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Concept of Performance Management

It is the process of : Planning performance, Appraising/Evaluating performance, Giving its feedback, and Counseling an employee to improve his performance.

Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 1

1.Performance Planning


is the process of determining what and how a job is to be done in such a manner that both the employee and his superior understand what is expected from the employee and how success is defined and measured.

Kumari,Associate Professor,IIBM,Navi Mumbai

Process of Performance Planning

In consultation with the superior, the employee formulates his job objectives keeping in view the organizational/unit objectives.

During Performance Planning session, each objective and its contribution to organizational objectives is discussed and it is also determined how the accomplishment of each objective will be measured.

In the light of the stated objectives, any developmental activities that will be required by the employee are worked out.

Once performance plan is established, it is the responsibility of the employee to carry out the objectives and responsibilities specified in the plan.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 3

2.Concept of Performance Appraisal

Performance Appraisal is the method of evaluating the behavior of employees in the work spot , normally including both quantitative and qualitative aspects of job performance. It is the activity used to determine the extent to which an employee performs work effectively. The other names of Performance Appraisal include Performance Evaluation, Performance Review, Personnel Rating, Merit Rating, Employee Appraisal, and Employee Evaluation.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 4

Objectives of Performance Appraisal Appraisal of employees serves several useful Purposes such as:

decisions. Promotion decisions. Training and development programs. Feedback. Personal development.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 5

Format/Process of Appraisal
Performance appraisal must provide accurate and reliable data. In order to provide these a systematic process must be followed which is as follows: 1. Establish performance standards for each position and criteria for evaluation. 2. Establish performance evaluation policies on when to rate, how often to rate, and who should rate. 3. Have raters gather data on employees performance. 4. Have raters (and employees in some systems) evaluate employees performance. 5. Discuss the evaluation with the employees. 6. Make decisions and file evaluation. Step 1 of this process is completed when an organization conducts a job analysis. 6 Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai

Format/Process of Appraisal Cont

Establish Criteria: The dimensions of performance upon which an employee is evaluated are called the Criteria of Evaluation , for example quality of work, quantity of work, and cost of work etc An effective criterion should possess the following characteristics: a) Reliability: A measure of performance must be consistent. The most important type of consistency for a performance measure is inter rater reliability. If different raters view the same worker, they should arrive at similar conclusion about the quality of that workers output.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 7

Format/Process of Appraisal Cont b) Relevance: A measure of performance must be

related to the actual output of an incumbent as logically as possible.

c) Sensitivity: Any criterion must be able to reflect the difference between high and low performers. That is, high and low performers must receive criterion scores that accurately represent the difference in their performance. d) Practicality: The criterion must be measurable, and data collection cannot be inefficient or too disruptive.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 8

Format/Process of Appraisal Cont

Most studies reveal multiple criteria are necessary to measure performance completely. The multiple criteria are added together statistically or combined into a single multifaceted measure. The choice of criteria is not an easy process. One must be careful to evaluate both activities (for example, number of calls a salesperson makes) and results (for example, rupees of sales). A combination of criteria using results and activities is desirable. Management must weigh the importance of multiple criteria.

Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai

Format/Process of Appraisal Cont

Set Policies on Who Evaluates, When, and How Often: When should evaluation be done? -In US a majority of the organizations continue to evaluate performance on an annual basis. There are two choices for when to actually conduct evaluations: (a) The date the person was hiredAnniversary date. (b) Alternatively a single calendar date. Merit-It is convenient administratively Demerits (i) It requires rater to spend lots of time conducting evaluation interviews and completing forms at one time, for which they may want to get it over with quickly. (ii) It may not be related to normal task cycle of the employee. Hence the manager can not evaluate performance effectively. 10

Format/Process of Appraisal Cont

Set Policies on Who Evaluates, When, and How Often Cont: Hence it is better to schedule the evaluation at the completion of a task cycle. Alternatively without a clear task cycle, based on the date. One way to set the date is by setting goals. Goals can be established by the consensus of manager and employee regarding the task cycle . Task cycle terminates with an evaluation of the employees performance during that cycle. - A small proportion(15.6) percent of US organizations evaluate performance twice a year. - Even small (3.6) percent of US organizations have implemented quarterly evaluation. - One study of 244 Indian firms found that appraisals were most often conducted once a year.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 11

