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Lecturer-1 (Introduction of Performance Appraisal )

Performance Appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does.

According to Flippo, a prominent personality in the field of Human resources, "performance appraisal is the systematic, periodic and an impartial rating of an employees excellence in the matters pertaining to his present job and his potential for a better job." Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future.

It is a powerful tool to calibrate, refine and reward the performance of the employee. It helps to analyze his achievements and evaluate his contribution towards the achievements of the overall organizational goals.

By focusing the attention on performance, performance appraisal goes to the heart of personnel management and reflects the management's interest in the progress of the employees.

Objectives Of Performance appraisal: To review the performance of the employees over a given period of time. To judge the gap between the actual and the desired performance. To help the management in exercising organizational control. Helps to strengthen the relationship and communication between superior subordinates and management employees. To diagnose the strengths and

weaknesses of the individuals so as to identify the training and development needs of the future. To provide feedback to the employees regarding their past performance. Provide information to assist in the other personal decisions in the organization. Provide clarity of the expectations and responsibilities of the functions to be performed by the employees. To judge the effectiveness of the other human resource functions of the

organization such as recruitment, selection, training and development. To reduce the grievances of the employees. PROCESS OF PERFORMANCE APPRAISAL 1.ESTABLISHING PERFORMANCE STANDARDS The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This

step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in measurable terms. In case the performance of the employee cannot be measured, great care should be taken to describe the standards.

2.COMMUNICATING THE STANDARDS Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization.

The employees should be informed and the standards should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated

to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators.


The most difficult part of the Performance appraisal process is


measuring the actual performance of the employees that is the work done by the employees during the specified period of time. It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work.



The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the employees from the standards set. The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the


organizational performance. It includes recalling, evaluating and analysis of data related to the employees performance.

5.DISCUSSING RESULTS The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of

problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees future performance. The purpose of the meeting should be to solve the problems faced and motivate the employees to perform better. 6.DECISION MAKING The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective


actions, or the related HR decisions like rewards, promotions, demotions, transfers etc.

Pre-requisites for Effective & Successful Performance Appraisal

The essentials of an effective performance system are as follows: Documentation means continuous noting and documenting the performance. It also helps the evaluators to give a proof


and the basis of their ratings. Standards / Goals the standards set should be clear, easy to understand, achievable, motivating, time bound and measurable. Practical and simple format - The appraisal format should be simple, clear, fair and objective. Long and complicated formats are time consuming, difficult to understand, and do not elicit much useful information.


Evaluation technique An appropriate evaluation technique should be selected; the appraisal system should be performance based and uniform. The criteria for

evaluation should be based on observable and measurable characteristics of the

behavior of the employee. Communication Communication is an indispensable part of the Performance appraisal process. The desired behavior or the expected results should be

communicated to the employees as well as


the evaluators. Communication also plays an important role in the review or feedback meeting. motivates Open the communication employees to system actively

participate in the appraisal process. Feedback The purpose of the feedback should be developmental rather than judgmental. To maintain its utility, timely feedback should be provided to the employees and the manner of giving

feedback should be such that it should have a motivating effect on the employees


future performance. Personal Bias Interpersonal

relationships can influence the evaluation and the decisions in the performance

appraisal process. Therefore, the evaluators should be trained to carry out the processes of appraisals without personal bias and effectively.


Challenges Of Performance Appraisal


organization and



various Of



Performance Appraisal in order to make a performance appraisal system effective and successful. The main Performance Appraisal challenges involved in the performance appraisal process are: Determining the evaluation criteria Identification of the appraisal criteria is one of the biggest problems faced by the

top management. The performance data to be considered for evaluation should be carefully selected. For the purpose of evaluation, the criteria selected should be in quantifiable or measurable terms Create a rating instrument The purpose of the Performance appraisal process is to judge the performance of the employees rather than the employee. The focus of the system should be on the development of the employees of the organization.


