Modern Techniques Of Performance Appraisal

The concept of µManagement by Objectives¶ (MBO) was first given by Peter Drucker in 1954. It can be defined as a process whereby the employees and the superiors come together to identify common goals, the employees set their goals to be achieved, the standards to be taken as the criteria for measurement of their performance and contribution and deciding the course of action to be followed. The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee¶s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and choosing the course of action to be followed by them, they are more likely to fulfil their responsibilities. Process of Management ByObjectives: Setting goals: In the first step, top managers formulate the overall organizational goals and plans and then work with middle managers to develop goals for the organizational divisions or units they manage. In turn, middle managers work with first-line managers to set goals for their departments or groups. During this process, managers and employees at all levels, in collaboration with their supervisors, also set individual goals for performance. Planning action: In the second step, managers determine exactly how their individual and group goals will be accomplished. During action planning, managers decide on the "who, what, when, where, and how" details needed to achieve each objective. Managers also prepare a schedule for the action plan to ensure that goals are reached on time, and this schedule is reviewed when individual performance is being evaluated. Implementing plans: Once managers have made a commitment to achieve specific goals and have received approval for their plans, the third step is implementation. To control their own performance, managers must be allowed to implement their plans in their own way. This element of self-control allows managers to channel their expertise for the benefit of the organization while allowing them to develop their professional skills more fully as they tackle the challenges of implementation. Reviewing performance: In the last step of the MBO process, managers periodically review the performance of the people they supervise and evaluate how well the plans are working in achieving group and individual goals. Benefits of Managements by Objectives: Improvements of managing:All the advantages of managements by objectives can be summarized by saying that is results is greatly improved management. Objectives cannot be established without planning is the only kind that makes sense. Management by objectives forces managers to think about planning for results, rather than merely planning activities or work. Clarification of organization: Another major benefit of managing by objectives is that is forces managers to clarify organizational roles and structures. To the extent possible, positions should be built around the key results expected of the people occupying them.

Encouragement of personal commitment:One of the great advantages of management by objectives is that it encourages people to commit themselves to their goals. The key difference is that rather than 'set' objectives from a cascade process. following instruction. they have had an opportunity to put their ideas into planning programs. They have had a part in actually setting their objectives.e. Robert Rodgers and John Hunter concluded that companies whose CEOs demonstrated high commitment to MBO showed. also known as 'multi-rater feedback'.anyone who comes into contact with the employee and can provide valuable insights and information or feedback regarding the ³on-the-job´ performance of the employee. suppliers/ vendors . Engagement of employees in the objective setting process is seen as a strategic advantage by many. not at what they should do. While MBO is not as fashionable as it was before the 'empowerment' fad. subordinates. Development of effective controls:In the same way that management by objectives sparks more effective planning. Companies with CEOs who showed low commitment only saw a 6% gain in productivity. it may trigger an unethical behaviour of distorting the system of results and financial figures to falsely achieve targets that were set in a short-term. A saying around MBO and critical success factors. and waiting for guidance and decisions. managers (i. . to relative buy-in by leadership and stake-holders. narrow. As an example of the influence of management buy-in as a contextual influencer. or CSFs is perhaps the most famous aphorism of performance measurement. in a 1991 comprehensive review of thirty years of research on the impact of Management by Objectives. customers. superior). objectives are discussed and agreed. bottom-line fashion The use of MBO needs to be carefully aligned with the culture of the organization. Trait appraisal only looks at what employees should be. It underemphasizes the importance of the environment or context in which the goals are set. based upon a more strategic picture being available to employees. a 56% gain in productivity. team members. agreed and managed by organizations. therefore. Control involves measuring results and taking action to correct deviations from plans in order to ensure that goals are reached. Limitations Of Management By Objectives: It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes. 360 degree respondents for an employee can be his/her peers. When this approach is not properly set. it still has its place in management today. it also aids in developing effectives controls. No longer are people just doing work. That context includes everything from the availability and quality of resources. they are now individuals with clearly defined purposes. Companies evaluated their employees by comparing them with the "ideal" employee. is the most comprehensive appraisal where the feedback about the employees¶ performance comes from all the sources that come in contact with the employee on his job. in self-centred thinking employees. on average. 360º PERFORMANCE APPRAISAL 360 degree feedback. to avoid potential problems SMART and SMARTER objectives need to be agreed upon in the true sense rather than set.

