Module-7 Performance Management & Appraisal

Performance Appraisal :
Performance Appraisal (PA) refers to all those procedures and standards that are used to evaluate the personality, performance, potential, of members and groups. It is an objective assessment of performance against well defined benchmarks. Builds employee database It is directional ,evaluative ,periodical and formal. Appraisal data is archived and used for organizational development.

Performance Management


 

Performance management involves designing and executing a set of HR activities to assess and improve performance. It is ongoing ,facilitative and less formal. It improves and employee performance and development.

Nature of Performance Performance Management Management



Processes used to identify, encourage, measure, evaluate, improve, and reward employee performance


Provide information to employees about their performance. Clarify organizational performance expectations. Identify the development steps that are needed to enhance employee performance. Document performance for personnel actions. Provide rewards for achieving performance objectives. 114

 

 

Performance Management Linkage

Figure 111

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Components of Effective Performance Management

Figure 112

116

Difference Between Performance Management and Performance Appraisals



Performance Management


Performance Appraisal


Processes used to identify, encourage, measure, evaluate, improve, and reward employee performance.

The process of evaluating how well employees perform their jobs and then communicating that information to the employees.

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Relationship between job analysis and performance appraisal:

Job analysis performance standards Translate job Into levels of To acceptable Or unacceptable performance performance appraisal Describes the Job relevant strengths and weakness of Each individual

Describes work & Personnel Requirement Of a particular job

Characteristics
    

It is a step by step process It examines the employee strengths and weaknesses Scientific and objective study Ongoing and continuous process Secures information for correct employee related decision-making.

Needs and Objectives:

     

Provides feedback about employees Helps in building performance database Diagnose the Strengths & Weaknesses of individuals Provides coaching, counseling, career planning to subordinates Develop positive relation building and reduces grievance Facilitates research in personnel management

Appraisal Benefits


Appraisals offer employees:

 Direction  Feedback  Input  Motivation

Appraisal Benefits(Contd.)


Appraisals offer the company:

 Documentation  Employee  Feedback  Legal

Development

protection  Motivation system

Why Appraisals Are Important

Recognize accomplishments Guide progress Improve performance

Why Important (cont.)

   

Review performance Set goals Identify problems Discuss career advancement

Steps in performance appraisal

Establishing job standards Designing an appraisal programme Appraise performance Performance interview Use appraisal data For appropriate purpose

Process of PA
Taking corrective measures Setting performance standards Communicating standards

Discussing results Comparing standards

Measuring standards

Uses of Performance Appraisal

     

organizational planning Human Resource Planning Organizational Effectiveness Compensation Management Placement adjustment decisions To identify training and development needs of the employees For Career planning and development
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Conflicting Uses for Performance Appraisal

Figure 114

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Developmental Uses of Performance Appraisal

Performance Appraisal

Administering Wages and Salaries

Giving Performance Feedback

Identifying Strengths and Weaknesses

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Typical Division of HR Responsibilities: Performance Appraisal

Figure 115

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Issues in appraisal system

Formal and informal What methods? Whose performance?

When to evaluate? Appraisal Design

Who are the raters?

What to evaluate? How to solve?

What problems?

How PA contribute to firms competitive advantages

Improving performance Values and behavior Competitive advantage Minimizing dissatisfaction And turnover Ensuring legal competence Making correct decision

Problems in performance appraisal

1.

Errors In rating
       

Halo effects Stereotyping Central tendency Leniency and Strictness/severity error Contrast error Personal bias Recency effect False attribution

Problems in performance appraisal (Contd)

2. 3. 4. 5. 6.