Lack of competence Top management should choose the raters or the evaluators carefully. They should have the required expertise and the knowledge to decide the criteria accurately. They should have the experience and the necessary training to carry out the appraisal process objectively. Errors in rating and evaluation Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait


influencing the evaluators rating for all other traits) etc. may creep in the appraisal process. Therefore the rater should exercise objectivity and fairness in evaluating and rating the performance of the employees. Resistance The appraisal process may face resistance from the employees and the trade unions for the fear of negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well


the process of appraisal. The standards should be clearly communicated and every employee should be made aware that what exactly is expected from him/her.


Purpose Of Performance Appraisal





practiced in 90% of the organisations worldwide. appraisal Self-appraisal also form a and part potential of the




Typically, Performance Appraisal is aimed at:


To review the performance of the employees over a given period of time. To judge the gap between the actual and the desired performance. To help the management in exercising organizational control. To diagnose the training and

development needs of the future.

Provide information to assist in the HR decisions like promotions, transfers etc.


Provide clarity of the expectations and responsibilities of the functions to be performed by the employees. To judge the effectiveness of the other human resource such functions as of the



selection, training and development. To reduce the grievances of the

employees. Helps to strengthen the relationship and communication subordinates between and superior



employees. According to a recent survey, the percentage of organisations (out of the total organisations surveyed i.e. 50) using performance appraisal for the various purposes are as shown in the diagram below:


The most significant reasons of using Performance appraisal are: Making payroll and compensation

decisions 80% Training and development needs 71% Identifying the gaps in desired and actual performance and its cause 76% Deciding future goals and course of action 42% Promotions, demotions and transfers


49% Other purposes 6% (including job analysis and providing superior support, assistance and counseling)


Performance Appraisals as Career Development Performance appraisal is a part of career mantra development. being The latest by


organizations across the world being "get paid according to what you contribute" the focus of the


organizations performance



to and


specifically to individual performance. Performance appraisal helps to rate the performance of the employees and evaluate the their contribution goals.



Performance appraisal as Career Development leads to the

recognition of the work done by the employees, many a times by the means of rewards and appreciation etc. It plays the role of the link


between the organization and the employees personal career goals.



part helps

of to and

Performance identify the

appraisal, hidden


potential of the individuals. Identifying these potential talents can help in preparing the individuals for higher responsibilities and positions in the future. The performance appraisal

process in itself is developmental in nature.


Performance appraisal is also closely linked to other HR processes like helps to identify the training and

development demotions, compensation

needs, changes etc. A

promotions, in the


communicated in a positive manner goes a long way to motivate the employees and helps to identify

individual career developmental plans. Based on the evaluation, employees can develop their career goals, achieve


new levels of competencies and chart their career progression. Performance appraisal encourages employees to

reinforce their strengths and overcome their weaknesses.



Traditional approach



appraisal has been used as just


a method for determining and justifying the salaries of the

employees. Than it began to be used a tool for determining

rewards (a rise in the pay) and punishments (a cut in the pay) for the past performance of the employees.





oriented approach which focused only on the past performance of the employees i.e. during a past


specified period of time. This approach did not consider the developmental aspects of the

employee performance i.e. his training and development

needs or career developmental possibilities. The primary concern of the traditional approach is to judge the performance of the organization as a whole by the past performances of its



Therefore, this approach is also called as the overall approach. In 1950s the performance

appraisal was recognized as a complete system in itself and the Modern Approach to performance appraisal was developed.

Performance Modern





approach development

to has



made the performance appraisal process more formal and

structured. Now, the performance appraisal is taken as a tool to identify employees better from performing others,

employees training needs, career development paths, rewards and bonuses and their promotions to the next levels.




continuous and periodic activity in


the organizations. The results of performance appraisals are used to take various other HR decisions like promotions, demotions, and outcomes. to

transfers, development, The modern

training reward


performance appraisals includes a feedback process that helps to strengthen between subordinates communication the relationships and improve the

superiors and








Performance appraisal is a future oriented approach in and is This as

developmental recognizes



individuals and focuses on their development. Performance Appraisal Feedback Performance appraisal process is

incomplete without the feedback given to


the employee about his appraisal and his performance. But the way of giving as well as receiving the feedback differs from person to person and their way of

handling and their outlook towards the issue.


