r m a n c e

Pe r f o
e w ar d
&R t
a g e m e n
M a n

By
Madhukar Saxena
 AKTU MBA III SEM SYLLABUS
Code: KMBHR02 Performance and Reward Management
Unit 1: Introduction to Performance Management System :Meaning, Uses
and purpose of Performance Management, Performance Management vs
Performance Appraisal, Performance management and its challenges in current
scenario, Performance management as a System and Process.
Establishing Performance Criterion for an Effective Appraisal System
KRA (Key Result Areas), KPA (Key Process Areas), KSA (Knowledge, Skills &
Abilities) Vs KPI (Key Performance Indicator).

Unit 2: Managing Performance: Methods of managing performance of all the

levels of Management, 360 degree Performance Appraisal, MBO and
Performance analysis for Individual and organizational development.

Unit 3: Contemporary Issues: Potential appraisal, Competency mapping & its

linkage with Career Development and Succession planning,
Balance score card (used for strategy implementation and evaluation): Introduction and
Applications, Advantages and limitations.
 AKTU MBA III SEM SYLLABUS
Code: KMBHR02 Performance and Reward Management
Contd..
Unit 4: Reward System: Compensation- Definition, Function, and
significance. Job evaluation: Methods of job evaluation, Inputs to job
evaluation, Practical implication for technical/non-technical and
executive/managerial positions and significance of wage differentials.

Unit 5: Compensation: Method of pay and Allowances,

 Pay structure: Basic Pay, DA, HRA, Gross Pay, Take home pay etc.
 Incentive schemes; Methods of payment: Time and piece rate.
 Fringe benefits & other allowances: Overtime, City compensatory, Travelling .
 Regulatory compliance: Introductions, Wage and Pay commissions,
Overview of minimum wages Act- 1948 and Equal Remuneration Act-1976.
Profit Sharing options.
___________
 Potential Vs Performance

POTENTIAL PERFORMANCE
It indicates whether an employee will be It is the level of success one
able to take up a position and succeed in achieves in their current role by
more broad and complex roles in the future. delivering consistent results.

A high potential employee is a dynamic It means that employees possess

employee who can develop beyond existing competencies in-line with the
skills and abilities. current role.

Potential predicts the likelihood of future It explains the past and present
success. success.

High potential includes elements of High performance doesn't

performance, i.e. high potentials are highly guarantee high potential
likely to be top performers.
 Performance and Potential Appraisal

What is Appraisal
Appraisal means formal assessment, evaluation or judgment of an
employee over a period of time

Performance Appraisal   Potential Appraisal

It is related to evaluating the past It is related to assessing the

and current performance of an abilities of an employee to assume
employee through appropriate future challenging responsibilities
methods. through appropriate methods.
 
 Performance Management
Why do we need to manage Performance?
Performance of employees is like an asset of an organisation. Managing the
performance of our employees is essential for both the management (to make further
use of it) and the employees (for analysing their own strengths and weaknesses).
Performance Management is the process of ensuring that a set of activities and
outputs meets an organisation’s goals in an effective and efficient manner.
Performance Management can focus on the performance of an organisation, a
department, an employee, or the processes in place to manage particular tasks.
Performance Management is beneficial in the following ways :
1. Highlights training needs.
2. Boosts morale.
3. Helps in identifying the right employees for promotion.
4. In the development of Special task groups (teams).
5. Supports workforce planning.
6. Increases employee retention.
7. Delivers greater employee autonomy.
 Performance Management System (PMS)
Performance management system is a tool used to
- communicate the organizational goal to the employees,
- allot individual accountability towards that goal,
- tracking of the progress in the achievement of the goals assigned, and
- evaluating individual performance.

PMS reflects the individual performance of an employee, which evaluates and

keeps track of all the employees of the organization.

PMS is the systematic approach to measure the performance of employees.

