What is Performance Appraisal – Meaning

Performance appraisal is a formal system that evaluates the quality of a worker’s

performance. The appraisal measures skills and accomplishments with reasonable accuracy
and uniformity. It provides a way to help identify areas for performance enhancement and
to help promote professional growth.

Role and Importance

In most organizations, appraisals are conducted only once per year. Organizations usually
conduct appraisals in order to improve organizational effectiveness by providing vital
information pertaining to the suitability and capability of its human resource.

Performance appraisal is usually conducted by the organizations for administrative and/or

developmental purposes.

The role and importance of performance appraisal in these areas is discussed below:

1. Human Resource Planning:

Performance appraisal generates significant, relevant, and useful information about the
promotability and the potential of employees. This information is used to assess the
organization’s internal supply of human resources and availability of managerial personnel
for succession planning.

2. Recruitment and Selection:

Evaluation made in performance appraisal can be used to find out the particular areas of
knowledge, skills, and experience possessed by successful performers. This information can
be used to review effectiveness of recruitment and selection procedures and practices so
that right type of candidates can be selected for the right job.

Problems of Performance Appraisal

The problems inherent in performance appraisal may be listed thus:

Judgment Errors:
People commit mistakes while evaluating people and their performance. Biases and
judgment errors of various kinds may spoil the show. Bias here refers to inaccurate
distortion of a measurement.

These are:

i. First Impressions (Primacy Effect):

The appraiser’s first impression of a candidate may colour his evaluation of all subsequent
behaviour. In the case of negative primacy effect, the employee may seem to do nothing
right; in the case of a positive primacy effect, the employee can do no wrong.

ii. Halo:

The halo error occurs when one aspect of the subordinate’s performance affects the rater’s
evaluation of other performance dimensions. If a worker has few absences, his supervisor
might give the worker a high rating in all other areas of work. Similarly, an employee might
be rated high on performance simply because he has a good dress sense and comes to
office punctually!

iii. Horn Effect:

The rater’s bias is in the other direction, where one negative quality of the employee is
being rated harshly. For example, the rate does not smile normally, so he cannot get along
with people!

iv. Leniency:

Depending on rater’s own mental make-up at the time of appraisal, raters may be rated very
strictly or very leniently. Appraisers generally find evaluating others difficult, especially
where negative ratings have to be given.

A professor might hesitate to fail a candidate when all other students have cleared the
examination. The leniency error can render an appraisal system ineffective. If everyone is to
be rated high, the system has not done anything to differentiate among employees.

v. Central Tendency:

An alternative to the leniency effect is the central tendency, which occurs when appraisers
rate all employees as average performers. For example, a professor, with a view to playing it
safe, might give a class grades nearly equal to B, regardless of the differences in individual
performance.
vi. Stereotyping:

Stereotyping is a mental picture that an individual holds about a person because of factors
like the person’s sex, age, religion and caste. By generalizing behaviour on the basis of such
blurred images, the rater grossly overestimates or underestimates a person’s performance.

For example, employees from rural areas might be rated poorly by raters having a
sophisticated urban background if they view rural background negatively.

vii. Recency Effect:

In this case, the rater gives greater weightage to recent occurrences than earlier
performance. For example, an excellent performance that may be six or seven months old is
conveniently forgotten while giving a poor rating to an employee’s performance which is
not so good in recent weeks.

Alternatively, the appraisal process may suffer due to a ‘spillover effect’, which takes place
when past performance influences present ratings.

viii. Poor Appraisal Forms:

The appraisal process might also be influenced by the following factors relating to the forms
that are used by raters:

1. The rating scale may be quite vague and unclear.

2. The rating form may ignore important aspects of job performance.

3. The rating form may contain additional, irrelevant performance dimensions.

4. The forms may be too long and complex.

ix. Lack of Rater Preparedness:

The raters may not be adequately trained to carry out performance appraisal activities. This
becomes a serious limitation when the technical competence of a rate is going to be
evaluated by a rater who has limited functional specialization in that area.

The raters may not have sufficient time to carry out appraisals systematically and conduct
thorough feedback sessions. Sometimes, the raters may not be competent to do the
evaluations owing to a poor self-image and lack of self-confidence. They may also get
confused if the objectives of appraisal are somewhat vague and unclear.
x. Ineffective Organizational Policies and Practices:

If the sincere appraisal effort put in by a rater is not suitably rewarded, the motivation to do
the job thoroughly declines. Sometimes, low ratings given by raters are viewed negatively
by management—as a sign of failure on part of rater or as an indication of employee
discontent.

So, most employees receive satisfactory ratings, despite poor performance. Normally, the
rater’s immediate supervisor must approve the ratings. However, in actual practice, this does
not happen. As a result the rater ‘goes off the hook’ and causes considerable damage to the
rating process.

Approaches of Performance Appraisal

Although potential uses of the performance appraisal system are many, very few
organizations seem to make effective utilization of the system. There is great degree of
variation in the approaches, design and use of performance appraisal system and also in the
formats.

In general, there are three approaches to performance appraisal practices/ procedures:

1. A Casual Approach:

This is an unsystematic use and often haphazard appraisal system which was frequently
used in the beginning and which has subsequently given place to more formal methods. It
has been largely based on seniority or quantitative standards of output for rank and file
employees.

2. A Traditional Approach:

This approach is highly systematic and takes into account the measurement of employee
characteristics and/or employee contribution (or both). In this system all employees are
rated in the same manner utilizing the same approach so that the rating of separate
personnel can be compared.

3. A Behavioural Approach:

This approach is based on the behavioural value of fundamental trust in the goodness,
capability and responsibility of human beings. It lays emphasis on providing mutual goal
setting and appraising of progress made by both the appraiser and the appraisee.

A systematic appraisal process is considered to be superior to a casual, intuitive and at times

haphazard evaluation. The fundamental value of systematic performance appraisal is that it
provides information of great assistance in making and enforcing administrative decisions
about such matters as promotions, pay increases, lay off and transfers.

It provides this information in advance of the time when it may be needed, thereby avoiding
spot judgement when a decision may be made. Moreover, the systematic approach provides
the information in a form that permits the making of comparisons’. Records established by
the systematic rating of personnel are of great value in backing up decisions that have been
challenged.

Another value of systematic appraisal lies in the fact that it serves to stimulate and guide
employee development through a comparison of actual performance with the approved
pattern. Not only appraisees but also appraisers benefit with better skills in judging and
helping personnel through systematic approach.