PERFORMANCE APPRAISAL

Performance Appraisal:
• It is an objective assessment of an individual’s
performance against well defined benchmarks.
• PA is a formal, structured system of measuring and
evaluating an employees job related behaviors and
outcomes to discover how and why the employee is
presently performing on the job and how the
employee can perform more effectively in the future
so that the employee, organisation and society all
benefit.
• Evaluating factors includes job knowledge, quality
and quantity of output, leadership qualities,
supervision, co-operation, dependability, judgment,
versatility, health, etc.
 Relationship of PA and job analysis:

Job Analysis Performance Standards Performance Appraisal

Describes work and Describes the job-

Translate job requirements
personnel relevant strengths and
into levels of acceptable or
requirement of a weaknesses of each
unacceptable performance
particular job individual
 Main Purpose of Employee Assessment:
To effect promotions based on competence and
performance.
To confirm the services of probationary employees

upon their completing the probationary period

satisfactorily.
To assess the training and development needs of
employees.
To decide upon a pay raise where pay scales have
not been fixed.
To let the employees know where they stand
insofar as their performance is concerned and
to assist them with constructive criticism and
guidance for the purpose of their development.
To improve communication.
For determining whether HR programes such
as selection, training, and transfers have been
effective or not.
Multiple Purposes of PA:
General Purpose
Developmental Issues
Administrative Uses/ Decisions
Organizational Maintenance/ Objectives
Documentation
Specific Purpose
Identification of individual needs
Performance Feedback
Determining Transfers and Job Assignments
Identification of Individual Strengths
Salary
Promotion
Retention or Termination
Identification of poor performers
HR Planning
Determining Organization Training Needs
Evaluation of Organizational Goal
Achievement
Evaluation of HR systems
Criteria for Validation Research
Documentation for HR Decisions
Helping to Meet Legal Requirements
 Performance Appraisal contributes to firm’s
Competitive Advantage:

Improving
Performance

Strategy Making
And Correct
Behavior Decisions

Competitive
Advantage

Ensuring
Values
Legal
And
Compliance
Behavior
Minimizing
Dissatisfaction and
Turnover
Appraisal Process:
Objectives of
Performance Appraisal

Establish Job
Expectations

Design an
Appraisal Program

Appraise
Performance

Performance
Interview

Use Appraisal Data for

Appropriate Purposes
1. Objectives of Appraisal:
It includes effecting promotions and transfers,
assessing training needs, awarding pay increases,
etc.
Appraisal in future would assume systems
orientation from traditional way, which aims at
improving the performance instead of assessing it.
Towards end, appraisal system seeks to evaluate
opportunity factors including physical
environment such as noise, ventilation and
lightings, available resources as human and
computer assistance and social process as
leadership effectiveness.
Performance Appraisal Systems:
Traditional Systems System oriented

Guiding Value Attribution to individual Attribution to system

Primary Goals Control, documentation Development, problem

solving

Leadership practices Directional, Evaluative Facilitative, coaching

Appraisal Frequency Occasional frequent

Degree of formality High Low

Reward Practices Individual Orientation Group Orientation

2. Establish Job Expectations:
The second process in job appraisal process
which includes informing the employee what is
expected from him/her on the job.
Normally a discussion is held with the superior
to review the major duties contained in the job
description.
Individuals are not expected to begin the job
until they understand what is expected of them.
3. Design Appraisal Program:
Formal
Vs
Informal
Whose
What
Performance
Methods?
?

When To Appraisal Who Are the

Evaluate? Design Raters?

What To What
Evaluate? Problems?