Through both formal and informal processes, effective PMS helps in aligning
their employees, resources, and systems to meet their strategic objectives
with available resources (e.g. Manpower, material etc) and set the priorities.
 Performance Management System (PMS)
Actions included in performance management systems:
 Providing career development support and promotional guidance to the
employees.
 Performance management system helps in giving regular feedback and
coaching during the period of delivery of performance.
 By proper selection process, selecting the right set of people.
 Making clear a job description and employee performance plan.
 Arranging training and development programs based on the evaluations of
the performance of the employees.
 Conducting the exit interviews in order to know the reason for the
discontentment.
 Performance Management System (PMS)
Advantages of Performance Management System
1. Performance based conversation- This enables the managers to talk about the
performance of the employees individually. This may help the employees in
case he is not performing well, on the other hand appreciate him in case he
does good work.
2. It also help to identify the employee development opportunities, which could
be the crucial part of the succession planning process.
3. It rewards the employees who are good performers as employees deserving
the promotions can easily be identified.
4. The under performer can be identified and eliminated or helped improving
his performance with various training and development programs.
5. Proper maintenance of the past performance records of the employee in a
systematic order, which can be used for future references.
6. Employee himself can gauge his performance and work upon it accordingly.
 Purpose of Performance Management System (PMS)

PMS serves two  fold

purposes:

(1) to improve employees

work performance by
helping them realize and
use their full potential in
carrying out their firms
missions.

(2) to provide information

to employees and managers
for use in making work
related decisions.
 Purpose of Performance Management System (PMS)

More specifically, PMS serve

the following purposes:

1. Feedback Mechanism
PMS provide feedback to
employees therefore serve as
carriers for personal and
career development.

Performance Management
must convey to employees
how well they have performed
on established goals.
 Purpose of Performance Management System (PMS)

2. Development Concern
Once the development needs
of employees are identified,
appraisals can help establish
objectives for training
programs.

It refers to those areas in

which an employee has a
deficiency or weakness, or an
area simply could be better
through effort to enhance
performance
 Purpose of Performance Management System (PMS)

3. Documentation Concern
A performance management
system should concern itself
with the legal aspects of
employee performance.

Proper documentation of
employee performances is
recorded and stored.

Since documentation issues

are prevalent in today’s
organizations, HRM must
ensure that the evaluation
systems used support the legal
needs of the organization.
 Purpose of Performance Management System (PMS)

4. Diagnoses of Problems
related to Organization
As a result of proper
specifications of performance
levels, system can help
diagnose organizational
problems.
 Setting up of performance
standards used in evaluating
performances
 Correction in Job
Description may help in future
hiring.
 Also provide a basis for
distinguishing between
effective and ineffective
performers.
 Purpose of Performance Management System (PMS)

5. Employment Decisions
Appraisals provide legal and
formal organizational
justification for employment
decisions to promote
outstanding performers; to
weed out marginal or low
performers; to train, transfer,
or discipline others; to justify
merit benefits or no change; and
as one basis for reducing the
size of the workforce.

Thus PMS serve as a key input

for administering reward and
punishment system.
 Differences between
Performance Appraisal and Performance Management
Sl. No. Subject Performance Appraisal Performance Management

An organized way of
The complete process of
evaluating performance &
managing the human
By potential of employees for
1 resources of the
Definition their future growth &
organization is known as
development is known as
Performance Management.
Performance Appraisal.

System or Performance Appraisal is a Performance Management

2
Process system is a process.

Performance appraisal is Performance management

3 Flexibility
inflexible or static. is flexible.

Performance Appraisal is
Type of an operational tool to Performance management
4
tool improve the efficiency of is a strategic tool.
employees.
 Differences between
Performance Appraisal and Performance Management
Contd.
Sl. No. Subject Performance Appraisal Performance Management

Performance Appraisal is
Here managers are held
conducted by a Human
5 Conduction responsible for
Resource Department of
Performance management.
the organization.

In performance appraisal,
Performance management
6 Usage corrections are made
is forward looking.
retrospectively.

Performance Appraisal In opposite to Appraisal

7 Approach has an individualistic Performance Management
approach. is a generalized approach.

Performance Appraisal is Performance Management

8 Timing
carried on eventually. is an ongoing process.
 Performance Management and its Challenges
The basic objective of performance management is to develop and improve the
performance effectiveness of team members. The manager and the team member
work together to plan, monitor, review and appraise the work objectives. Some of
the major challenges in managing performance could be as follows:
 
