What is 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 employee¶s 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. ‡ Evaluating factors includes job knowledge, quality and quantity of output, leadership qualities, supervision, co-operation, dependability, judgment, versatility, health, etc.

Basic Concepts in Performance Management and Appraisal
Performance Appraisal and Performance Management

Performance Appraisal:
Setting work standards, assessing performance, and providing feedback to employees to motivate, correct, and continue their performance.

Performance Management:
An integrated approach to ensuring that an employee¶s performance supports and contributes to the organization¶s strategic aims.

Comparing Performance Appraisal and Performance Management
‡ Performance appraisal
± Evaluating an employee s current and/or past performance relative to his or her performance standards.

‡ Performance management
± The process employers use to make sure employees are working toward organizational goals.
‡ Employees individual goals point towards overall strategic direction

Why Performance Management?
y Increasing use by employers of performance management reflects:
The popularity of the total quality management (TQM) concepts. The belief that traditional performance appraisals are often not just useless but counterproductive. The necessity in today s globally competitive industrial environment for every employee s efforts to focus on helping the company to achieve its strategic goals.

Objectives of Performance Appraisal
y To effect promotions based on competence and performance. y To confirm the services of probationary employees upon their completing the probationary period satisfactorily. y To assess the training and development needs of employees. y To identify employee strengths and weaknesses, are useful for career planning. y To correct deficiencies and reinforce things done correctly. y To decide upon a pay raise where pay scales have not been fixed.

Multiple Purposes of PA
General Purpose Developmental Issues 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

Administrative Uses/ Decisions

Organizational Maintenance HR Planning Objectives 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

Uses of Performance Appraisals
‡ Performance Improvement. ‡ Compensation Adjustments. ‡ Placement decisions. ‡ Training and development needs. ‡ Career planning and development. ‡ Deficiencies in staffing process. ‡ Informational inaccuracies. ‡ Job design error. ‡ Avoidance of discrimination.

Who Should Do the Appraising?

Immediate Supervisor



Potential Appraisers


Rating Committee

360-Degree Feedback

Who does Performance Appraisal?
y Supervisors
Usually do the actual appraising. Must be familiar with basic appraisal techniques. Must understand and avoid problems that can cripple appraisals. Must know how to conduct appraisals fairly.
x Give the employee advance notice x Give the employee an advance copy of the appraisal

x Review prior performance appraisals x Review any notes taken regarding employee s performance x BE FAMILIAR with the employee s job
x What projects they are working on, etc.

(cont d)
y HR department
Serves a policy-making and advisory role. Provides advice and assistance regarding the appraisal tool to use. Prepares forms and procedures and insists that all departments use them. Responsible for training supervisors to improve their appraisal skills. Responsible for monitoring the system to ensure that appraisal formats and criteria comply with laws and are up to date.

Performance 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.

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
What Methods ? When To Evaluate? What To Evaluate? How To Solve? Formal Vs Informal Whose Performa nce? Who Are the Raters? What Problems ?

Appraisal Design

Designing the Appraisal Tool Cont d.
‡ What to measure?
± Work output (quality and quantity) ± Personal competencies ± Goal (objective) achievement

‡ How to measure? (Appraisal Methods)

Appraisal Methods
‡ Past Oriented Appraisal Methods ‡ Future Oriented Appraisal Methods

Past Oriented Appraisal Methods
Graphic rating scale method
A scale that lists a number of traits and a range of performance for each. The employee is then rated by identifying the score that best describes his/her level of performance for each trait. Performance criterion such as dependability, output, attendance, attitude, co-operation, and like are rated on the scale ranging from excellent to poor.


adaptability  relatively ease of use  low cost

rater s biases are likely to influence evaluation especially in case of subjective performance criterions.

Graphic Rating Scale with Space for Comme nts

Alteration Ranking method
Ranking employees from best to worst on a particular trait

Paired comparison method
± Ranking employees by making a chart of all possible pairs of employees for each trait and indicating which is the better employee of the pair. ± The appraiser compares each employee with every other employee, one at a time.

Alternation Ranking Scale

Ranking Employees by the Paired Comparison Method

Note: + means ³better than.´ í means ³worse than.´ For each chart, add up the number of 1¶s in each column to get the highest-ranked employee.

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

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 is forced to select statements which are readymade. Example: Typical statements are Learns fast 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
Similar to grading on a normal curve; predetermined percentage of raters are placed in various performance categories Example:
15% high performers 20% high-average performers 30% average performers 20% low-average performers 15% low performers

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 people 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.

