PERFORMANCE APPRAISAL

Performance – What does it mean???

 Record of an Outcome/Achievement.

 Dictionary Meaning – How well or badly a particular activity can be done.

 Oxford: The accomplishment, execution, carrying out, working out of anything ordered or
undertaken.

 Performance means both behaviour and results. Behaviour emanates from the performer and
transforms performance from abstraction to action.

Factors affecting Performance:

Personal Factors:- Skill,Competence,Motivation, Commitment etc..

Leadership Factors:- Quality of encouragement , guidance and support

Team Factors :- Quality of support from peers.

Systems Factors:- Infrastructural facilities

Contextual Factors:- Internal & External environmental factors.

Definition:

A process of systematic evaluation of individual with respect to his job and his or her potential for
development.

PfA is the formal, systematic assessment of hw well employees are performing their jobs in relation to
established standards , and the communication of that assessment to the employees.
Wendell French
  PfA is the systematic, periodic and an impartial rating of an employees excellence in matters
pertaining to his present job and his potential for a better job. Flippo.

 PfA is the process by which an employees contribution to the organization during a specified
period of time is assessed.

Fischer, Schoenfeldt and Shaw.

The Performance Appraisal Process

E Objectives of P.A
N
V
I
R
O Establish Job Expectations
N
M
E
N Design appraisal programme
T
A
L
Appraise Performance
I
N
F
L Performance Interview
U
E
N
C
E
Use of Data
Objectives of Performance Appraisal

 To effect promotions based on competence & Performance.

 To confirm the services of probationary employees.

 To assess the training and development needs of employees.

 To decide up on a pay rise.

 To let the employees know where they stand in terms of their own performance.

 To improve communication.

 To check if selection, training, transfers etc has been effective or not.

Establishing Job Expectations

 Informing the employee what is expected from him / her – Organisation, Team and Individual
point of view

 Usually this is conveyed through a discussion by the superior and subordinate. Sets super
ordinate goals, which are mutually acceptable.

 Employees are not supposed to proceed unless and until they become clear about their
expectation.

Designing Appraisal Programme ( refer HRM – Aswathappa)

a) Formal Vs Informal Appraisal.

b) Whose performance is to be assessed?

c) Who are the raters?

d) What problems will be encountered?

e) How to solve problems?

f) What should be evaluated?

g) When to evaluate?

h) What methods of appraisal has to be used?

Problems Encountered in Appraisal

 Halo error.

 Primacy effect

 Recency Effect

 Perceptual Set.

 Spill over Effect.

 Leniency.

Rating Errors Example

Job Rating Scale
Halo EXCELLENT
on all or any factors

Job Rating Scale Job Rating Scale Job Rating Scale Job Rating Scale
Leniency Employee A Employee B Employee C Employee D
EXCELLENT EXCELLENT SUPERIOR EXCELLENT

Job Rating Scale Job Rating Scale Job Rating Scale Job Rating Scale
Central
Employee A Employee B Employee C Employee D
Tendency AVERAGE AVERAGE AVERAGE AVERAGE

Recency Job rating scale behavior during the

Bias last month has been POOR.
Leniency error is when a raters’ tendency is to rate all employees at the positive end of the scale
(positive leniency) or at the low end of the scale (negative leniency). This can happen when a
manager over-emphasizes either positive or negative behaviors.

 It is a rating of myself.

 May be discharged from the organization.

 Poor inter personal relationships.

 To increase the hold over subordinates.

 Who ever associates with me is meritorious, so .. I am Meritorious.

 To gain approval.

First impression error is the rater’s tendency to let their first impression of an employee’s
performance carry too much weight in evaluation of performance over an entire rating period.
An example of this would be a new employee joining the organization and performing at high
levels during their “honeymoon” period and then possibly losing some of that initial momentum.
Similar-to-me error is when the rater’s tendency is biased in performance evaluation toward
those employees seen as similar to the raters themselves.   We can all relate to people who are
like us but cannot let our ability to relate to someone influence our rating of their employee
performance.
Since human biases can easily influence the rating process, it is important to create objective
measures for rating performance.   Observing behaviors and using available technology to help
track performance can take some of the biases out of the rating process.