Structural Challenges
1. Wrong Design: The PMS and its tools must fit with the specific needs of the
organization. It cannot be a copy or duplication of another organization.
2. Defining a poorly structured strategy: When the performance management
strategy is not in compliance of organisation’s goals and overall strategy, it could
not result in success.
3. Absence of Integration: The PMS has to be integrated with the strategic
planning and HRM systems as well as with the organizational culture, structure and
all other major organizational systems and processes.
4. Lack of Leadership and Management Commitment: Leadership commitment
and support is must for smooth implementation of the system. Leaders must drive
the process and make performance management an integral part of the
management.
 Performance Management and its Challenges
5. Ignoring Change Management in System Implementation: Management of
change is a vital part of implementing the system. It involves careful management
of resistance. Communication would be a major intervention and a key tool in
managing the change.
6. Incompetence: Competence to use the performance management system is
necessary to ensure smooth implementation of the system.

Implementation Challenges
7. Lack of Alignment: Sometimes the performance management system lacks
alignment between individual performance, departmental performance and
organisational delivery and so all systems default back to financial measurements.
8. Lack of Measurements: in many cases targets are set but no relevant measure
is put in place. In other cases no data can be collected or is kept as evidence to track
performance.
9. Biased Perception: Employees think that performance management process is
full of biases. The ratings are subject to the reviewer’s favouritism, and fail to take
into account the true estimate of an employee’s performance or potential.
 Performance Management and its Challenges
10. Review Period: whether performance system should be ongoing or yearly
practice must be clear and well communicated..
11. Rating Method: Normally in PMS the employees are categorised as top
(reward), middle (training) and bottom (fire) performers. But, it has drawn
criticism. HR experts have been recommending new practices and tools, but their
effectiveness is not proven yet.
12. Lack of Standardisation: There are also no clear standards on what level of
performance, trait or behaviour, the employees are measured. This leads to lack of
clarity among both parties and across the organization, resulting in ineffective and
inaccurate system
13. Managing of the performance system: Managing a performance system in an
organisation requires a disciplined framework; it requires the organisation to work
off one master plan broken down into relevant parts and areas of responsibility.
14. Managing poor performance: If poor performance is not managed on time, it
will leads to lack of valid measurements and the collection of required evidence and
measurement data.
 Effective Appraisal System and Criteria (KRA, KSA, KPI)
Effective Performance appraisal is a systematic method of obtaining, analyzing a
recording information about a person doing a specific job, rather than assessing the
job itself as in the case of job analysis. Performance appraisal is the assessment of
the real and relative worth of the employees in a systematic and subjective way.
Characteristics of Effective Performance Appraisal:
1. The system must be bias-free: The evaluator must be objective and the
methods of appraisal must be fair and equitable. The atmosphere must be that of
confidence and trust.
2. It must be relevant: It should only measure behaviour that are relevant to the
successful job performance and not any other personal traits.
3. It should be acceptable to all: The performance standards as well as the
appraisal methods should be developed by joint participation and joint
collaboration.
4. It should be reliable; dependable; stable and consistent: High reliability is
essential for correct decision-making and validation studies. It should be
sufficiently scientific, so that if an employee is evaluated by two different
evaluators, then the result should be significantly the same.
 Effective Appraisal System and Criteria (KRA, KSA, KPI)
5. It must be able to objectively differentiate between a good employee and an
ineffective employee: Rating an employee average does not adequately indicate the
degree of effectiveness. So the technique must be sufficiently sensitive to pick up
the difference between an effective and an ineffective employee.
6. It must be practical, sound, clear and unambiguous so that all parties
concerned understand all its implications.
 Effective Appraisal System and Criteria (KRA, KSA, KPI)
Key Result Areas (KRA)
Definition: Key result areas or KRAs refer to the general metrics or parameters
which the organization has fixed for a specific role. The term outlines the scope of
the job profile, and captures almost 80%-8% of a work role.
Description: Key result areas (KRAs) broadly define the job profile for the
employee and enable them to have better clarity of their role. KRAs should be well-
defined, quantifiable, and easy to measure. It also helps employees to align their
role with that of the organization.
A key result area (KRA) is an strategic factor either internal to the organization or
external, where strong positive results must be realized for the organization to
achieve its strategic goal(s), and therefore, move toward realizing the organization’s
longer term vision of success.  Key result areas are sometimes referred to “critical
success factors”  or “key drivers of success.”
   Once 6-9 KRAs are defined, a leadership team can move on to spelling out (and
eventually selecting) a set of feasible strategy alternatives for positively impacting
each Key Result Area.  These strategies can then be incorporated into the
organization’s long term strategic plan with appropriate responsibilities and time
frames assigned.
 Key Result Areas (KRA) Contd..
KRAs are broad categories or topics on which the employee has to concentrate
during the year. For example, an employee who is working at a managerial level in a
manufacturing company would have a different KRA than somebody who is in a
technology firm.
A manager who is working in a manufacturing firm would have to focus on
maintaining the budget of the department, safety of the employees, coordination
with different departments, training, reporting as well as introducing new
technologies to improve productivity.
The next step is to define objectives and standards for each KRA which should be
easily quantifiable. The employee should have a clear understanding of his/her
KRAs to perform his/her tasks efficiently.
Key result areas are those areas in which you have to take complete ownership. The
first step is to list out daily activities which could be part of the KRAs. In some
organization even a team meeting everyday is part of a manager’s KRA.
So, KRAs could be vary from organization to organization and from one work
profile to another. There are no set rules to define KRAs, but broadly they sum up
the job profile as well as the key impact areas on which the employee is expected to
deliver.
 Key Performance Indicator (KPI)
A KPI is a measurable value that demonstrates how effectively a company is
achieving key business objectives. Organizations use key performance indicators at
multiple levels to evaluate their success at reaching targets. High-level KPIs may
focus on the overall performance of the enterprise, while low-level KPIs may focus
on processes or employees in departments such as sales, marketing or a call center.
Formulation of KPIs : Firstly your team should start with the basics and
understand what your organizational objectives are, how you plan on achieving
them, and who can act on this information. This should be an iterative process that
involves feedback from analysts, department heads and managers.
As these facts unfolds, you will gain a better understanding of which business processes
need to be measured with KPI and with whom that information should be shared.
Effectiveness of KPI : KPI is as valuable as the action it inspires. Too often,
organizations blindly adopt industry-recognized KPIs and then wonder why that KPI
doesn’t reflect in their own business and fails to affect any positive change.
An important aspects of KPIs is that they are a form of communication. As such,
they abide by the same rules and best-practices as any other form of communication.
Concise, clear and relevant information is much more likely to be absorbed and
acted upon. KPIs are an effective tool to help build better performing teams.
 Comparison between KPI & KRA

