PERFORMANCE APPRAISAL

Once the employee has been selected, trained and motivated, he is then
appraised for his performance, Performance appraisal is the step where the management finds
out how effective it has been at hiring and placing employees. If any problems identified,
steps are taken to communicate with the employee and to remedy them. A "Performance
appraisal" is a process of evaluating an employee’s performance of a job in terms of its
requirements. Heyel observes; "It is the process of evaluating the performance and
qualifications of the employees in terms of the requirements of the job for which he is
employed, for purposes of administration including placements, selection for promotions,
providing financial rewards and other actions which require differential treatment among the
members of a group as distinguished from actions affecting all members equally."
Individually and collectively, it is a part of all the other staffing processes, via. Recruitment,
selection, placement and indoctrination.

Employee appraisal techniques are said to have been used for the first time
during the First World War, when, at instance of Walter Dill Scott, the US Amy adopted the
"Man-to-Man" rating system for evaluating military personnel. During the 1920-30 period,
rational wage structures for hourly paid workers were adopted in industrial units under this
system the policy of giving grade wage increments on the basis of merit was accepted. These
early employee plans were called merit rating programmes, which continued to be so called
up to mid-fifties. By then, most of these plans were of the rating-scale type, where emphasis
was given to factors, degrees and points. In the early fifties, however, attention began to be
devoted to the performance appraisal of technical, professional and managerial personnel.
Since then, as a result of experiments and a great deal of study, the philosophy of
performance appraisal has undergone tremendous changes. Consequently, a change has also
taken place in terminology used. Now, the older phrase merit ratings largely restricted to the
rating of hourly paid employees, and is used frequently in developing criteria for salary
adjustments, promotions, transfers, etc. The

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later phrase, personnel appraisal, places emphasis on the development of the individual as
and widely used to evaluate technical, professional and managerial personnel

The systematic assessment of employee’s performance is a comparatively recent

development in India. In 1960's a study was conducted and at that time only few units used
the systematic appraisal system. A survey in 1976 done by Prof Malthi Bolar,jit was revealed
that performance appraisal continues to be used in a large number of organizations of
controlling employees rather than for developing them. This is because of a narrow
understanding of the potential scope of the appraisal systems, unimaginative personnel
managers and lack of commitment from top management to the development of human
resources

In later years, in a few progressive organizations, however, the performance appraisal

system has moved from the personality, behavioural traits approach to that of linking up
performance with either goal setting or management by objectives. In 1976, National
productivity council set up a team of experts to study the possibility of introducing MBO in
Indian industries in the private and public sector. NPC team highlighted the two prerequisites
for the success of MBO programme. There are (a) firm commitment of top management to
the philosophy and (b) an outside advisor and the initial period to reconcile the differences
between managers at various levels regarding goals, standards, priorities etc.

In this decade the companies have understood the importance of performance appraisal in
motivating the employees. Today performance appraisal system is used as precautionary
measure rather than remedial measure.

CONCEPT OF PERFORMANCE APPRAISAL

Appraisal is the evaluation of worth, quality or merit. In the organizational context

Performance Appraisal is a systematic evaluation of personnel by superiors or others

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familiar with their performance. Performance Appraisal is also described s merit rating in
which one individual is ranked as better or worse in comparison to others. The basic purpose
in this merit rating is to ascertain an employee’s eligibility for promotion However,
Performance Appraisal is more comprehensive term for such activities because its use
extends beyond ascertaining eligibility for promotion

A formal definition of Performance Appraisal is as follows

Performance Appraisal is the process of evaluating the performance and

qualifications of the employees in terms of the requirements of the job for which he is
employed, for the purpose of administration including placement, selection for promotion,
providing financial rewards and other actions which require differential treatment among the
members of a group as distinguished from actions affecting all members equally

Beach has defined Performance Appraisal as follows "Performance Appraisal is the

systematic evaluation of the individual with regards to his performance on the job and his
potential for development”

Thus Performance Appraisal is a systematic and objective way of judging the

relative worth or ability of an employee in performing his job. It emphasizes on two aspects:
Systematic and Objective. The appraisal is systematic, when it evaluates all performance
such an appraisal is taken periodically according to plan; it is not left to chance. Thus both
ratters and ratters know the system of Performance Appraisal and its timings. Appraisal has
objectivity also. Its essential features are that it attempts to accurate measurement by trying
to eliminate human biases and prejudices.