Central tendency error is the raters’ tendency to avoid making “extreme” judgments
of employee performance  resulting in rating all employees in the middle part of a scale.
This can happen either when a manager is not comfortable with conflict and avoids low marks to
avoid dealing with behavioral issues or when a manager intentionally forces all employees to the
middle of the scale.
Recency error is the rater’s tendency to allow more recent incidents (either effective or
ineffective) of employee behavior to carry too much weight in evaluation of performance over an
entire rating period.
This can be extreme on both ends of the spectrum.  Either an employee just finishing a major
project successfully or an employee may have had a negative incident right before the
performance appraisal process and it is on the forefront of the manager’s thoughts about that
employee.
It is for this reason that keeping accurate records of performance throughout the year to refer
back to during performance appraisal time is so important.
Primacy error is the rater’s tendency to allow earlier incidents (either effective or ineffective) of
employee behavior to carry too much weight in evaluation of performance over an entire rating
period.
A mistake or bias that can occur in evaluating an individual's performance where they are
consistently rated based on the evaluator's overall impression, rather than on their actual
performance in various categories. Human resource professionals evaluating employees of a
business need to be aware of the halo error and correct for it.

What should be rated??

 Quality – Perfectionism .
 Quantity – Amount produced expressed in monetary terms.
 Timeliness – whether the target is achieved in the stipulated time frame.
 Cost effectiveness – in terms of using the resources.
 Need for supervision – the extent to which supervision is required.
 Inter personal relationship – extent to which I – P is promoted.

Methods of Performance Appraisal

Basically PfA Methods are classified in to two.
They are :
a) Past Oriented Methods
b) Future Oriented Methods.
 Methods of PfA
Past Oriented Future Oriented
 Ra ting Sca les  M.B.O
 Checklists  360 degree Appra isa l.
 Cost Accounting Methods  Psychologica l
 Essa y Method Appra isa l
 BARS
 BOS
 CIT

Merit Rating
Advantages:

 Helps in correct placement of workers.

 Helps in guiding and correcting employees.

 Helps the employee to know where they stand in terms of performance.

 Consequently it motivates to perform.

 Used as a sound basic to effect promotions, rewards etc.

 Helps to design a very good training programme.

 If done systematically and scientifically, will prevent grievances and build in confidence.
Disadvantages:-

 Appraisers were reluctant to appraise.

 Inadequate follow up.

 Became obsolete.

 Mainly concerned with the assessment of traits.

For Example:

A supervisor is : Inspiring, Favourable, Indifferent, Unfavourable, Repellent

 No analysis done.

 Focus is on past , what matters is future.

 Trait varies from person to person and from situation to situation.

Rating Scales

Performance appraisal method that combines elements of the traditional rating scale and critical

incident methods; various performance levels are shown along a scale with each described in
terms of an employee's specific job behavior. The important dimensions that makes up job are
identified and further scales are determined. Each factor will be further rates against a five point
scale. The scaling levels may change. All the column totals are added and then a final score is
arrived at, which in fact turns out to be the total performance score of the employee.

Effective rating scales use descriptors with clearly understood measures, such as frequency.
Scales that rely on subjective descriptors of quality, such as fair, good or excellent, are less
effective because the single adjective does not contain enough information on what criteria are
indicated at each of these points on the scale.
 Rating Scale

Total Score

Checklists usually offer a yes/no format in relation to student demonstration of specific criteria.

This is similar to a light switch; the light is either on or off. They may be used to record
observations of an individual, a group or a whole class.

Is the employee really interested in the job? Yes No

Is his or her attendance satisfactory? Yes No
Does he or she obey orders? Yes No
Does he or she co operate with workers? Yes No
Has he or she got adequate knowledge? Yes No
Does he or she shirk responsibility Yes No

Weighted checklist - The above evaluation being conducted by the immediate supervisor
and further they send the filled in check list to the HJR department for further processing.
Such a Checklists to which the HR department has assigned values or weights based on the
descriptive statements and also by considering the effective and ineffective behavior is
called as a weighted checklist. The value of each question may be weighted equally or
certain questions may be weighted more heavily than others.
Advantages and Disadvantages of Weighted Checklist:
I. This method help the manager in evaluation of the performance of the employee.

II. The rater may be biased in distinguishing the positive and negative questions. He may assign
biased weights to the questions.

III. This method also is expensive and time consuming.

IV. It becomes difficult for the manager to assemble, analyse and weigh a number of statements
about the employee’s characteristics, contributions and behaviours.

Critical Incident Method

Critical incident is an event that has a significant effect, either positive or negative, on task
performance or user satisfaction, thus affecting usability. The critical incidents for performance
appraisal is a method in which the manager writes down positive and negative performance
behaviour of employees throughout the performance period. Critical incident is a method used
for many sectors.

Critical incident method-Recording of events by appraiser. An incident is critical when it

illustrates what the employers has done or failed to do. The critical incidents for performance
appraisal are a method in which the manager writes down positive and negative performance
behaviour of employees throughout the performance period.