Incompetence Negative approach Multiple objectives Resistance Lack of knowledge

Essentials of an effective appraisal system

         

Mutual trust Clear objectives Standardizations Training Job relatedness Documentation Feedback and participation Individual differences Post appraisal review Review and appeal

Appraisals and Discrimination

Appraisal Discrimination Act and other fair employment Laws are applicable to PA on Failure to communicate standards  Failure to give timely feedback  Failure to allow employees to correct performance  Inconsistency in measuring performance  Failure to document performance objectively

Appraisal Forms
    

Define performance expectations Describe measurement tools Use a rating system Cover specific examples Set measurable goals

Measure Performance
     

Measurement systems need to be: Specific Fair Consistent Clear Useful

Measure Performance (cont.)

Systems can be:  Numerical  Textual  Management by Objective (MBO)  Behavior oriented

Set Goals.
     

Based on job requirements Realistic Measurable Observable Challenging Prioritized

Types of feedback
  

Formal appraisals Informal appraisals Open communication

Recognize Good Performance

   

Verbal Public Tangible Monetary

Identify Poor Performance

   

Act early Take the right approach Deal with employee reaction Handle continued poor performance

Discipline Poor Performance

  

Recognize problems Talk with employee Follow company policy

Performance Appraisal Methods

1 .Individual Evaluation Methods  Confidential report  Essay evaluation  Critical incidents  Checklists  Graphic rating scale  Behaviorally anchored rating scale  MBO

Methods of Performance Appraisal

Traditional Methods


    1. 2. 3.

Graphic Rating Scales(GRS)-Individual performance is compared to an absolute standard and is recorded on a scale.This method is also known as linear /simple rating scale. Ranking Method(RM)-Under this method employees are ranked as best or worst on the basis of some characteristics. Paired Comparison Method(PCM)-It is a simple method under which appraiser compares one employee in the group with other employees one at a time. Forced Distribution Method(FDM)-Under this method the raters spread their employee evaluations in a prescribed distribution on a bell-shaped curve. Checklist Methods (Simple,Weighted or forced)-Under this method the rater checks the checklist consisting of a number of statements concerning employee behaviour. In a simple checklist the employee performance is rated on the basis of the number of positive checks while negative checks are ignored. Weighted checklist involves assigning different weightage to different items in the checklist in accordance of their importance in comparison to each other Forced choice/checklist It involves preparation of a large number of statements in groups,each group consisting of four descriptive statements(tetrad) concerning employee behaviour.Two are favourable and the remaining two are unfavourable statements.The rater will not be informed about the favourable and unfavourable statements to avoid appraiser prejudice

Methods of Performance Appraisal



Critical incident method records the critical incidents of exceptional or poor performance of the employees in comparison with the preset standards Essay or free form appraisal Under this method managers write short essays describing the performance of the employees during the rating period. Group appraisal Under this method employee is appraised by a group of appraisers consisting of supervisor of the employee and other supervisors who have close contact with the working of the employee. Confidential Reports Under this method the superior ,confidentially appraises the subordinates based on his observations,judgment and intuitions .

360 Degree Performance Appraisal System

360 degree PA system is a multi-source appraisal system under which employees are appraised by     

Superiors subordinates Team members/peers Employees self-appraisal 1138 Outside sources rating employees

Multisource Appraisal

Figure 117

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Critical Incident method

Ex: A fire, sudden breakdown, accident Workers A B C D E reaction informed the supervisor immediately Become anxious on loss of output tried to repair the machine Complained for poor maintenance was happy to forced test scale 5 4 3 2 1

Checklist method
Simple checklist method Weighted checklist method Forced choice method

Simple checklist method:

Is employee regular Is employee respected by subordinate Is employee helpful Does he follow instruction Does he keep the equipment in order Y/N Y/N Y/N Y/N Y/N

Weighted checklist method

weights Regularity Loyalty Willing to help Quality of work Relationship 0.5 1.5 1.5 1.5 2.0 performance rating (scale 1 to 5 )

Forced choice method

Criteria 1.Regularity on the job Always regular Inform in advance for delay Never regular Remain absent Neither regular nor irregular Most Rating Least