Format/Process of Appraisal Cont

Set Policies on Who Evaluates, When, and How Often Cont: Who should do the appraising? Performance evaluation is a HRM activity that involves cooperation between the line operating managers and HR specialists. The various appraisers are:
a) b) c) d) e) f) g)

Operating Manager (Immediate Supervisor) Committee of Several Supervisors Employees Peers (Co-Workers) Employees Subordinates Self Appraisal. Consultants. Combination of Approaches (360 Degree Feedback).

Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 12

Format/Process of Appraisal Cont

360-Degree Feedback: In human resources or industrial/organizational psychology, 360-degree feedback, also known as "multi-rater feedback," "multi source feedback," or "multi source assessment," is feedback that comes from all around of an employee. "360" refers to the 360 degrees in a circle, with an individual figuratively in the center of the circle. Feedback is provided by subordinates, peers, and supervisors. It also includes a self-assessment and, in some cases, feedback from external sources such as customers and suppliers or other interested stakeholders. It may be contrasted with "upward feedback," where managers are given feedback by their direct reports, or a "traditional performance appraisal," where the employees are most often reviewed only by their managers. The results from 360-degree feedback are often used by the person receiving the feedback to plan training and development. Results are also used by some organizations in making administrative decisions, such as pay or promotion. It was originally developed by T.V Rao and others at IIMA as a fact finding and self correction technique.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 13

Format/Process of Appraisal Cont

Merits of 360-Degree Feedback 1. Multiple perspectives of a persons performance. 2. Ratings can evaluate person based on actual contact and observation. 3. Feedback is provided from multiple directions-above, below, peer, & outsider. 4. Anonymous upward feedback which results in full participation. 5. Learning about weaknesses and strengths is motivational.
Demerits of 360-Degree Feedback:

Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai

1. Feedback from all; can be overwhelming. 2. Rater can hide in a group of rates and provide harsh evaluations. 3. Conflicting ratings can be confusing and frustrating. 4. Linking findings to rewards can prove to be unfair. 5. Requires a plan and welltrained raters which is not typically found in organizations.

Methods/Techniques of Performance Appraisal

Individual Evaluation Methods Evaluating employees individually. No comparison with other employees. The standards of performance are defined without reference to other employees. The methods are: 1.Graphic Rating Scale 2.Forced Choice 3.Essay evaluation 4.Critical Incident Technique 5.Checklists and Weighted and Checklists 6.Behaviorally Anchored Rating Scale Multi-Person Evaluation Methods Direct/indirect comparison of performance of one employee with that of other employees. Thus the standard of performance are relative: an employees performance is defined as good /bad as compared with the performance of other employees. The Methods are: 1.Ranking 2.Paired Comparison 3.Forced Distribution
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 15

Performance Appraisal Errors

(A) (B) (C) (D)

Performance appraisals are intended to evaluate the performance and potential of employees. Still these may not be valid indicator of what these are intended to assess because of a variety of limitations on their uses. The problems that affect the validity and dependability of the Performance appraisal systems are called Performance Appraisal Errors. These are as follows: Judgment Error Poor Appraisal Forms Lack of Rater Preparedness Ineffective Organizational Policies and Practices
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 16

Performance Appraisal Errors Cont

(A)Judgment Error: People commit mistake due to biasness and judgment errors while evaluating people and their performance. These are:

First Impression( Primacy Effect) Latest Behavior (Recency Effect) Halo Effect Horn Effect Stereotyping Central Tendency Leniency Strictness Spillover Effect Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai


Performance Appraisal Errors Cont

(B) Poor Appraisal Forms : The appraisal process might also be influenced by the following factors relating to the forms that are used by raters: The rating scale may be quite vague and unclear. Problems with evaluation standards arise because of perceptual differences in the meaning of the words used to evaluate employees. Thus good, adequate, satisfactory, and excellent may mean different things to different evaluators. The rating form may ignore important aspects of job performance. The forms may be too long and complex.

Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 18

Performance Appraisal Errors Cont

(C) Lack of Rater Preparedness: The raters may not be adequately trained to carry out performance management activities. This is a serious problem when technical competency of a ratee is evaluated. The rater may not have sufficient time for systematic appraisal and feedback sessions. The rater may have poor self image and low confidence. The rater may get confused when the objectives of the appraisal are somewhat vague and unclear. (D) Ineffective Organizational Policies and Practices: If the sincere appraisal report put in by a rater is not suitably rewarded, the motivation to do the job thoroughly finishes off.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 19

Potential Appraisal

1. 2. 3. 4.

In the modern era of HRM, appraisal system lays greater emphasis on the development of employees rather than on their evaluation. This is better fulfilled by the Potential Appraisal which involves assessing the capability of an employee which he possesses but that is not being utilized fully. It is to identify the potential of a given employee to occupy higher positions in the organizational hierarchy and undertake higher responsibilities. Potential appraisals are required to: Inform employees about their future prospects. Help the organization chalk out a suitable succession plan. Update training efforts from time to time. Advise employees about what they must do to improve their career prospects.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 20

Process of Potential Appraisal

Role descriptions Organizational roles and functions must be defined clearly. For this job descriptions must be prepared for each job. Qualities needed to perform the roles Based on job descriptions the roles to be played by people must be prepared (i.e. technical, managerial jobs and behavioral dimensions) Rating mechanisms 1) Rating by others to examine technical capabilities. 2) Psychological tests to know managerial and behavioral dimensions. 3) Simulation games to uncover the potential of the candidate. 4) Performance records and ratings on candidates previous jobs can be examined on dimensions like creativity, risk taking 21

Process of Potential Appraisal Cont..

Organizing the system HR manager sets up a system to allow the introduction of the scheme smoothly incorporating answers to some complex questions such as: 1. How much weightage to accord to merit in place of seniority in promotions? 2. How much weightage to accord to each of the performance dimensions-technical, managerial, and behavioral qualities? 3. What are the mechanisms of assessing the individual on different indicators of his potential, and with what degree of reliability? Feedback Every employee must have the opportunity to know the results of his assessment.

Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 22

Potential Appraisal at Philips India






Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai


Potential Appraisal at Philips India Cont

1. 2. 3. 4.

It is a potential-cum-performance based model. Philips uses a five-point scale to measure the potential of an employee and put him into one of the above quadrants. The potential appraisal criteria include the following: Conceptual Effectiveness (including vision, business orientation, entrepreneurial orientation, and sense of reality etc.) Interpersonal Effectiveness (including network directedness, negotiating power, personal influence, and verbal behavior etc.) Operational Effectiveness (including result orientation, individual effectiveness, risk-taking, and control etc.) Achievement Motivation (including drive, professional ambition, innovativeness, and stability etc.) Once the potential of an employee is measured along these dimensions on a five-point scale, Philips lays down a fast-track career growth plan for the star performers (five to ten year plan)
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 24

3.Appraisal Feedback
1. 2. 3. 4.

Appraisal Feedback must be provided to employees to enhance their Self-Perception. Self-Perception is the process of understanding oneself: Where he stands in terms of his efficiency. What his strengths and weaknesses are. To what extent, he is able to use his capabilities. How he can improve himself further.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 25

4.Performance Counseling
It is an interactive process between the employee and his counselor to anticipate the likely problems in job performance, defining proactive actions to overcome those problems, and implementing those actions on a continuous basis. Steps in Performance Counseling: Rapport between employee and counselor.

Exploring information about performance. To define future goals. Drawing action plans.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 26

Performance Counseling Cont

Pre-requisite for Performance Counseling:

Organizational culture for performance improvement. Continuous desire for learning. Continuous dialogue. Focus on work-related behavior.
Dr.Sarita Kumari,Associate Professor,IIBM,Navi Mumbai 27