BASIS FOR COMPARISON KPI KRA

Key performance
indicator (KPI) means a Key result area (KRA),
mechanism used to alludes to the sector of
represent how well the outcome within the
Meaning
company is able to reach business organization, for
the business goals. which the department or
unit is responsible

What is it? It is a metric. It is a strategic factor.

Nature Quantitative Qualitative

Evaluates the success

Outlines the scope of the
Use towards goals at various
job or product.
levels.
 KNOWLEDGE, SKILL, ABILITIES (KSA)
Managing employee performance is a key concern for every employer. The measure of
success and method for harnessing employee performance to align with business needs
will vary from employer to employer as well as being dependant on industry sector.
Whilst employers will seek to tailor their performance management systems to their own
operations. Employers in KSA need to be mindful of the provisions in the Ministry of
Labour and Social Affairs’ Model Work Regulations regarding performance management.
The Model Work Regulations are available for employers to adopt as a whole or to
adopt with modifications provided any amendments receive prior approval from the
Ministry of Labour and Social Affairs.
Broadly the Model Work regulations provide for the following:
Every employee should be assessed formally and in writing at least once a year;
with the appraisal covering the following:
The individual’s ability to perform work and their level of proficiency;
Employee’s conduct, cooperation with colleagues, customers, and managers; and
The individual’s punctuality.
Each employee should be given a performance ranking based on five performance
gradings which include categories along the lines of high performance, upper
intermediate, intermediate, lower intermediate, and poor.
 UNIT 2 Managing Performance
Process of Performance Appraisal
A meaningful performance appraisal is a two-way process that benefits both the
employee and the manager.
For employees, appraisal is the time to find out how the manager thinks they are
performing in the job.
For a manager, a formal appraisal interview is a good time to find out how
employees think they are performing on the job. The planning appraisal strategy
has to be done:
Before the Appraisal
1. Establish key task areas and performance goals.
2. Set performance goals for each key task area.
3. Get the facts.
4. Schedule each appraisal interview well in advance.
During the Appraisal
1. Encourage two-way communication.
2. Discuss and agree on performance goals for the future.
 UNIT 2 Managing Performance
Process of Performance Appraisal Contd...
During the Appraisal
3. Think about how you can help the employee to achieve more at work.
4. Record notes of the interview.
5. End the interview on an upbeat note.
After the Appraisal
1. Prepare a formal record of the interview.
2. Monitor performance.
3. Feedback session – tell and sale, tell and listen, problem solving.
4. Developing need based training program.
5. Working out reward based incentives.
 UNIT 2 Managing Performance