Graphic Rating Scale

Continuous Rating Scale Discontinuous Rating Scale Employee name_________ Deptt_______ Raters name ___________ Date________ -----------------------------------------------------------------------Exc. Good Acceptable Fair Poor 5 4 3 2 1 _ Dependability Initiative Overall output Attendance Attitude Cooperation Total score Continuous Rating Scale

Indifferent
Attitude

Enthusiastic

No Interest

Interested

Very enthusiastic

Discontinuous Rating Scale

BARS( Behaviorally Anchored Rating Scale) Step 1. Step 2. Step 3. Step 4. Step 5. Identify critical incidents Select performance dimension Retranslate the incidents Assign scales to incidents Develop final instrument

MBO Process
   

Set organizational goals Defining performance target Performance review feedback

Performance Appraisal Methods

2.Group Appraisal
   

Ranking Paired comparison Forced distribution Performance tests Field review technique

Ranking method
Employee A B C D E Rank 2 1 3 5 4

Paired comparison method

A B C D E A + + B + C D + + + E Final Rank + 3 + + + 2 1 4 5

No of Positive evaluation Total no. of evaluation

Forced Distribution method

No. of employees 10% 20% 40% 20% 10% Excellent

poor Below average good average Force distribution curve

Field review method

Performance Dimension Leadership Communication Interpersonal skills Decision making Technical skills Motivation subordinate peers superior customer ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^

3 .Assessment Center


Under this method performance of the individuals is appraised using several techniques like in basket, role playing,case studies,simulation exercises ,structured in sight, transactional analysis,etc.

4 . Human Resource Accounting

This deals with the cost of the employees and their contributions to the organizations.Cost of the employees includes cost of manpower planning,recruitment , selection , induction ,placement ,training ,development, wages and benefits ,etc. and contribution is the money value of employee service measured in terms of labour productivity.

5. Psychological Appraisal
This is conducted to appraise the employees potential.It consists of in-depth interviews, psychological tests, consultations and discussions with employees,supervisors,sub-ordinates and peers ,reviews of other evaluations

Performance criteria for executives



For top managers

   

Return on capital employed Contribution to community development Degree of upward communication from middle-level executives Degree of growth and expansion of enterprise.

For middle level managers

   

Departmental performance Coordination among employees Degree of upward communication from supervisors Degree of clarity about corporate goals and policies

For supervisors
    

Quality and quantity of output in a given period Labor cost per unit of output in a given period Material cost per unit in a given period Rate of absenteeism and turnover of employees No of accidents in a given period

Performance Appraisal System or Process

        

Establish Performance Standards Communicate standards/expectations to the employees Measure actual performance Adjust actual performance to the environmental influence Compare the adjusted performance with that of previous performances Find deviations Communicate actual performance to employees concerned Suggest changes in job analysis and standards Follow-up performance appraisal report.

Performance Coaching and Counselling



Performance Coaching is a form of directive or nondirective coaching. Directive Coaching involves the busy Manager who sometimes acts as a Coach: telling, instructing, giving advice, offering guidance, giving feedback, making suggestions etc. Non-Directive Coaching involves helping someone to solve their own problems. The directive style of coaching has been adopted as the model for coaching for performance, such as; helping provide people with direction, guiding them in how to master new skills, procedures, tasks and meet performance goals etc

Career Planning and Development



  

Career is a sequence of separate but related work activities that provide continuity , order and meaning in a persons life. Career planning is the process by which one selects career goals and path to these goals. Career development refers to the improvements one undertakes to achieve a personal career plan. Career management is the process of designing and implementing goals, plans and strategies to enable the organization to satisfy employee needs while allowing individuals to achieve their career goals.

Process of Career Planning and Development

  

Analysis of individual skills,knowledge, abilities,aptitudes,etc. Analysis of career opportunities both within and outside the organization. Analysis of career demands on the incumbent in terms of skills,knowledge,abilities,aptitude,etc.and in terms of qualifications, experience and training received,etc.