How To
Solve?
PROBLEMS OF RATING

Performance appraisals are subjected to a wide

variety of inaccuracies & biases referred to as ‘rating
errors’. These errors occurs in rater’s observations,
judgment, & information processing, and can effect
assessment results.
TYPES OF RATING ERRORS
 Leniency or Severity
 Central Tendency
 Halo Error
 Rater Effect
 Primacy & Recency Effects
 Perceptual Set
 Performance Dimension Order
 Spillover Effect
 Status Effect
Leniency or Severity: Performance appraisal in this
case become subjective on the part of the rater.
One rater may judge a particular criterion with
severity, the other rater may judge the same with
leniency.
Example: Distribution of Judgment on Written
Communication skill by Lenient & Severe Rater.
 Central Tendency: This occurs when the
employees are incorrectly rated near the average
or middle of the scale. In such situation it
becomes difficult to distinguish between excellent
performance & poor performance. This error
leads to ‘range restriction’.

Halo Error: This occurs when one aspect of an

individual’s performance influences the
evaluation of entire performance of the
individual. Rating the employees separately on
each of the performance criterion & encouraging
raters to guard against the halo effect are the two
ways to reduce the halo effect.
 Raters Effect: This occur because of factors like
favoritism, stereotyping, & hostility. In such cases
the rater does take into consideration the actual
outcomes or behaviors, but gives judgment on the
basis of his/her attitude towards the ratee. Sex,
age, race, & friendship biases are examples of this
type of error.
Primacy & Recency Effects: The rater’s rating is
heavily influenced by behavior exhibited by the
ratee during the early stages of the review period
(primacy) or by outcomes or behavior exhibited
by the ratee near the end of the review period
(recency). Composite performance of the ratee is
one way to guard against such error.
 Perceptual Set: This occurs when the rater’s
assessment is influenced by previously held
beliefs. Example if the Supervisor has a belief
that employees hailing from one particular region
are intelligent & hard working, then his
subsequent rating for employees hailing from that
region tends to be favorably high.
Performance Dimension Order: Two or more
dimensions on the performance follow or closely
follow each other & both describes a similar
quality. The rater rates the first dimension
accurately & then rates the second dimension
similar to the first because of the proximity.
 Spillover Effect: Referring to past performance
appraisal to unjustifiably influence current rating.
Past rating, good or bad, results in similar rating
for current period although the demonstrated
behavior does not deserve the rating, good or
bad.

Status Effect: It refers to overrating of employees

in higher-level job or jobs held in high esteem,
and underrating employees in lower-level job or
jobs held in low esteem.
SOLVING RATER’S PROBLEM
The best way to overcome the rater’s problem is to
provide training. Training is not a “cure-all’ for all
the ills of the appraisal systems. From practical point
of view there are many other factors like:
 union pressure
 turnover rates
 time constraints
But training can improve the appraisal system to
the extent of distortion that occurs due to the rater’s
errors such as halo, leniency, central tendency & bias.
Example rater’s are shown video-tape of jobs being
performed & asked to rate the workers.
What should be Rated?
There are six criterion for assessing performance:
 Quality: The degree to which the performance of an
activity conforms with the ideal way of performing that
activity.

 Quantity: The amount produced, expressed in monetary

terms, no. of units, or no. of completed activity cycles.

 Timeliness: The degree to which an activity is completed

or a result is produced, at the earliest time desirable from
the standpoint of both co-ordinating with the output of
others and of maximizing the time available for other
activities.
 Cost Effectiveness: The degree to which the
organization's resources is maximized in the sense of
getting the highest gain or reduction in loss from each
unit or instance of use of a resource.

 Need for Supervision: The degree to which a job

performer can carry out a job function without either
having to request supervisory assistance or requiring
supervisory intervention to prevent an adverse outcome.