Methods of Managing Performance of all the Levels of Management

Performance Appraisal For Employees at Different Levels
Two things to be noted and evaluated for the purpose of appraisals are:
Performance in accomplishing goals, and
Performance as managers
(I) Performance in accomplishing goals
Managers are responsible for the performance of their teams as a whole.
Performance in accomplishing goals would mean to look at the completion or
achievement of the goals set for a team of employees which is being assigned to or
working under a particular manager. The best measuring criteria for a manager are
hi goals, his plans of course of action to achieve them and the extent of
achievement of the goals.
(II) Performance as managers
The responsibilities of managers include a series of activities which are concerned
with planning, organizing, directing, leading, motivating and controlling. Managers
can be rated on the above parameters or characteristics
 UNIT 2 Managing Performance

Criteria for measuring performance at different levels:

The criteria for measuring performance changes as the levels of the employees and
their roles and responsibilities change.

For top level management

a) Degree of organizational growth and expansion
b) Extent of achievement of organizational goals
c) Contribution towards the society
d) Profitability and return on capital employed

For middle level managers

e) Performance of the departments or teams
f) Co-ordination with other departments
g) Optimal use of resources
h) Costs Vs. revenues for a given period of time
i) The communication with superiors and subordinates
 UNIT 2 Managing Performance
Evaluating the performance at the Managerial Levels
An evaluation of the manager—a process hated by most and ignored by others—
should be an opportunity to both develop a manager’s knowledge and move a
community forward.
 These five essential components for evaluating the manager:
 Well-defined mission and vision.
 Clearly defined goals and expectations.
 Defined roles and responsibilities.
 Positive working relationships.
 A method to evaluate the progress and success of the manager.
Managers’ evaluations usually require narrative responses, as well as goal-setting
for identifying milestones that coincide with organizational goals and objectives.
Managers have two primary job functions – overseeing departmental processes and
managing the employees in their departments.
Therefore, performance appraisals for managers must address both areas with equal
attention to past performance and future performance and development goals.
 UNIT 2 Managing Performance
Evaluating the performance at the Managerial Levels
1) Obtain the manager’s employment file and review past performance appraisals
as well as interim feedback from directors throughout the evaluation period.
2) Review the manager’s compensation records for information related to cash
bonuses, incentives or other rewards for outstanding performance.
3) Gather employee responses from workplace surveys that relate to
organizational leadership. Determine if there exist any comments about the
manager’s performance that were submitted anonymously through employee
opinion surveys.
4) Read the manager’s job description and highlight specific activities for which
they are responsible. Make a list of job duties in the two primary areas of
leadership: overseeing department functions and managing employees.
5) Access all records necessary for a complete evaluation of the manager’s
departmental productivity, including employee work logs, attendance records,
disciplinary review and corrective action.
 UNIT 2 Managing Performance
Evaluating the performance at the Managerial Levels
 