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Objectives of Performance Appraisal

Review of organisational practices shows that organisations undertake performance

Appraisal exercises to meet certain objectives which are in forms of salary increase
promotion, identifying training and development needs, providing feedback to employee’s
organisational practices shows that organizations undertake Performance and putting
pressure on employees for better performance

 Salary increase: Performance Appraisal plays a major role in making decision about
salary increase. Normally salary increase of an employee depends on how he is
performing his job. There is a continuous evaluation of his performance cither
formally or informally. In large organizations, formal Performance Appraisal has
been undertaken. This may disclose how well an employee is performing ad how
much he should be compensated by the way of salary increase.
 Promotion: Performance Appraisal plays significant role where promotion I based on
merit. Most of the organizations often use a combination of merit and seniority for
promotion. Similarly, Performance Appraisal can be used for transfer, demotion and
discharge of an employee.
 Training and Development: Performance Appraisal tries to identify the strengths
and weaknesses of an employee on his present job. This information can be used for
devising training and development programme appropriate for overcoming the
weaknesses of the employee. In fact many organizations use Performance Appraisal
as means of identifying training needs of an employee
 Feedback: Performance Appraisal provides feedback to employees about their
performance. It tells them where they stand. A person works better when he knows
how he is working, how his efforts are contributing to the achievement of
organizational objectives. When the person gets feedback about his performance, he
can relate his work to the organizational objectives.
 Pressure on employees: Performance Appraisal puts a sort of pressure on employees
for better performance. If the employees are conscious that they are

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being appraised in respect of certain factors and their future largely depends on such
appraisal, they tend to have positive and acceptable behaviour in their respect Thus appraisal
can work automatically as control device.

Principles and Importance of Performance appraisal

Performance appraisal is a very significant activity in most of organisation provides data

about past present and expected performance of employee’s data are highly useful in taking
decisions in selecting, training and development, promotion etc.

An effective performance appraisal should fulfil the following principles

1. The employees immediate ratter should make the performance appraisal as

he/she knows thoroughly the employees working under his/her supervision

2. The ratter should be aware of the significance and the value of the systematic
performance appraisal.

3. The ratter should have the skill and enthusiasm for the employee’s
performance appraisal

4. The appraiser should have a clear understanding of the appraisal tool that is
being used

5. The frequency of performance appraisal should be decided beforehand, that is

whether quarterly, half yearly or annually

6. All employees in a given department should be appraised at the same time

7. To avoid hasty appraisal, the time interval should not be short

8. The raters should frequently check the appraisals for the purpose of knowing
thoroughness of the job

9. The personnel management department should make the final check by using
past appraisals as a guide to know any usual changes in the appraisals that
occur

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Approaches to Performance appraisal

Generally there are three approaches to performance appraisal, they are

 A causal, unsystematic and often haphazard appraisal. This method was used in the
past, now a more formal method is used where the main basis being seniority or
quantitative measures of quantity and quality of output for the rank and file personnel.

 The traditional and highly systematic measurement of employee characteristics,

employee contributions, or both. It evaluates all the performances in the same
manner, utilizing the same approach, so that the ratings obtained of separate
personnel are comparable

 The behavioural approach: According to this system, the superior is placed in the
place of judgement. He judges and criticizes the personnel worth of his men. Here,
emphasis is laid upon providing mutual goal setting and appraisal of progress by both
appraiser and appraise

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METHODS OF PERFORMANCE APPRAISAL
Performance appraisal method can be classified into two categories
1. PAST ORIENTED METHODS
2. FUTURE ORIENTED METHODS

METHODS RATING SCALE

PAST ORIENTED
CHECKLISTS

FORCED CHOICE METHOD

FORCED DISTRIBUTION METHOD

CRITICAL INCIDENT METHOD

BEHAVIOURLLY ANCHORED SCALES

FIELD REVIEW METHOD

PERFORMANCE TESTES AND OBSERVATIONS
APPRAISAL
ANNUAL CONFIDENTIAL REPORTS

ESSAY METHOD

COST ACCOUNTING APPROACH

COMPARATIVE EVALUATION APPROACH

MANAGEMENT BY OBJECTIVES
FUTURE ORIENTED

360-DEGREE APPRAISAL

PSYCHOLOGY

ASSESSMENT CENTRES

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PAST ORIENTED APPRAISALS

RATING SCALES:

This is a simplest and most popular technique for appraising employee performance.
The rating scale consists of several numerical scales; each represents a job related criterion
such as dependability, initiative, output, attendance, attitude, co-operation, and the like. Each
scales ranges from excellent to poor. The rater checks the appropriate performance level on
each criterion, and then computes the employee's total numerical scores. Rating scales offer
the advantages of adaptability, relatively easy to use and low cost. The disadvantages of this
method are several. The rater's biases are likely to influence evaluation, and the biases are
particularly pronounced on subjective criteria such as co-operation, attitude, and initiative

CHECKLIST

Under this method, a checklists of statements on the traits of the employee and his or
her job is prepared in two columns-viz., a YES' column and 'NO' column. The rater should
do is tick the "YES' column if the answer to the statement is positive and in column 'NO if
the answer is negative. After ticking off against each item, the rater forwards the list to the
HR department where actual assessment of the employee takes place. The HR department
assigns certain points to each YES' ticked. Depending up on the number of 'YES' the total
score is arrived at. The advantages of checklist are economy, ease of administration, limited
training of rater, and standardization. The disadvantages include susceptibility to rater's
biases, use of personality criteria instead of performance criteria, misinterpretation of
checklist items, and the use of improper weights by the HR department

FORCED CHOICE METHOD

In this the rater is given a series of statements about an employee. These statements
are arranged in blocks of two or more, and the rater indicates which statement

40
is most or least descriptive of the employee. This approach is known as the force choice
method because the rater is forced to select statements which are readymade. The advantage
of this method is the absence of personal bias in rating. The disadvantage is that the
statements may not be properly framed- they may not be precisely descriptive of the ratee's
traits.

FORCED DISTRIBUTION METHOD

This method operates under an assumption that the employee performance level
conforms to normal statistical distribution. Generally, it is assumed that employee
performance levels conform to a bell-shaped curve. Major weakness of the forced
distribution lies in the assumption that employee performance level always conform to a
normal distribution. In organizations that have done a good job of selecting and retaining
only the good performer, the use of forced distribution approach would be unrealistic, as well
as possibly destructive to the employee morale. One merit of this approach is that it seeks to
eliminate the error of leniency

CRITICAL INCIDENTS METHOD

This method focuses on certain critical behaviours of an employee that make

all the difference between effective and non-effective performance of a job. Such incidents
are recorded by the superiors as and when they occur.

The advantages of critical incident method are:

1) Evaluation is based on actual job behaviour.

2) Giving job related feedback to the rate is easy

3) Reduces regency bias, if raters record incidents throughout the rating period.

The disadvantages include:

1) Negative incidents are generally more noticeable than positive ones

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2) The recording of incidents is a chore to the supervisor and may be put off and easily
forgotten

3) Overly close supervision may result

4) Managers may unload a series of complaint about incidents during an annual

performance review appear as a punishment the rate. More appropriately, the
management should use incidents of poor performance as opportunities for immediate
training and counselling session. The feedback may be too much at one time and thus

BEHAVIOURALLY ANCHORED RATING SCALES (BARS)

These are rating scales whose scale points are determined by statements of effective
and ineffective behaviours. They are said to be behaviourally anchored in t the scales
represent a range of descriptive statements of behaviour varying from least to most effective.
BARS have the following feature:

I. Areas of performance to be evaluated are identified and defined by the people

who will use the scales

2. The scales are anchored by description of actual job behaviour that,

supervisors agree, represent specific levels of performance. The result is a set
of rating scales in which both dimensions and anchors are precisely defined.

3. All dimensions of performance to be evaluated are based on observable

behaviours and are relevant to the job being evaluated since BARS are tailor-
made for the job.

4. Since the raters who will actually use the scales are actively involved in the
improvement process, they are more likely to be committed to the final
product.

FIELD REVIEW METHOD

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This is appraisal by someone outside the assesses own department usually someone from the
corporate office or HR department. The outsider reviews employee records and holds
interviews with the ratee and his or her superior. The method is

The first step is to establish the goals each subordinate is to attain. In some organizations,
superiors and subordinates work together to establish goals. In others, superiors establish
goals for subordinates. These goals can then by used to evaluate employee performance.

The second step involves setting performance standards for the subordinates in a previously
arranged time periods. As, subordinates perform, they know fairly well what there is to do,
what has been done, and what remains to be done.

In the third step, the actual level of goal attainment is compared with the goals agreed upon.
The evaluator explores reasons for the goals that were not met and for the goals that were
exceeded. This step helps determine possible training needs.