Each employee will be evaluated as such and one’s performance appraisal will be based on the
logs that are put in the evaluation form.

The manager maintains logs on each employee, whereby he periodically records critical
incidents of the workers behaviour. At the end of the rating period, these recorded critical
incidents are used in the evaluation of the workers’ performance. The critical incidents file of
performance appraisal is a form of documentation that reflects all data about employee
performances.

Disadvantages of Critical Incident:

This method suffers however from the following limitations:
I. Critical incidents technique of evaluation is applied to evaluate the performance of superiors
rather than of peers of subordinates.

II. Negative incidents may be more noticeable than positive incidents.

III. It results in very close supervision which may not be liked by the employee.

IV. The recording of incidents may be a chore for the manager concerned, who may be too busy
or forget to do it.

V. The supervisors have a tendency to unload a series of complaints about incidents during an
annual performance review session.

There are positive and negative incidents

 A front office executive always smiles and greets the customers.

 Always argue with supervisors for unjustifiable reasons.
 Refuses to accept instructions even after detailed discussions.
 Eventhough in a team, person is not at all cooperative.

Behaviourally Anchored Rating Scales

This method used to describe a performance rating that focused on specific behaviours or sets as
indicators of effective or ineffective performance. It is a combination of the rating scale and
critical incident techniques of employee performance evaluation. This method used to describe a
performance rating that focused on specific behaviours or sets as indicators of effective or
ineffective performance.

It is a combination of the rating scale and critical incident techniques of employee performance
evaluation. In psychology research on behaviourism, Behaviourally Anchored Rating Scales
(BARS) are scales used to report performance.

BARS are normally presented vertically with scale points ranging from five to nine. It is an
appraisal method that aims to combine the benefits of narratives, critical incident incidents, and
quantified ratings by anchoring a quantified scale with specific narrative examples of good or
poor performance.
  Also called as Behavioural Expectation Scales.
 Rating scales whose scale points are determined by statements of effective and
ineffective behaviour ranging from the least to the most effective.

Steps in developing a BARS

 Identify the important dimensions that make up effective performance.
 Identify the critical incidents.
 Retranslation.
 Rating the level of performance.
 Pilot Testing.

Assessment Centres

Assessment centres were created in World War II to select officers and are still commonly used
in military recruitment today. Examples include the Admiralty Interview Board of the Royal
Navy and the War Office Selection Board of the British Army. In modern times, the German
Army introduced assessment techniques for selecting its officers in the 1930s.

Business entities in U.S & U.K in 1943, also called as Executive training centers.
It is a place where managers are evaluated over a period of time , say one to three days, by
observing ( and later evaluating) their behavior across a series of select exercises or work
samples. Tested on various skills related to Communication, Stress Management, Mental
alertness, Creativity, Decision Making, Assertiveness, Self Confidence etc.

a) The HLL Training Academy

b) Tata Group of companies
c) Eicher Motors
d) Toyota – Bengaluru

Management by Objectives

 Peter F Drucker – 1954 – Published in his book : “The Practice Of Management”.

 Other names – Appraisal by Results & Joint Target setting.

Based on certain assumptions:
a) People perform better when they know what is expected of them and can relate their
personal goals to that of organizational goals.
b) People are interested in goal setting process and in evaluating their performance against
the targets.
Definition:

Management by objectives or results was introduced by R Drucker in 1954. Drucker in The

Practice of Management used this term and recognised the need of self-set goals. Since then it
has become very popular as a method of planning, setting standards, motivating and appraising
performance o/e employees.The concept of MBO incorporates the better parts of the different
theories of motivation. It recognises Maslow’s Self-fulfilment need. It is based on McGregor’s
theory Y. It also honours Herzberg’s motivational factors of achievement, recognition,
challenging work and responsibility. It also accepts the concept that people prefer to be assessed
according to criteria or standards which they feel are realistic and reasonable. Under modern
democratic managerial style, employees, are themselves required to appraise or evaluate their
performance, i.e., through self-appraisal studies and the manager or leader is merely a guide or
his adviser enabling the employee to rate his merits. Hence, merit rating by the superior is now
replaced by self-appraisal studies. MBO is the best device for employee appraisal.

MBO is a process in which managers/employees set objectives for the employee, periodically
evaluate the performance, and reward according to the result. MBO focuses attention on what
must be accomplished (goals) rather than how it is to be accomplished (methods).MBO is a
process in which managers/employees set objectives for the employee, periodically evaluate the
performance, and reward according to the result. MBO focuses attention on what must be
accomplished (goals) rather than how it is to be accomplished (methods).Management by
Objectives (MBO) is a process of agreeing upon objectives within an organization so that
management and employees agree to the objectives and understand what they are in the
organization.