6) Draft a narrative about three areas of performance – functional expertise, core
competencies and professional traits.
Functional expertise refers to job knowledge and the manager’s ability to
perform the actual functions of their job, such as a human resources manager
who must be knowledgeable about labor and employment law.
Core competencies are the basic qualifications a manager must have to
perform her job functions. Examples of core competencies are analytical and
critical thinking processes, decision-making capabilities and written
communication skills.
Professional traits include characteristics such as integrity, commitment and a
strong work ethic.
 7) Prepare a list of suggested performance goals to present to the manager during
the performance appraisal meeting. The goals should align management duties with
organizational goals.
Management by Objective (MBO): (Peter F. Drucker)
It is actually a process in which all the superior and subordinate of an
organisation jointly identify its common goals, define each individual’s major
areas of responsibility in terms of the results expected of him, being expected
from him and use these measures as guide for operating the unit and assessing
the contributions of each individual in the organisation.
It requires the manager to get specific measurable goals with each employee and
then periodically discuss his or her progress towards these goals. It is a method
by which managers and subordinates plan, organize, communicate, control and
debate over the performance.
MBO is, thus, a method of mutual goal-setting, measuring progress towards the
goals, taking action to assure goal attainment, feedback, and participation.
It is a result-oriented philosophy, enabling an employee to measure progress toward
a goal which the employee often has helped to set.
In the goals-setting phase of MBO, a superior and subordinate discuss job
performance problems and a goal is agreed upon. Along with mutual goal-setting,
the performance review session between the superior and subordinate takes place
regularly to evaluate progress towards specified goals.
Management by Objective (MBO): (Peter F. Drucker)
The key features of Management By Objectives are as under:
1. Superior and subordinate get together and jointly agree the list the principal duties
and areas of responsibility of the individual’s job.
2. The subordinate sets his own short-term performance goals or targets in cooperate
with his superior.
3. They agree upon criteria for measuring and evaluating performance.
4. From time to time, as decided upon, the superior and subordinate get together to
evaluate progress towards the agreed-upon goals. At those meetings, new or
modified goals are set for the ensuing period.
5. The superior plays a supportive role. He tries, on a day-to-day basis, to help the
subordinate achieve the agreed upon goals, he counsels and coaches.
6. In the appraisal process, the superior plays less of the role of a judge and more of
the role of one who helps the subordinate attain the organization goals or targets.
7. The process focuses upon results accomplished and not upon personal traits.
Management by Objective (MBO): (Peter F. Drucker)
MBO programme consists of four main steps:
a) Goal Setting: Here superior and subordinate jointly establish goals, which each
individual is to attain.
b) Performance Standards: Standards are set for the employees as per the
previously arranged time period. When the employees starts performing their
jobs, they came to know what is to be done, what has been done, and what
remains to be done.
c) Comparison: In the third step, actual levels of goals attained are compared with
the goals agreed upon. This enables the evaluator to find out the reasons for
variation between the actual and standard performance of the employees.
d) Periodic Review: Finally corrective measure is initiated when actual
performance deviates from the standards established. The purpose of this
review is not to degrade the performer, but to aid his/her future performance.
Management by Objective (MBO): (Peter F. Drucker)
MBO has many benefits, since it:
1. Providing a way for measuring objectively the performance of subordinates.
2. Co-ordinates individual performance with company goals.
3. Clarifies the job to be done and defines expectations of job accomplishment.
4. Improves superior-subordinate relationship through a regular dialogue.
5. Increases competence, personal growth, & opportunity for career development.
6. Aids in an effective overall planning system.
7. Supplies a basis for more equitable salary determination, incentives & bonuses.
8. Develops factual data for promotion criteria.
9. Stimulates self-motivation, self-discipline and self-control.
10. Serves as a device for integration of many management functions.
Management by Objective (MBO): (Peter F. Drucker)
MBO has certain potential problems such as:
1) Management Support: It often lacks support & commitment of top
management.
2) Setting of unclear & un-measurable objectives creates problem for both the
employee to perform and superior to evaluate the performances.
3) Time consuming: Activities like goal setting and measuring performances
requires a greater time period to give realistic results.
4) Tug of War: Sometimes setting objectives with the subordinate turns into tug of
war in the sense that the superior pushes for higher quotas and the subordinates
push in lower quotas of performances.
5) Lack of Trust: MBO is likely to be ineffective in an environment where
management has little trust in its employees.
6) More Paper work: Its implementation creates excessive paperwork if it is not
closely monitored.
7) Short Term Planning: It concentrates too much on the short run at the expense
of long-range planning.
360o Performance Appraisal
An appraisal made by top management, immediate superior, peers, subordinates,
self and customers is called 360 Degree Appraisal.
This method was first developed by General Electric Company of USA in 1992.
This is a new concept in performance appraisal, where the feedback is
collected from all around-the employee, the superior, the subordinates, the peer
group, the clients and the customers.
Thus an employee is appraised by superior, subordinates, peers, clients and
customers, with whom he interacts in the course of his job performance.
The evaluation is very comprehensive in terms of the employee’s skills, abilities,
styles, and job-related competencies and is done by computerized software
systems, which prepares individual reports. These reports are then presented to
the employee being rated. They then meet the some or any of the appraiser and
share information they feel as important and useful in developing a self
improvement plan.
This method is more useful for training and development requirements, rather than
for pay increase.
360o Performance Appraisal
360o Performance Appraisal
The six parties involved in 360 degree appraisal are :
Top Management : The top management normally evaluates the middle level
managers. However, in a small organization, they also evaluate the performance of
the lower level managers and senior employees.
Immediate Superior : The immediate superior is in a very good position to
evaluate the performance of his subordinates. This is because they have direct and
accurate information about the work performance of their subordinates.
Peers / Co-workers: Peer or colleagues also evaluate each other’s performance.
They work continuously with each other, and they know each other’s performance.
Peer evaluation is used mostly in cases where team work is important.
Subordinates: The Subordinates can also evaluate the performance of his superior.
Now-a-days students are asked to evaluate the performance of their teachers.
Self Appraisal: In the self-appraisal, a person evaluates his own performance. He
should be honest while evaluating himself. This results in self-development.
360o Performance Appraisal