 Interpersonal Impact: The degree to which a performer

promotes feeling of self-esteem, goodwill & co-
operation among co-workers & subordinates.
TIMING OF EVALUATION
How often should the employee be assessed?
 The general trend is to evaluate once in three
months, or six months, or once in a year.
 according to a survey conducted in 1997, 70%
of the organization conduct performance
appraisal once a year.
 Newly hired employees are rated more
frequently than older ones.
 Frequent assessment is better than phased
evaluation because in former case we get
constant feedback enabling a person to improve
his/her performance if there is any deficiency.
METHODS OF APPRAISAL
There are numerous methods to measure the quality &
quantity of employee’s job performance. Each of the
method is effective for some purpose, for the
organizations. Broadly, all the approaches to appraisal
can be classified into:
 Past-Oriented Method
 Future-Oriented Method
PAST-ORIENTED METHOD
Rating Scale: In this technique for appraisal the
performance criterion such as dependability, output,
attendance, attitude, co-operation, and like are rated on
the scale ranging from excellent to poor.
Advantages:
 adaptability
 relatively ease use
 low cost
Disadvantages:
 rater’s biases are likely to influence evaluation
especially in case of subjective performance criterions.
 Checklist: Under this method, a checklist of statements on
the traits of the employee and his/her job is prepared in
two columns-viz, a ‘Yes’ column and ‘No’ column. The
rater is just supposed to tick Yes or No in front of those
traits being evaluated. When points are allotted to the
checklist it becomes a ‘weighted checklist’.
Advantages:
 economy
 ease of administration
 limited training of rater
 standardization
Disadvantages:
 susceptibility to rater’s biases (especially halo effect)
 use of personality criterion instead of performance
 use of improper weights by the HR Department
 Forced Choice Method: In this, the rater is given a series
of statement about the employees. These statements are
arranged in blocks of two or more, and rater indicates
which statement is most or least descriptive of the
employees. In this method the rater if forced to select
statements which are readymade.
Example: Typical statements are
Learns Fast ………....works hard
work is reliable……..performance is a good example for
Absent often………...others usually tardy
Advantages:
 absence of personal bias in rating
Disadvantages:
 statements may not be properly framed-they may not be
precisely descriptive of the ratee’s traits
Forced Distribution Method: One of the error in rating is
central tendency- clustering of large no. of employees
around a high point on a rating scale. Forced distribution
helps in overcoming this problem by compelling the
rater to distribute the ratees on all points on the rating
scale. The method is based on the assumption that the
employees performance level conforms to a normal
statistical distribution.
Critical Incidents Methods: The approach focuses on certain
critical behavior of an employees that make all the
difference between effective & non effective performance
of a job. Such incidents are recorded by superiors as &
when they occur.
Advantages:
 evaluation is based on actual job behavior
 the approach has descriptions in support of particular
rating of employee
 it also reduces recency bias
 chance that subordinates will improve because they learn,
what is expected from them
Disadvantages:
 negative incidences are more noticeable than positive
ones
 Overly close supervision may result
 Behaviorally Anchored Rating Scales: BARS are rating
whose scale points are determined by statements of
effective and ineffective behaviors. A rater is expected
to indicate which behavior on each scale best describes
an employee’s performance. BARS has following
features:
 Area of performance to be evaluated are identified &
defined by the peoples who will use the scales.
 The scales are anchored by descriptions of actual job
behavior that supervisor agree, represents specific levels
of performance.
 All dimensions of performance to be evaluated are
based on observable behaviors & are relevant to the job
being evaluated since BARS are tailor-made for the job.
 Since the raters who will actually use the scales are
actively involved in the development process.
 FIELD REVIEW METHOD:

Appraisal by someone from outside the assessee’s

own department, usually someone from the
corporate office or HR office. The outsider reviews
employee records and holds interviews with the
ratee and his or her superior. It is used for
making promotional decision at the managerial level.
Drawbacks:
 An ‘outsider’ is not usually familiar with conditions
in an employee’s work environment.
 An ‘outsider’ review does not have the opportunity
to observe employee behavior of performance over
a period of time and in a variety of situations.
 PERFORMANCE TESTS AND OBSERVATIONS:
Test of knowledge or skills to measure the potential
more than actual performance.
 CONFIDENTIAL RECORDS:
Maintained mostly in government departments. The
report has following 14 items-
Attendance, Self-expression, Ability to work with others,
Leadership, Initiative, Technical ability, Ability to
understand the new material, Ability to reason, Originality
and resourcefulness, Areas of work that suits the person
best, Judgement, Integrity, Responsibility, Defect
◦ 12 of these are filled on a 4-point grade scale.
◦ Integrity and justification are considered separately.
◦ Overall rating on a 5-point grade scale is separately
given.
 ESSAY METHOD:
The rater must describe the employee of broad
categories, such as
i. The rater’s overall impression of the
employee’s performance
ii. The promotability of the employee
iii. The jobs that the employee is now able or
qualified to problem
iv. The strength and weaknesses of the employee
v. The training and the development assistant
required by the employee
The strength of this method depends on the
writing skills and analytical ability of the rater.
  Paired-comparison method- the appraiser compares each employee
with every other employee, one at a time. The no. of comparisons
may be calculated by following formula
N ( N  1) ,Where N stands for no. of
employees 2
 FUTURE ORIENTED APPRAISALS:
This technique is used because of following reasons-
 It is not enough if only the past performance is assessed.
 Performance in the coming days is equally important.