The term “management by objectives” was first popularized by Peter Drucker in his 1954 book
‘The Practice of Management’. 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 fulfill their responsibilities.
Features and Advantages:
The principle behind Management by Objectives (MBO) is basically for employees to have
clarity of the roles and responsibilities expected of them. They then understand the objectives
they must do and the overall achievement of the organization. They also help with the personal
goals of each employee.

Some of the important features and advantages of MBO are:

1. Motivation:
Involving employees in the whole process of goal setting and increasing employee empowerment
increases employee job satisfaction and commitment.

2. Better Communication and Coordination:

Frequent reviews and interactions between superiors and subordinates helps to maintain
harmonious relationships within the enterprise and also solve many problems faced during the
period.

3. Clarity of goals:
4. Subordinates have a higher commitment to objectives that they set themselves than those
imposed on them by their managers.
5. Managers can ensure that objectives of the subordinates are linked to the organisation’s
objectives.

M.B.O is “a process where by the superior and the subordinate of the organization jointly
identify its common goals, define each individuals major areas of responsibility in terms of
results expected from him, and use these measures as a guide for operating the unit and also in
assessing the contribution of each of its members.”

 Cascading of organizational goals and objectives.

 Specific objectives for each member.
 Participative decision making.
 Explicit time period.
 Performance evaluation & feedback.
 Superiors Subordinates

Establish Long Term

Goals (SMART PLANS)

Establish performance
Review & Control objectives

Appraise Results

Internal Environment

Limitations:
There are several limitations to the assumptive base underlying the impact of managing by
objectives, including:
1. It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.

2. It underemphasizes the importance of the environment or context in which the goals are set.
That context includes everything from the availability and quality of resources, to relative buy-in
by leadership and stakeholders.

As an example of the influence of management buy-in as a contextual influencer, in a 1991,

comprehensive review of thirty years of research on the impact of Management by Objectives,
Robert Rodgers and John Hunter concluded that companies whose CEOs demonstrated high
commitment to MBO showed, on average, a 56% gain in productivity.

Companies with CEOs who showed low commitment only saw a 6% gain in productivity.

3. Companies evaluated their employees by comparing them with the “ideal” employee. Trait

appraisal only looks at what employees should be, not at what they should do.
Cost Accounting Method
 Evaluating performance in terms of monetory returns from the employee and the cost
associated for maintaining the employee.
 COST BENEFIT Relationship.

Essay Method
This method asked managers/supervisors to describe strengths and weaknesses of an employee’s
behaviour. Essay evaluation is a non- quantitative technique. This method usually use with the
graphic rating scale method.

This method asked managers/supervisors to describe strengths and weaknesses of an employee’s

behaviour. Essay evaluation is a non-quantitative technique. This method usually use with the
graphic rating scale method.

Input of Information Sources:

a. Job knowledge and potential of the employee;

b. Employee’s understanding of the company’s programs, policies, objectives, etc.;

c. The employee’s relations with co-workers and superiors;

d. The employee’s general planning, organizing and controlling ability;

e. The attitudes and perceptions of the employee, in general.

Disadvantages of Essay Evaluation:

i. Manager/supervisor may write a biased essay.

ii. A busy rater may write the essay hurriedly without properly assessing the actual performance
of the worker.

iii. Apart from that, rater takes a long time, this becomes uneconomical from the view point of
the firm, because the time of rater is costly.
iv. Some evaluators may be poor in writing essays on employee performance. Others may be
superficial in explanation and use flowery language which may not reflect the actual
performance of the employee.

Detailed Description of the following

a) Over all impression about the performance.
b) Promotability of the employee
c) Jobs that currently pursuing
d) SW of employee
e) T & D assistance if required or not.

Paired Comparison Methods

Paired comparison analysis is a good way of weighing up the relative importance of options. A
range of plausible options is listed. Each option is compared against each of the other options.
The results are tallied and the option with the highest score is the preferred option. Paired
comparison analysis is a good way of weighing up the relative importance of options.
Advantages and Disadvantages of Paired Comparison Analysis:
a. It is useful where priorities are not clear.
b. It is particularly useful where you do not have objective data to base this on.
c. It helps you to set priorities where there are conflicting demands on your resources.
d. This makes it easy to choose the most important problem to solve, or select the solution that
will give you the greatest advantage.

