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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. Objectives 1 To review the performance of the employees over a given period of time. 2 3. To judge the gap between the actual and the desired performance. To help the management in exercising organizational control.

4. Helps to strengthen the relationship and communication between superior subordinates and management employees. 5. To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.


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

This will help them to understand their roles and to know what exactly is expected from them.

MEASURING THE ACTUAL PERFORMANCE 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.

COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCE 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.

DISCUSSING RESULTS The result of the appraisal is communicated and discussed with the employees on one-to-one basis.
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. 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.



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 . 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. 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.

Example: Bob > Carol; Bob > Ted; Bob > Alice Carol > Ted; Carol > Alice Ted > Alice

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. 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 . Eg:Items from a behavioral checklist for a salesperson's job Instructions to the rater 1. Calls on customers immediately after hearing of any complaints 2. Discusses complaints with customer 3. Gathers facts relevant to customers' complaints

4. Transmits information about complaints back to customers and resolves problems to their satisfaction 5. Plans each day's activities ahead of time

6. Lays out broad sales plans for one month ahead

7. Gathers sales information from customers, other salesmen, trade journals, and other relevant sources 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

Examples of a 5-point scale: 5 = Excellent 4 = Very satisfactory 3 = Satisfactory 2 = Unsatisfactory 1 = Very unsatisfactory 5 = Greatly exceeds standards 4 = Exceeds standards 3 = Meets standards 2 = Below standards 1 = Far below standards

FORCED DISTRIBUTION Forced distribution is a form of comparative evaluation in which an evaluator rates subordinates according to a specified distribution.

Evaluator must place a fixed percentage of employees in each performance category Example: 10% must be rated 5 = Excellent 25% must be rated 4 = Very satisfactory 45% must be rated 3 = Satisfactory 15% must be rated 2 = Unsatisfactory 5% must be rated 1 = Very unsatisfactory MODERN METHODS 360 degree feedback, also known as 'multi-rater 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 etc Some of the organizations following it are Wipro, Infosys, and Reliance Industries etc

360 degree appraisal has four integral components:

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

The concept of Management by Objectives (MBO) was first given by Peter Drucker in 1954.

Management by objectives (MBO) involves setting specific measurable goals with each employee and then periodically discussing his/her progress toward these goals 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.

UNIQUE FEATURES AND ADVANTAGES OF MBO 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 increasing employee empowerment increases employee job satisfaction and commitment. 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.

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 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.


Development of BARS evaluations requires an in-depth understanding of each positions key tasks, along with an understanding of the full range of behaviors displayed by individuals in carrying out such tasks.

The evaluator rate these behaviors for each employee; then he anchor each behavior to points on a rating scale, which indicates whether the behavior is exceptional, excellent, fully competent, or unsatisfactory. The result is a rating scale for each task.

For example, in a hypothetical position of human resources coordinator, one of the job holders responsibilities is to complete status change notices, which update the personnel system regarding changes in employee pay, position, title, supervisor, and personal data. The BARS method for this specific task in this specific job could read as follows:

5 Exceptional performance: Accurately completes and submits all status change notices within an hour of request. 4 Excellent performance: Verifies all status change notice information with requesting manager before submitting. 3 Fully competent performance: Completes status change notice forms by the end of the workday. 2 Marginal performance: Argues when asked to complete a status change notice. 1 Unsatisfactory performance: Says status change notice forms have been submitted when they havent.

HUMAN RESOURCES ACCOUNTING Human resources are valuable assets for every organization. Human resource accounting method tries to find the relative worth of these assets in the terms of money. In this method the performance 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, recruitment and selection costs, induction and training costs etc whereas their contribution includes the total value added (in monetary terms). The difference between the cost and the contribution will be the performance of the employees