Therefore, On the part of the person


receiving the feedback, the following points are important to be taken care of: The employee should have a positive attitude towards the feedback process He should listen to the suggestions of the appraiser calmly and try to

incorporate them in his plans. He should not hesitate to ask for the help of his superiors. Should have a co-operative attitude during the feedback meeting.


Dont judge the appraiser as a person. Should take the feedback objectively. Should not judge the appraiser as a person on the basis of the feedback.

On the part of the appraiser or the manager / person giving the feedback, the following points are to be taken care of: The appraiser should make the receiver feel comfortable during the feedback meeting. The appraiser should make it a two


way conversation i.e. let the employee speak. Listen to the employee and note his points, suggestions, problems etc. The appraiser should not adopt a

confrontational approach towards the meeting. The goal is not to criticize the employee. Provide a constructive feedback to the employee i.e. in a way which will

motivate him to perform better.


Have a positive attitude towards the process Try to understand the reasons of his failure. Be fair and objective Prepare yourself for what to say and how to say. Make the appraisal feedback meeting useful and productive for the

organization and the employee.


Balanced Scorecard




organisational in


employee appraisal

performance management approach

Performance the the

processes, measures


performance only on a few parameters like the action processes, results achieved or the financial measures etc. The

Balanced scorecard an approach given by Kaplan and Norton provides a


framework of various measures to ensure the complete and balanced view of the performance Balanced measures of the employees. on the

scorecard that




The balanced scorecard provides a list of measures that internal balance and the



measures with results, achievements and financial measures.


The two basic features of the balanced scorecard are: A balanced set of measures based on. the four perspectives of balanced

scorecard Linking the measures to Employee

Performance The four Perspectives recommended by Kaplan and Norton for the managers to collect information are: The financial measures The

financial measures include the results








share, return on investments and other economic measures as a result of the actions taken. The customers measures - These measures help to get on customer

satisfaction, the customers perspective about the organisation, customer

loyalty, acquiring new customers. The data can be and collected number of from the



complaints, the time taken to deliver the


products and services, improvement in quality etc. The internal business measures These are the measures related to the organizations internal processes which help to achieve It the customer the



infrastructure, the long term and short term goals and objectives, and



procedures, systems and the human resources.



innovation The


learning and the

perspective learning

innovation cover


organisations ability to learn, innovate and improve. They can be judged by employee competencies, skills value matrix, added and key the

revenue per employee.


Balanced Scorecard Approach to Measure Performance

The balanced scorecard focuses on the measures that drive the employee performance. The balanced scorecard provides a list of measures that balance the

organizations internal and process measures with results, achievements and financial measures. The two basic features of the balanced scorecard are: A balanced set of measures based on. the four perspectives of balanced scorecard


Linking the measures to Employee Performance

A balanced set of measures

Instead of relying on just one instrument or measure, using a balanced set of measures ensures that all the aspects of the employees performance are covered and provide relevant support for the decisions taken.

Therefore, it is necessary that the manager should be capable of observe and note the several instruments and measures simultaneously. The four perspectives given by


Kaplan and Norton are the financial measures, the customers perspective, the internal business perspectives and the innovation and learning perspectives.

For each perspective of the following things are measured: Objectives: the goals and the targets to be achieved Measures: the standards which will be used to measure the actual performance and the progress. Action plans: the initiatives taken and the course of action to be followed to achieve the objectives


Tie-In to Employee Performance

The balanced scorecard approach can be used and applied at both the individual and the organisational level. It provides a balanced approach to evaluate the employees performance (for the purpose of Performance appraisal) in a comprehensive manner rather than a partial view. In most of the organisations, the common practice of measuring the employee performance refers to only the comparison of their action plans and behaviours with the standards set i.e. without actually measuring the results of their actions like profits and increase in market share. This conventional practice can lead to the appraisal of most of


the employees without any or little progress towards achieving the goals and objectives of the organisation. Thus, the balanced scorecard gives the complete view of the employees and the organisational performance and helps to align the employee performance/action plans with the organisational goals. BENEFITS OF BALANCED SCORECARD

The benefits of the balanced scorecard approach in measuring performance are: Gives the complete picture of the employee as well as the organisational performance.