The six parties involved in 360 degree appraisal are :

Customers :Customers can also evaluate the performance of the employees who
interacts with them. This evaluation is best because it is objective. It is also given a
lot of importance because the customer is the most important person for the
business. Organizations use customer appraisals to improve the strengths and
remove the weaknesses of their employees.
Appraisal Panel: In addition to these six parties, appraisal can also be done by an
Appraisal Panel. This panel consists of 5 to 6 different types of members. Outside
Consultants are also used for conducting appraisals. In some cases, Personnel
Department also conducts an appraisal of employees and managers.
360o Performance Appraisal
This system has the following advantages:
i. Higher validity and reliability of the evaluation
ii. Self evaluation by the employees gets compared with the perception of others
iii. Helps in maximizing employee potential in the face of challenges.
iv. There is no “bias” or “halo effect”. Hence the evaluation will become more
realistic.
Advantages of 360 Degree Feedback System?
1. Creates Self-Awareness: 360 degree feedback gives employees a much better
self-awareness of their own strengths and weaknesses, which motivates them
to take up the journey towards self-improvement. It has definitely helped our
team to develop their skills.
2. Identifies Training Gaps: Once participants finish answering survey questions,
the responses straight away get collected in the survey repository. So, if an issue is
identified across a unit, training programs can be deployed to bridge those gaps.
360o Performance Appraisal
3. Strengthens Leader’s Connect with Management : 360 feedback gives
leaders a laser focused approach to their development. It also helps align a leader’s
priorities with their senior management as the 360 provides clear data on where the
leader is spending their time.
4. Gives Insight into Employee’s Work: the main objectives of 360 degree
performance appraisal for employers is to really understand an employee’s role in
the company, beyond what they see in the outcomes of tasks. It helps higher-ups
understand how the worker fits in with the team.
5. Increases Transparency Within the Organization: it provides increased
transparency which enables all individuals in the organization to further develop
trust between members.

In India, companies like Reliance Industries, Wipro Corporation, Infosys

Technologies, Thomas cook etc. have been using this method of appraising the
performance of the employees.
360o Performance Appraisal
Disadvantages of 360 Degree Feedback?
1. Sidelines Positive Feedback : some managers can be tempted to use 360 degree
feedback to concentrate on finding negative aspects of an employee’s performance,
rather than celebrating and developing positive aspects.
2. Garners Dishonest Reviews : If there is a lack of trust in the people
administering the 360-degree appraisal, no one will give honest feedback.
Respondents will respond only to what they think you want to hear, making the
feedback useless.
3. Increases Distrust in the Leader : if a leader does not communicate what they
learned or what they will do to address the feedback, then those that participate
feel that it was just a useless exercise and nothing will change. That depletes trust
in the leader and the organization and hurts engagement.
4. Time Consuming Process : it takes up a lot of time, both from fellow team
members and from HR. Other staff members need to take the time to answer
questions and to hopefully do so thoughtfully, while supervisors and HR
employees need to then sift through all of the material in order to actually be able
to use it.