e. This technique is being effectively used across the globe for performance appraisals. The major competencies that are judged in assessment centres are interpersonal skills. Also known as internal customers. skill enhancement through simulations). leadership qualities etc. Generally. 360 degree appraisal is also a powerful developmental tool because when conducted at regular intervals (say yearly) it helps to keep a track of the changes others¶ perceptions about the employees. Self-appraisal gives a chance to the employee to look at his/her strengths and weaknesses. his achievements. Assessment centres serve three main human resources functions: y y y Selection and promotion Diagnosis (e. Subordinates appraisal gives a chance to judge the employee on the parameters like communication and motivating abilities. Self-assessment is an indispensable part of 360 degree appraisals and therefore 360 degree Performance appraisal have high employee involvement and also have the strongest impact on behaviour and performance. ASSESSMENT CENTERS An assessment centre typically involves the use of methods like social/informal events. and Reliance Industries etc.. Superior¶s appraisal forms the traditional part of the 360 degree appraisal where the employees¶ responsibilities and actual performance is rated by the superior. superior¶s ability to delegate the work. The following dimensions are normally assessed in assessment centres: . assignments being given to a group of employees to assess their competencies to take higher responsibilities in the future. employees are given an assignment similar to the job they would be expected to perform if promoted.g. and judge his own performance. identification of training and development needs) Development (i. The trained evaluators observe and evaluate employees as they perform the assigned jobs and are evaluated on job related characteristics. career orientation etc. motivation. intellectual capability.. assessment centres are also an effective way to determine the training and development needs of the targeted employees. planning and organizing capabilities. co-operation and sensitivity towards others. Some of the organizations following it are Wipro. Infosys. the correct feedback given by peers can help to find employees¶ abilities to work in a team.360 degree appraisal has four integral components: y y y y Self-appraisal Superior¶s appraisal Subordinate¶s appraisal Peer appraisal. tests and exercises. It provides a "360-degree review" of the employees¶ performance and is considered to be one of the most credible performance appraisal methods. A 360 degree appraisal is generally found more suitable for the managers as it helps to assess their leadership and managing styles.

someone may outline a ton of experience (e. but in a group exercise they are observed to dominate. BARS Behaviorally Anchored Rating Scales (BARS) are scales used to report performance. Reduce rater bias and error by anchoring the rating with specific behavioural examples based on job analysis information. do not listen to others and ignore the quieter group members. Designed and run properly. rather than in terms of general traits or abstract constructs.y y y y y y y y Planning and organising Leadership n Analytical Problem solving Sensitivity Decision-making Creativity Sociability Management control and delegating. vague work habits). There are four steps in the BARS construction process: y y y y Listing of all the important dimensions of performance for a job or jobs Collection of critical incidents of effective and ineffective behavior Classification of effective and ineffective behaviors to appropriate performance dimensions Assignment of numerical values to each behavior within each dimension (i. they provide a window to cross-check or challenge information gained through self-report measures such as interviews. in that it focuses on behaviours that are determined to be important for completing a job task or doing the job properly. It differs from "standard" rating scales in one central respect. For example. subjectivity and failure to identify the essential functions of the job..e.g.g. Minimize evaluators' impreciseness. personality. It was developed by Smith and Kendall to provide a better method of rating employees. The main advantage of assessment centres is that it allows key job success behaviours to be directly observed and measured. leadership experience) in a behavioural interview. Organisations which have growth plans coupled with the desire to get people to man positions from within. should get started on assessment centres. rather than looking at more general employee characteristics (e. Eliminate the use of potentially misleading numerical and volume measures that are not readily interpretable. Assessment centres are powerful and are becoming increasingly popular. scaling of behavioral anchors) Each behavior can rate at one of 7 scales as follows (you can set scales depend on your requirements) y Extremely poor (1 points) . Objectives: y y y y Assess performance in terms of specific behaviours that are critical to the job.

Replacement costs could be positional i. induction and training costs etc. Ideally.e. then amortisation of costs is rescheduled. selection.e. training costs of employees are capitalised and written off over the expected useful life of the employees. Human resource accounting method tries to find the relative worth of these assets in the terms of money.y y y y y y Poor (2 points) Below average (3 points) Average (4 points) Above average (5 points) Good (6 points) Extremely good (7 points) HUMAN RESOURCE ACCOUNTING Human resources are valuable assets for every organization.Under this method. The difference between the cost and the contribution will be the performance of the employees. Human resources accounting brings to light the quantum of human resources and indicates the right control of conservation. the personnel leave the company before the anticipated period of service. the monetary implications of replacing existing personnel. The cost of employees include all the expenses incurred on them like their compensation. the cost of acquisition i.Under this method. hiring. then the unamortised portion of costs remaining in the company¶s books is written off against the profit and loss account in that year.e. In case.e. replacing personnel for particular positions or personal i. Standard cost method .Under this method. Replacement cost method . Competitive bidding method . recruitment and selection costs.This approach suggests competitive bidding for scarce employees in an organisation i.e. the human resources are valued at their replacement cost i. The main objective of human resource accounting is to facilitate the management to get information on the cost and value of human resources. If the period of service exceeds the anticipated time. Methods of valuing and accounting of human resources: Methods based on cost: Historical cost method . depletion and appreciation of it in the right perspective. . and developing per grade of employees are determined annually. the contribution of the employees should be greater than the cost incurred on them. The total standard cost for all personnel of the company is the value of human resources. The approach proposes the capitalising of additional earning potential of each human resource within the company. In this method the Performance appraisal of the employees is judged in terms of cost and contribution of the employees. opportunity cost of employees linked to scarcity. hiring. standard costs of recruiting. replacing specific talent or ability of particular persons. training. whereas their contribution includes the total value added (in monetary terms). It provides data to the interested persons about the cost of human resources and correspondingly comparing it with the benefit obtained out of its utilization.

as human resource groups account for productivity and performance in organisations.Methods based on value: Jaggi and Lau method . the net present value of incremental cash flows attributed to human resources is taken as the asset value. Economic value method .This method estimates the worth of human resources on a group-basis. .Under this method.