed below:

technical knowledge and skills

managerial capabilities and qualities

behavioral capabilities

conceptual capabilities

4) Indicators of Quality:

A potential appraisal system should also include the various mechanisms for judging these qualities
in an employee. These mechanisms for judging these qualities are:

Rating by others

Psychological tests

Simulation games and exercises

Performance appraisal records

Other indicators of potential are:

A sense of reality: The employee thinks and acts objectively, and resist purely emotional pressures.

Imagination: The employee uses his imagination to pursue objectives, and go beyond the
conventional approach to certain situations.

Power of analysis: The employee can break down facts, reformulate or transform crisis into
manageable terms.

The span of vision: The employee can examine a problem in the context of a broader framework of
reference.
Persuasiveness: The employee can sell his ideas to people and uses personal influence to gain a
continuing commitment.

5) Organizing the System:

Once the roles, the qualities required, and the indicators of quality are listed down, then the system
should be established. The potential appraisal system should be organized in such a way that there is
clarity in the organizational policies and systematization of efforts.

6) Feedback:

Finally, the last step should be the inclusion of the climate of transparency and openness. This will
help employees to understand and gauge their abilities—and their strengths and weaknesses.
Providing feedback allows them to better perform their jobs and develop their skills and abilities.
Moreover, the company’s management should incorporate regular one-on-one coaching or periodic
counseling.

Conclusion:

Employees want to be recognized. It motivates them as well as encourage them to perform better, be
productive, and be more committed. Conducting regular performance appraisal helps to have higher
overall performance and productivity. It also helps the company to achieve its goals and objectives.

A potential appraisal is a part of the performance appraisal. It helps identify and evaluate the latent
abilities of an employee which is not currently being utilized. Conducting a potential appraisal also
have various advantages for the company like supporting manpower planning. In its entirety, a
potential appraisal is beneficial for both the employee and the company.

Appraisal Interview

We have discussed the performance appraisal process in earlier articles. In this article, we
discuss the performance appraisal interview and its importance in the performance appraisal
cycle. The performance appraisal interview is the first round in the performance appraisal
process and this is the round in which the manager communicates his evaluation of the
employee’s performance during the appraisal period or the time that the employee’s performance
is being evaluated.

What is a Performance Appraisal Interview ?

A performance appraisal interview is the first stage of the performance appraisal process and
involves the employee and his or her manager sitting face to face to discuss threadbare all
aspects of the employee’s performance and thrash out any differences in perception or
evaluation. The performance appraisal interview provides the employee with a chance to defend
himself or herself against poor evaluation by the manager and also gives the manager a chance to
explain what he or she thinks about the employee’s performance.

In a nutshell, the performance appraisal interview precedes the normalization process and is
subsequent to the employee filling up the evaluation form and the manager likewise doing so.
The interview is the stage where both sides debate and argue the employees’ side of the story as
well as the manager’s perception.

Objective Evaluation versus Personal Biases

Though management theorists like to propound the benefits of objective evaluation, it is a fact in
contemporary organizations that an element of personal bias enters the evaluation. This is
evident from the studies and surveys done by HR consultants like Hewitt that point to the
employee’s dissatisfaction with the performance appraisal process as one of the main reasons for
leaving the company. To curb the incidence of biases and heuristics playing a role in the
appraisal, HR managers typically conduct orientations and trainings to both the Managers and
the Employees to sensitize them to these dangers that are sometimes inherent in the process.

On the other hand, the employees’ should approach the process without unrealistic expectations
and expect the Manager to agree to whatever they write on the performance evaluation form.
Hence, there is a need for both sides in the interview process to approach the same with an open
mind and be as objective as possible. However, this is easier said than done and hence
organizations expend resources on making the process as transparent and objective as possible.

The Right and Wrong Way to Approach a Performance Appraisal Interview

The performance appraisal interview must be taken seriously and both the employee and the
manager must set aside time to go through the process. The manager cannot arbitrarily change
the time or the venue and must not approach the interview in a haphazard manner. Despite all
these injunctions, it is often the case that the manager has to be reminded about the interview and
then he or she hurriedly arranges the meeting. This is definitely the wrong way to approach the
interview. Further, the manager must make the time to go through the employees’ self evaluation
and rate the same objectively.

Though there is no right way to conduct the performance appraisal interview, it is incumbent
upon the manager to avoid the pitfalls described above. A rule of thumb would be set aside a few
days to conduct all the interviews with members of his or her team and ensure follow-ups to the
process. The follow-up is needed when the employee is not satisfied with the interview
discussion and hence requests for additional time to debate the rating. In some cases, the HR
manager may need to step in to ensure that the process is concluded to the satisfaction of the
employee and the manager.