Need for Career Planning

      

To attract competent persons and to retain them in the organization To provide suitable promotional opportunities To ensure employee development in order to facilitate them to meet future challenges To increase utilization of managerial reserves within an organization To correct employee placement To reduce employee dissatisfaction and turnover To boost the morale of the employees and to motivate them

Steps involved in Career Development

   

Assessment of Training needs Linking the career needs with the organizational vision. Preparing an action plan to achieve the vision Career development programme should be integrated with the organizational MDPs in order to achieve results

Advantages of CP&D
     

Individuals get career guidance. It facilitates employees to choose a career to suite their life-style,family environment and scope of development Helps organizations in identifying internal employees who can be promoted. CD boosts the morale of the employees resulting in increased job satisfaction. Secures employee commitment and loyalty. Improves employees performance by fulfilling his esteem needs.

Career Management through Internal Mobility



Promotions-It involves advancement of the employees to a better job with greater responsibility,more prestige or status,greater skill and increased pay. Transfer- It is a lateral shift causing movement of individuals from one position to another usually without involving any marked change in duties, responsibilities, skills needed or compensation. Demotion is reassignment of an employee to a lower level job with delegation of responsibilities and authority required to perform that lower level job with a lower pay.

Types of Promotion
Vertical promotion/Dry PromotionUnder this method employee is moved to higher level in the organizational hierarchy with greater responsibility , authority ,pay and status. Up gradation- Under this, job is upgraded in the organizational hierarchy offering employees more salary, higher authority and responsibility. Bases of Promotion Merit-Based on skill knowledge, ability, efficiency and aptitude and is measured on the basis of educational training and past employment record.  Seniority- Based on length of service in the same job in the same organization.

Advantages and Disadvantages of Merit System

Advantages

Disadvantages

Resources of higher order Difficult to judge merit of employees can be better utilized. Competent employees are motivated to contribute to organizational efficiency and effectiveness. Golden hand-cuff to stop employee turnover Facilitates all-round development of the employee May involve personal bias or prejudice

Techniques of measurement are subjective Merit denotes past achievement and does not ensure future success.

Merits and Demerits of Seniority as a basis of Promotion

Merits
Measuring length of service is relatively easy Trade Unions support this system and it reduces grievances and conflicts No scope for favoritism and judgment There is an element of certainty regarding promotions

Demerits
Demotivates young and more competent employees It kills zeal and interest to develop as everybody will get promoted

Un dynamic and old blood diminishes organizational effectiveness Distinguishing between job seniority ,company seniority,zonal senioriy ,etc becomes difficult.

Benefits of Promotion
   

Promotions facilitate better utilization of the skills and knowledge of the employees It secures employee commitment It boosts the morale of the employees thereby increasing their job satisfaction It improves organizational health

Problems with Promotion Some employees refuse promotion Promotions disappoint some employees when favoritism is involved.

Principles of Promotion
       

Promotion policy should be uniform It should be fair and impartial It should be systematic Should provide equal opportunities to all It should contain clear cut norms for judging criteria,merit, length of service,etc Appropriate authority should be entrusted with the task of making a final decision Favoritism should not be taken as a basis for promotion. It should contain promotional counselling,encouragement,guidance and follow-up regarding promotional opportunities,etc.

Types of Transfers
     

Production Transfer-due to changes in production Replacement Transfer-due to replacement of long standing employees in the same place. Rotation Transfer- In order to increase the versatility of the employees Shift Transfer-Transfer of an employee from one shift to another. Remedial Transfer-To correct wrong placements Penal Transfer-initiated as a punishment or in disciplinary action

Reasons for Transfer

      

To meet organizational requirements To satisfy employees needs To utilize employee skill,knowledge,etc. To correct inter-personal conflicts To give relief to employees who are indulged in overburdened work for sometime. As a measure of punishment to erring employees To minimize fraud or bribery which will result due to permanent stay and contact of an employee with customers

Principles of Demotions


Specifying circumstances under which employees will be demoted like reduction in operations , in disciplinary cases ,etc.