Muneer Ansal Swathy Yadu Dhinsiya

No of comparisons = N(N-1)/2

N- No: of employees to be compared.

Suppose there are ten employees, then what will be the number of comparisons?

Graphic Rating Scales:

The Rating Scale is a form on which the manager simply checks off the employee’s level of
performance. This is the oldest and most widely method used for performance appraisal. The
Rating Scale is a form on which the manager simply checks off the employee’s level of
performance.

This is the oldest and most widely method used for performance appraisal. The scales may
specify five points, so a factor such as job knowledge might be rated 1 (poorly informed about
work duties) to 5 (has complete mastery of all phases of the job).

Content of Appraisal:
a. Quantity of work. Volume of work under normal working conditions
b. Quality of work. Neatness, thoroughness and accuracy of work knowledge of job.
c. Dependability. Conscientious, thorough, reliable, accurate, with respect to attendance, relief,
lunch breaks, etc.
d. Judgment
e. Attitude exhibits enthusiasm and cooperativeness on the job
f. Cooperation willingness and ability to work with others to produce desired goals.
g. Initiative.

360 Degree Performance Appraisal:

360 Degree Feedback is a system or process in which employees receive confidential,
anonymous feedback from the people who work around them.

Who should conduct 360 degree performance appraisal?

a. Subordinates.

b. Peers.

c. Managers (i.e., superior).

d. Team members.

e. Customers.

f. Suppliers/vendors.
g. Anyone who comes into contact with the employee and can provide valuable insights and
information.

What’s 360 degree measures?

a. 360 degree measures behaviours and competencies.

b. 360 degree addresses skills such as listening, planning, and goal-setting.

c. 360 degree focuses on subjective areas such as teamwork, character, and leadership
effectiveness.

d. 360 degree provide feedback on how others perceive an employee.

360 degree appraisal has four components:

a. Self appraisal

b. Subordinate’s appraisal

c. Peer appraisal.

d. Superior’s appraisal

360 degree appraisal has four integral components:

1. Self appraisal

2. Superior’s appraisal

3. Subordinate’s appraisal

4. Peer appraisal.

Self appraisal gives a chance to the employee to look at his/her strength and weaknesses, his
achievements, and judge his own performance. Superior’s appraisal forms the traditional part of
the 360 degree performance appraisal where the employees’ responsibilities and actual
performance is rated by the superior.
Subordinates appraisal gives a chance to judge the employee on the parameters like
communication and motivating abilities, superior’s ability to delegate the work, leadership
qualities etc. Also known as internal customers, the correct feedback given by peers can help to
find employees’ abilities to work in a team,-co-operation and sensitivity towards others.

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
behavior and performance. It provides a “360 degree review” of the employees’ performance
and is considered to be one of the most credible performance appraisal methods.

360 degree performance 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.

A 360 degree appraisal is generally found more suitable for the managers as it helps to assess
their leadership and managing styles. This technique is being effectively used across the globe
for performance appraisals. Some of the organizations following it are Wipro, Infosys, and
Reliance Industries etc.

Use of appraisal Data

 Widely used in TNA.

 Remuneration administration.
 To effect Promotions
  To decide on pay rise
 To confirm services of probationary employees.
 Inter personal exercise.
 Success of Basic HR Functions.

Performance Interview
 A review session by the superior .
 Pit falls are identified and instructions are given to the ratee’s on how to improve.
 Well performing behaviour will be recognised.
Types of feedback Interviews
a) Tell & Sell.
b) Tell & Listen.
c) Problem Solving.

Tell & Sell

1. Supervisor persua des employee to cha nge
in a prescribed wa y.
2. Employees sees how cha nged beha vior will
be of grea t benefit.
Tell & Listen
1. Supervisor covers strengths/weaknesses for first
half
2. Solicits employee’s feelings about comments
3. Deal with disagreement, non-defensively
4. Negotiate future concrete objectives
The problem Solving Interview
1. Discuss strengths and weaknesses since last review.
2. Explore feelings of sub-ordinate.
3. Listening, accepting, and responding are essential.
4. Stimulate growth (performance) job.
5. Discuss problems, needs, innovations, satisfactions and dissatisfactions since last review.
6. Listen and respond with goal of helping person and productivity.

The Philips Model of Potential Appraisal

(Business Today Jan. 7 – 12 , 1996.)

H
I
G
H

L
O
W
LOW HIGH

Performance Management –PfM is defined as a Strategic and Integrated approach to delivering

sustained success to organizations by improving the performance of the people who work in
them and by developing the capabilities of teams and individual contributions.

(Armstrong & Baron 1998)