The final step involves establishing new goals and, possibly, new strategies for goals not
previously attained. At this point subordinate and superior involvement in goal setting may
change. Subordinates who successfully reach the established goals may be allowed to
participate more in the goal setting process the next time.

One comment made against the approach is that it is not applicable to all jobs in all
organization. Jobs with little or no flexibility, such as assembly-line work, are not compatible
with MBO

The MBO process seems to most useful with managerial personal and employees who have a
fairly wide range of flexibility and self-control in their jobs. Besides, when the results of an

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MBO system are to be used to allocate organizational rewards, employees may be less likely
to establish challenging goals- goals they are confident that they can accomplish

PSYCHOLOGICAL APPRAISALS

This appraisal normally consists of in-depth interviews, psychological tests,

discussions with supervisors and a review of other evaluations. The psychologists then writes
an evaluation of the employee's intellectual, emotional, motivational and other related
characteristics that suggest individual potential and may predict future performance. The
evaluation by the psychologist may be for a specific job opening for which the person being
considered or it may be a global assessment of his or her future potential. From these
evaluations, placement and development decisions may be made to shape the person's career.
The quality of the appraisal depends largely on the skills of the psychologists.

ASSESSMENT CENTRES

Assessment centres is a central location where managers may come together

to have their participation in job related exercises evaluated by trained observers. Assesses
are requested to participate in in-basket exercises, work groups, computer simulations, role
playing and other similar activities which requires the same attributes for successful
performance, as in the actual job. After recording their observation of ratee behaviour, the
raters meet to discuss these observations. The decision regarding the performance of each
assesse is based upon the discussion of observations. Self-appraisal and peer evaluation are
also thrown in for final rating.

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The problem with assessment centres is their cost. Not only are the assesses away from their
jobs while the company pays for their travel and lodging, but the evaluators are often
company managers who are assigned to the assessment centre for short durations.

The approach also involves real hazards. One of the most obvious is the examination- taking
syndrome. Solid performers in day-to-day operations feel suffocated in the

simulated environment. Another drawback is its potential adverse effect on those not selected
to participate in the exercise.

Employee who receive a poor report from the centre may react negative ways. Ideally, a
rejected employee would return to his or her former job, satisfied that he or she would not be
promoted to a job he or she could not handle. However, a good performer at one level may
leave the organization in order to remove the bad assessment report from his or her work
recode. Thus, a poor record can demoralise an employee who was once an asset

360-DEGREE FEEDBACK

It is technique where multiple raters are involved in evaluating performance, the technique is
called 360-Degree appraisal. It is systematic collection performance data on an individual or
group, derived from a number of stakeholders- the stakeholders being the immediate
supervisors, team members, customers, peer and self.

The 360-degree appraisal provides a broader perspective about an employee's

performance. In addition, the technique facilitates greater development of the employee. It
enables an employee to compare his or her perception about self with perceptions of others. It
makes the employee feel much more accountable to his or her internal or external customers.
By design, the 360- degree appraisal is effective in identifying and measuring interpersonal
skills, customer satisfaction, and team-building skills here are drawbacks in 360-degree
feedback. Receiving feedback on performance from multiple sources can be intimidating.
Further, firms that use technique take long time on selecting the rater, designing

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questionnaires, and analysing data. In addition multiple raters are less adept at providing a
balanced an objective feedback than the supervisors who are sought to be replaced

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Performance appraisal system at HLL Life Care limited

The performance management system at HLL Life Care limited is rudimentary and it is not
well planned. There is a system of performance appraisal and the department head does the
appraisal of their employees. The employees are not made to participate in the performance
expectation setting process.

Executive appraisal at HLL Life Care Limited

The superior of the executives does the appraisal and self-appraisal is used. A five point scale
is used for the appraisal of executives- Outstanding, Very good, good, average, below
average and Poor. There are various chief factors used to appraise the executives then a
subjective analysis of the tasks assigned and the performance of the executives is appraised
by the controlling officer. The self-appraisal gives areas of improvement for the executives
and any specific training that the executive requires. It also includes any participation of the
employee in any social activity or developmental programmes. The controlling officer and
self-appraisal base the overall assessment on the total points scored by the employee in the
appraisal.

Supervisory appraisal at HLL Life Care Limited

The company has got its own supervisory appraisal form. The appraisal is mainly done for
promotion, probation, confirmation and increment .The supervisor may be appraised based
on the comments made by the assessment committee meeting, section head departmental
head, chairman of the committee and at last the final order is made by the General Manager
or Managing Director

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