Behaviorally anchored rated scales (BARS)

Steps to develop a BARS
1. 2. 3. 4. 5. Generate critical incidents Develop performance dimensions Reallocate incidents Scale incidents Develop final instrument
A more accurate gauge Clearer standards Feedback Independent dimensions Consistency

Advantages of using a BARS

Example of a Behaviorally Anchored Rating Scale for the Dimension Salesmanship Skill

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. Typically may have following itemsAttendance, 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, Disadvantages
Filled on a 4-point / 5-point grade scale. Integrity and justification are considered separately.

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.

Future Oriented Appraisal Methods
y This technique is used because of following reasonsIt is not enough if only the past performance is assessed. Performance in the coming days is equally important.

y Commonly used techniques:
Management by Objectives Psychological Appraisals Assessment Centers 360-Degree Feedback

Management by objectives (MBO) method
Involves setting specific measurable goals with each employee and then periodically reviewing the progress made. Usually begins with organization wide goals and works its way down to individual goals. y Involves setting specific measurable goals with each employee and then periodically reviewing the progress made.
1. 2. 3. 4. 5. 6. Set the organization s goals. Set departmental goals. Discuss departmental goals. Define expected results (set individual goals). Performance reviews. Provide feedback.

Drawbacks y Biggest problem with MBO s is when they are vague or unclear
Not applicable for all jobs in all organizations

Psychological Appraisals y When psychologists are used for evaluations, they asses an individual s future potential and not past performance. y Appraisal consists of in-depth interviews, psychological tests, discussions with supervisors and a review of other evaluations. Assessment Centers y An assessment center is a central location where managers may come together to have their participation in jobrelated exercises evaluated by trained observers. y 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. x It facilitates greater self-development of the employee. x 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

Advantages and Disadvantages of Appraisal Tools

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.

Potential Appraisal Problems/ 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/ Bias / Personal Prejudice The tendency to allow individual differences such as age, race, and gender to affect the appraisal ratings employees receive. 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. 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.

A Graphic Rating Scale with Unclear Standards

Unclear standards An appraisal that is too open to interpretation.

Note: For example, what exactly is meant by ³good,´ ³quantity of work,´ and so forth?

How to Avoid Appraisal Problems
y Learn and understand the potential problems, and the solutions for each. y Use the right appraisal tool. Each tool has its own pros and cons. y Train supervisors to reduce rating errors such as halo, leniency, and central tendency. y Have raters compile positive and negative critical incidents as they occur.

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.

4. Appraise the Performance
‡ ‡ ‡ ‡ ‡ Quantity of Output Quality of Output Timeliness of Output Presence at Work Cooperativeness

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.

5. Performance Management
‡ Getting feedback is not enough ‡ So conduct
± Performance Interview ± Archiving Performance Data ± Use Appraisal Data

The Appraisal Interview

Satisfactory²Not Promotable

Types of Appraisal Interviews


The Appraisal Interview
y How to conduct the appraisal interview
Talk in terms of objective work data. Don t get personal. Encourage the person to talk. Don t tiptoe around.

y How to handle a defensive subordinate
Recognize that defensive behavior is normal. Never attack a person s defenses. Postpone action. Recognize your own limitations.
x You are their boss not their shrink

The Appraisal Interview (cont d)
y How to criticize a subordinate
Do it in a manner that lets the person maintain his or her dignity and sense of worth. Criticize in private, and do it constructively. Avoid once-a-year critical broadsides by giving feedback on a daily basis, so that the formal review contains no surprises. Never say the person is always wrong Criticism should be objective and free of any personal biases on your part.

The Appraisal Interview (cont d)
y How to ensure the interview leads to improved performance
Don t make the subordinate feel threatened during the interview. Give the subordinate the opportunity to present his or her ideas and feelings and to influence the course of the interview. Have a helpful and constructive supervisor conduct the interview. Offer the subordinate the necessary support for development and change.

The Appraisal Interview (cont d)
y How to handle a formal written warning
Purposes of the written warning
x Purpose is to CHANGE BEHAVIOR x To shake your employee out of bad habits. x Help you defend your rating, both to your own boss and (if needed) to the courts.

Written warnings should:
x x x x Identify standards by which employee is judged. Make clear that employee was aware of the standard. Specify deficiencies relative to the standard. Indicates employee s prior opportunity for correction.

6. Archiving Performance Data
‡ Store the appraisal data so that at any point in future, the information can be retrieved and used

7. Use of Appraisal Data
Data and information outputs of a performanceappraisal program can critically influence the coveted employer-employee reward opportunities. It could be useful in following areas of HRM: Remuneration administration Validation of selection programs Employee training and development programs Promotion, transfer and lay-off decisions Grievance handling and discipline programs HR planning

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