It guides users in determining the critical success factors and performance indicators. Strategic review or analysis of the organisational capabilities and performance. Focusing the whole organisation on the few key things needed to create breakthrough performance. Integrating and directing the performance and efforts from the lowest levels in the organisation to achieve excellent overall performance.

Traditional Methods of Performance Appraisal


1. ESSAY APPRAISAL METHOD This traditional form of appraisal, also known as "Free Form method" involves a description of the performance of an employee by his superior. The description is an evaluation of the performance of any individual based on the facts and often includes examples and evidences to support the information. A major drawback of the method is the inseparability of the bias of the evaluator.

2. STRAIGHT RANKING METHOD This is one of the oldest and simplest techniques of

performance appraisal. In this method, the appraiser ranks the employees from the best to the poorest on the basis of their overall performance. It is quite useful for a comparative evaluation.

3. PAIRED COMPARISON A better technique of comparison than the straight ranking method, this method compares each employee with all others in the group, one at a time. After all the comparisons on the basis of the overall comparisons, the employees are given the final rankings.


4. CRITICAL INCIDENTS METHODS In this method of Performance appraisal, the evaluator rates the employee on the basis of critical events and how the employee behaved during those incidents. It includes both negative and positive points. The drawback of this method is that the supervisor has to note down the critical incidents and the employee behaviour as and when they occur.

5. FIELD REVIEW In this method, a senior member of the HR department or a training officer discusses and interviews the supervisors to evaluate and rate their respective


subordinates. A major drawback of this method is that it is a very time consuming method. But this method helps to reduce the superiors personal bias.

6. CHECKLIST METHOD The rater is given a checklist of the descriptions of the behaviour of the employees on job. The checklist contains a list of statements on the basis of which the rater describes the on the job performance of the employees.

7. GRAPHIC RATING SCALE In this method, an employees quality and quantity of


work is assessed in a graphic scale indicating different degrees of a particular trait. The factors taken into consideration include both the personal characteristics and characteristics related to the on the job performance of the employees. For example a trait like Job Knowledge may be judged on the range of average, above average, outstanding or unsatisfactory.

8. FORCED DISTRIBUTION To eliminate the element of bias from the raters ratings, the evaluator is asked to distribute the employees in some fixed categories of ratings like on a normal distribution curve. The rater chooses the


appropriate fit for the categories on his own discretion.

Modern Methods of Performance Appraisal


An assessment centre typically involves the use of methods like social/informal events, tests and

exercises, assignments being given to a group of employees to assess their competencies to take higher responsibilities in the future. Generally,

employees are given an assignment similar to the job


they would be expected to perform if promoted. The trained evaluators observe and evaluate employees as they perform the assigned jobs and are evaluated on job related characteristics.



competencies centres capability, motivation, are





assessment intellectual capabilities,

interpersonal and


planning career

organizing etc.


assessment centres are also an effective way to determine the training and development needs of the targeted employees.






Behaviorally Anchored


Scales (BARS) is a

relatively new technique which combines the graphic rating scale and critical incidents method. It consists of predetermined critical areas of job performance or sets of behavioral statements describing important job performance qualities as good or bad (for eg. the qualities like inter personal relationships, adaptability and reliability, job knowledge etc). These statements are developed from critical incidents.

In this method, an employees actual job behaviour is


judged against the desired behaviour by recording and comparing the behaviour with BARS. Developing and practicing BARS requires expert knowledge.












organization. Human resource accounting method tries to find the relative worth of these assets in the terms of money. In this method the Performance appraisal of the employees is judged in terms of cost and

contribution of the employees. The cost of employees include all the expenses incurred on them like their


compensation, induction and

recruitment training

and etc

selection whereas

costs, their (in

costs total






monetary terms). The difference between the cost and the contribution will be the performance of the

employees. Ideally, the contribution of the employees should be greater than the cost incurred on them.

360 Degree Performance Appraisals.

360 degree feedback, also known as 'multirater feedback', 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.

