PERFORMANCE MANAGEMENT &

APPRAISAL

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 CONTENTS

1. Definitions 1. PA methods
2. History 2. PA problems
3. Why appraise the 3. Advantages /
performance Disadvantages of PA
4. Steps in Performance methods
Appraisal (PA) 4. Guidelines for good
5. Potential Appraisers Appraisal
5. Deming’s views on PA

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Performance Appraisal - Definitions

Performance Appraisal is the systematic evaluation of the individual

with regard to his or her performance on the job and his potential for
development. – Dale S. Beach

Performance Appraisal is the systematic, periodic and impartial rating

of an employee’s excellence in matters pertaining to his present job
and his potential for a better job. – Edwin B Flippo

Performance appraisal and review is the formal, systematic

assessment of how well employees are performing their jobs in
relations to establish standards and the communication of that
assessment to employees . – Wendell French
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 History
 Performance appraisal of the individual is said to have begun as
early as the Wen Dynasty in China (A.D. 261 – 265) where an
Imperial Rater appraised the performance of members of the
official family.
 The New York Civil service introduced a formal performance
appraisal system just before 1st World War.
 During the first world war PA was introduced in US army by
Walter Dill Scott. It was called “man-to-man rating” for
evaluating military personnel
 Since 1950s PA has shifted to people in the professional fields.
These early appraisal systems were called ”merit rating” of
employees.
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 Why Appraise Performance
1. Forms the basis for pay / rewards and promotion
decisions for work done in the preceding period.
2. Helps the Boss and the subordinate to develop a plan
for correcting deficiencies and reinforcing good
performance. E.g. Training and development needs
3. Is useful in career planning. Helps the employee to
review his career plan in light of his / her strengths &
weaknesses
4. To establish data base for HR Planning required for
strategic needs of the organization
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 Steps in Performance Appraisal
 Defining the job
 Making sure that you and your subordinate agree on his or
her duties and job standards.

 Appraising performance
 Comparing your subordinate’s actual performance to the
standards that have been set; this usually involves some type
of rating form.

 Providing feedback
 Discussing the subordinate’s performance and progress, and
making plans for any development required. 6
Immediate
Self-Rating
Supervisor

Peers
Potential Subordinates
Appraisers

Rating 360-Degree
Committee Feedback

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 360 – degree feeback
 Involves being evaluated by superiors, subordinate, peers,
self assessment and the customers
 Possible advantages
1. Perhaps captures individual’s performance in multiple roles

2. Feedback from multiple sources may re-inforce the feedback

from the boss, thus making it difficult to discount the
viewpoint of that single person

3. Discrepancies between self rating and from other multiple

sources may be an eye-opener for acceptance of feedback
for improvement / development by the employee.

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 Performance Appraisal Methods
1. Graphic Rating Scale Method - A scale that lists a number
of traits and a range of rating for each trait that is used to
identify the score that best describes an employee’s level of
performance in that trait.
2. Alternation Ranking Method - Ranking employees from
best to worst on a particular trait, choosing highest and then
lowest; 2nd highest and then 2nd lowest… until all are ranked.
3. Paired Comparison Method - for each trait to be rated, the
supervisor would have a sheet with employee names in
pairs ... every employee is paired with every other name. For
each pair, the supervisor would circle the one of the two that
is better in that trait.

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 Performance Appraisal Methods
4. Forced Distribution Method (also referred as Bell – Curved
rating) – The supervisor is forced to segregate the good, mediocre
and not good performers into pre-determined percentages. The
supervisor is limited to giving a pre-determined percentage of his or
her employees' rating. For example: 15% can get a 1; 20% can get
a 2; 30 % can get a 3 ... and so on.
5. Critical Incidents method – the supervisor keeps a log of positive
and negative examples of a subordinate’s work related behavior and
discusses with him every 6 month or so.

