Performance Appraisal

and
Compensation Systems
Meaning of 'Performance Appraisal

 Evaluate an employee’s
 Skills,
 Achievements
 Growth,
 Or lack thereof.
360-degree performance appraisal
 A 360-degree performance appraisal

 An employee evaluation tool that

includes

 Feedback from a Supervisor

 Subordinates

 Colleagues

 Customers.
What points are needed in making a performance
appraisal?
 Necessary key points for performance
appraisals include:
 Rating performance against specific position
expectations
 Identification of areas for improvement
 Establishment of clear performance goals
going forward
 An opportunity for the person being evaluated
to review
 Comment and sign the appraisal.
Main components of an employee evaluation form?
 The main components of an employee evaluation form are
 Accomplishments
 Service
 Relationships
 Accountability
 Dependability
 Adaptability
 Flexibility
 Decision making and problem solving
 Additional portions of the evaluation form may cover
 Goals and objectives
 Job duties
 Employers expectations.
 Objectives of Performance Appraisal
 To maintain records to determine compensation packages,
wage structure, salaries raises, etc.
 To identify the strengths and weaknesses of employees to
place right men on right job.
 To maintain and assess the potential present in a person for
further growth and development.
 To provide a feedback to employees regarding their
performance and related status.
 It serves as a basis for influencing working habits of the
employees.
 To review and retain the promotional and other training
programs.
 Advantages of Performance Appraisal
 Promotion
 Compensation
 Employees Development
 Selection
Validation(justification)
 Communication
 Motivation
 Limitations of Performance Appraisal
 Halo effect: Superior appraises the person on certain
positive qualities only. The negative traits are not considered.
 Horn effect: Superior appraises on certain
the negative qualities of the employee are considered and
based on this appraisal is done.
 Central tendency: Superior gives an appraisal by giving
central values. This prevents a really talented employee from
getting promotion.
  Leniency and strictness : Employee who really deserves
promotions may lose the opportunity due to strict bosses
while those who may not deserve may get benefits due to
lenient boss.
Limitations of Performance Appraisal
 Spill over effect: Employee is judged by the boss
depending upon the past performance.
 Fear of losing subordinates and spoiling relations:
Many bosses do not wish to spoil their relations with their
subordinates. Therefore when they appraise the employee
they may end up giving higher grades which are not
required.
 Goodwill and techniques to be used: Sometimes a very
strict appraisal may affect the goodwill between senior
and junior.
 Paper work and personal biased: Personal bias and
prejudice result in bosses favoring certain people and not
favoring others.
Performance Standard and Measures
Developing Performance Standards : A performance
standard is a management-approved expression of the
performance threshold(s), requirement(s), or
expectation(s) that must be met to be appraised at a
particular level of performance.
General Measures : Performance standards should be
objective, measurable, realistic, and stated clearly in
writing (or otherwise recorded).
 General measurers used to measure employee
performance include the following:
Quality addresses how well the work is performed
and/or how accurate or how effective the final product is.
Quantity addresses how much work is produced.
 Performance Standard and Measures

 Timeliness addresses how

quickly, when or by what
date the work is produced.
 Cost-Effectiveness
addresses dollar savings to
the Government or working
within a budget.
 ETHICS IN PERFORMANCE APPRAISAL
 Reliability and validity : Appraisal system should provide
consistent, reliable and valid information and data, which
can be used to defend the organization-even in legal
challenges.
 Job Relatedness: The appraisal technique should measure
the performance and provide information in Job related
activities/areas.
 Standardization: Appraisal forms, procedures,
administration of techniques, rating etc. should be
standardized as appraisal decisions affect all employees of
the group
 Practical Viability: The techniques should be practically
viable to administer, possible to implement and economical
regarding cost aspect.
ETHICS IN PERFORMANCE APPRAISAL
 Legal Sanction : It should have compliance with the legal
provisions concerned of the country.
 Training and Appraisers : It would be useful to provide
training to appraisers namely insights and ideas on rating,
documenting appraisals, and conducting appraisal interviews.
 Open Communication: Most employees want to know how
well they are performing on the job. A good appraisal system
provides the needed feedback on a continuing basis.
 Employee Access to Results: Employees should know the
rules of the game. They should receive adequate feedback on
their performance. If performance appraisals are meant for
improving employees performance, then withholding
appraisals results would not serve any purpose.
 Performance Appraisal Systems in Organizations

 Organizations use a variety of methods for evaluating employee

performance. There are so many types of performance management
methods, understanding how each of them works will help
determine the best one to use within your organization.
 Management by Objectives : Management by objectives, or MBOs,
is a type of performance management system that requires the
manager and employee to identify employee goals as they relate to
the overall business.
 Forced Distribution : Forced distribution--sometimes referred to as
forced ranking--requires managers to determine three groups into
which their employees fall according to performance. The three
groups include performance rankings, usually called "20-70-10."
This means an organization has 20 percent of its work force in the
top rank, average performers compromise roughly 70 percent of the
work force and poor performers comprise the bottom 10 percent.
Performance Appraisal Systems in Organizations
 360 Degree Feedback : This type of performance
appraisal method solicits input from employees of all
ranks who interact with the employee being evaluated.
 Performance Ranking : It’s require managers to
evaluate employees against each other rather than how
well the employee performs in relationship to
company goals and objectives.
 Combined Manager-Employee Appraisal : This
employee appraisal combines the employee's self-
evaluation and manager feedback to construct a
balanced performance appraisal.