Commonly used techniques:

 Management by Objectives
 Psychological Appraisals
 Assessment Centers
 360-Degree Feedback
 MANAGEMENT BY OBJECTIVES:
1. Establishment of Goals
2. Setting the performance standard
3. Actual level of job attainment is compared with
the goals agreed upon.
4. Establishing new goals and new strategies for
goals not previously attained.
It is used with managerial personnel
and employees who have a fairly wide range of
flexibility and self-control in their jobs.
Drawbacks:
Not applicable for all jobs in all organizations
 PSYCHOLOGICAL APPRAISALS:
When psychologists are used for evaluations, they asses an
individual’s future potential and not past performance. The
appraisal consists of in-depth interviews, psychological tests,
discussions with supervisors and a review of other evaluations.
 ASSESSMENT CENTERS:
An assessment center is a central location where managers may
come together to have their participation in job-related exercises
evaluated by trained observers.
The characteristics assessed in a typical assessment
center include assertiveness, persuasive ability, communicating
ability, planning and organizational ability, self-confidence,
resistance to stress, energy level, decision-making, sensitivity to
the feelings of others, administrative ability, creativity and
mental alertness.
 360-DEGREE FEEDBACK:
A systematic collection of performance data on
an individual or group, derived from a number of
stakeholders (immediate supervisors), team members,
customers, peers, and self.
 It facilitates greater self-development of the
employee.
 It provide formalized communication links between
an employee and his or her internal or external
customers.
Drawbacks:
 Receiving feedback on performance from multiple
sources can be intimidating.
 The technique take a long time on selecting the rater,
designing questionnaires, and analyzing the data.
 Multiple raters are less adapt at providing a balanced
and objective feedback than the supervisors who are
sought to be replaced
4. Performance Interview
It has 3 goals:
To change behavior of employees whose
performance does not meet organizational
requirements or their own personal goals.
To maintain the behavior of employees who
perform in an acceptable manner.
To recognize superior performance behaviors
so that they will be continued.
5. Use of Appraisal Data:
Data and information outputs of a performance-
appraisal program can critically influence the
coveted employer-employee reward opportunities.
It could be useful in following areas of HRM:
I. Remuneration administration
II. Validation of selection programs
III. Employee training and development programs
IV. Promotion, transfer and lay-off decisions
V. Grievance and discipline programs
VI. HR planning
CHALLENGES OF PERFORMANCE
APPRAISAL
 Create a culture of excellence that inspires every employee to
improve and lend himself or herself to be assessed.
 Align organizational objectives to individual aspirations.
 Clear growth paths for talented individuals.
 Provide new challenges to rejuvenate careers that have
reached the Plateau stage.
 Forge a partnership with people for managing their careers.

(contd…)
 CHALLENGES OF PERFORMANCE
APPRAISAL
 Empower employees to make decisions without the fear of
failing.

 Embed teamwork in all operational processes.

 Debureaucratise the organization structure for ease of flow of

information.
 LEGAL ISSUES ASSOCIATED WITH
PERFORMANCE APPRAISAL
 Performance appraisal data are used to make many important
HR decisions (e.g. pay, promotion, training, transfer, and
termination).

 The appraisal system is a common target of legal disputes by

employees involving charges of unfairness and bias.

(contd…)