360 degree respondents for an employee can be his/her peers, managers (i.e. superior), subordinates, team members, customers, suppliers/ vendors - anyone who comes into contact with the employee and can provide valuable insights and information or feedback regarding the "on-the-job" performance of the employee.


360 degree appraisal has four integral components:

1. Self appraisal 2. Superiors appraisal 3. Subordinates appraisal 4. Peer appraisal.

Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his achievements, and judge his own performance. Superiors 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, superiors 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 "360degree 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.

Arguments Against 360 Degree Performance Appraisal

Despite the fact that 360 degree appraisals are being widely used throughout the world for appraising the performance of the employees at all levels, many HR experts and professionals argument against using the technique of 360


degree appraisals. The main arguments are: 360 performance rating system is not a validated or corroborated technique for

Performance appraisal. With the increase in the number of raters from one to five (commonly), it become difficult to separate, calculate and eliminate personal biasness and differences. It is often time consuming and difficult to analyze the information gathered.








employees towards their desired ratings with the help of the raters. The 360 degree appraisal mechanism can have a adversely effect the motivation and the performance of the employees. 360 degree feedback as a process

requires commitment of top management and the HR, resources(time, financial resources etc), planned implementation and follow up. 360 degree feedback can be adversely

affected by the customers perception of the organisation and their incomplete knowledge


about the process and the clarity of the process. Often, the process suffers because of the lack of knowledge on the part of the participants or the raters.







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 employees actual performance with the standards set. Ideally, when employees


themselves have been involved with the goal setting and the choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities. THE MBO PROCESS









Objectives (MBO) is to create empowered employees who have clarity of the roles and responsibilities expected from them,

understand their objectives to be achieved and thus help in the achievement of organizational as well as personal goals. Some of the important features and

advantages of MBO are: Clarity of goals With MBO, came the concept of SMART goals i.e. goals that are:


Specific Measurable Achievable Realistic, and Time bound.

The goals thus set are clear, motivating and there is a linkage between organizational goals and performance targets of the employees. The focus is on future rather than on past. Goals and standards are set for the


performance for the future with periodic reviews and feedback. Motivation Involving employees in the whole process of goal setting and




increases employee job satisfaction and commitment. Better communication and

Coordination Frequent interactions between

reviews and and


subordinates helps to maintain harmonious relationships within the enterprise and also


solve many problems faced during the period

Assessment Centres Assessment centre refers to a method to objectively observe and assess the people in action by experts or HR professionals with the help of various assessment tools and instruments. Assessment centers simulate the employees on the job environment and facilitate the assessment of their on the job performance. An assessment centre typically involves the use of methods like social/informal events, tests and exercises, assignments being given to a group of employees to assess their competencies and on the job behaviour and potential to take higher

responsibilities in the future. Generally, employees are given an assignment similar to the job they would be expected to perform if promoted. The trained evaluators observe and evaluate employees as they perform the assigned jobs and are evaluated on job related characteristics. An assessment centre for Performance appraisal of an employee typically includes:

Social/Informal Events An assessment centre has a group of participants and also a few assessors which gives a chance to the employees to socialize with a variety of people and also to share information and know more about the organisation. Information Sessions information sessions are also a part of the assessment centres. They provide information to the employees about the organisation, their roles and responsibilities, the activities and the procedures etc. Assignmentsassignments in assessment centres include various tests and exercises which are specially designed to assess the competencies and the potential of the employees. These include

various interviews, psychometric tests, management games etc. all these assignments are focused at the target job. The following are the assessment centres:





The final results is based on the pass/fail criteria All the activities are carried out to fill the targeted job. Each session lasts from 1 to 5 days. The results are based on the assessment of the assessors with less emphasis on selfassessment immediate review or feedback are not provided to the employees.

An organizations human resources can be a vital competitive advantage and assessment centre helps in getting the right people in right places. The major competencies that are judged in assessment centres are interpersonal skills, intellectual capability, planning and organizing capabilities, motivation, career orientation etc. assessment centres are also an effective way to determine the training and

development needs of the targeted employees