6. Management By Objectives

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 Advantages & Disadvantages of Appraisal
methods
Methods Advantages Disadvantages

Graphic rating scale Simple to use; provides a Standards may be unclear;

quantitative rating for each halo effect, central tendency,
employee. leniency bias can also be
problems

Alternation ranking Simple to use (but not as Can cause disagreements

simple as graphic scales). among employees and may
Avoids central tendency and be unfair if all employees are
other problems of rating in fact excellent
scales

Forced distribution End up with predetermined Employees appraisal results

no. or % of people in each depend on your choice of
group cutoff points

Critical incident Helps specify what is “right” Difficult to rate or rank

& “wrong” about the employees relative to one
employee’s performance; another
forces supervisor to evaluate
subordinates on an ongoing
basis.

MBO Tied to jointly agreed upon Time consuming

performance objectives
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 Errors in Potential
Appraisal

Halo Leniency or Bias - The Recency

Effect - Occurs Central Strictness - tendency to effects –
when a Tendency - A The problem allow individual employees
Unclear
tendency to recent
Standards – supervisor’s that occurs differences
rating of a rate all when a such as age, performance
an appraisal
subordinate on employees the supervisor has race, and sex blind you to
that is too one trait same way, a tendency to to affect the what his or
open for biases the rate all appraisal
such as rating her
interpretation rating of that subordinates ratings performance
them all
person on average either high or employees has been over
other traits low. receive the year.

Stereotype – occurs when a supervisor rates an employee on a trait

based on the social circle he / she moves about.
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 Guidelines for Good Appraisal
1. Emphasize the positive aspects of the evaluation. The session is
to improve the performance and not to discipline the employee.

2. Conduct the interview session with minimum interruptions and in

private.

3. Make specific criticism, not vague or general.

4. Focus criticism on performance and not on personality.

5. Stay clam and do not argue with the employee being evaluated.
6. Identify specific actions the employee can take to improve
performance

7. Emphasize the appraiser's willingness to assist the appraisee &

improve his / her performance
8. End the sessions by stressing the positive aspects of the
employee’s performance. 13
 W Edwards Deming views on performance appraisal

The “Father of TQM” had quite a different view on the use of performance
appraisal. He opposed it on grounds that:

1. It hinders teamwork
2. Creates fear and mistrust

3. Discourages risk-taking behaviour

4. Suppresses innovation
5. PA is based on faulty assumptions that individuals have significant control
over their own performance – i.e. most individuals can improve if they
choose to do so by putting necessary effort. However, the fact is that
everything done in an organization is within the framework of various
systems. The framework provides limits on the activities. Thus in well
designed system it is virtually impossible for people not to perform well &
vice versa. Hence PA cannot differentiate among individuals for the
purpose of salary adjustments 14
 How to Criticize a Subordinate
1. Do it in a manner that lets the person maintain his or her
dignity and sense of worth.

2. Criticize in private, and do it constructively.

3. Give daily feedback so that the review has no surprises.

4. Never say the person is “always” wrong.

5. Criticism should be objective and free of biases.

Sample Graphic rating form

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Sample Graphic rating form

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Alternation Ranking Scale

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Ranking Employees by the Paired Comparison Method

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 Examples of Critical Actions for Assistant Plant Manager

Duties Targets Critical Actions

Schedule production 90% utilization of Instituted new production scheduling

for plant personnel and system; decreased late orders by 10%
machinery in plant; last month; increased machine
orders delivered on utilization in plant by 20% last month
time

Supervise Minimize inventory Let inventory storage costs rise 15%

procurement of raw costs while keeping last month; over-ordered parts “A”
materials and adequate supplies on and “B” by 20%; under-ordered part
inventory control hand “C” by 30%

Supervise machinery No shutdowns due to Instituted new preventative

maintenance faulty machinery maintenance system for plant;
prevented a machine breakdown by
discovering faulty part

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 Management by Objectives
A comprehensive and formal organization-wide goal-setting and appraisal program requiring:

1. Setting of organization’s goals.

2. Setting of departmental goals.
3. Discussion of departmental goals.
4. Defining expected results (setting individual goals).
5. Conducting periodic performance reviews.
6. Providing performance feedback.

Setting Goals

 SMART Goals:

 Specific, and clearly state the desired results.

 Measurable in answering “how much.”
 Attainable, and not too tough or too easy.
 Relevant to what’s to be achieved.
 Timely in reflecting deadlines and milestones. 21
A Graphic Rating Scale with Unclear Standards e.g,
what exactly is meant by “good,” “quantity of
work,” and so on?

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