Performance

&
Potential Appraisal
 Definitions

Performance: Degree of accomplishment of

tasks. i.e. Effectiveness + efficiency
Performance appraisal: Evaluating employee’s
current and/or past performance relative to his
or her performance standards.
Performance management - process through
which companies ensure that employees are
working toward organizational goals
The Difference
 Performance Appraisal

Performance Appraisal:
Evaluating individual job performance as
a basis for making objective personnel
decisions.
Appraisal involves:
Setting work standards
Assessing actual performance relative to
standards set
Providing feedback
 Goals of Performance Appraisal

The Organizational Goals:

Serves two sets of goals:
• Evaluation Goals
• Coaching and Development Goals
Important element in the information and
control system of complex organizations
To influence the behavior and work ethic of
work force.
For use in decisions about placement,
promotion, firing, pay
 Goals of Performance Appraisal

Evaluation Goals:
Provides feedback to subordinates so they
know where they stand
Develops valid data for pay & promotion
decisions and to provide a means of
communicating these decisions
Helps the company in making discharge
and retention decisions, and provides
warning to subordinates about
unsatisfactory performance
 Goals of Performance Appraisal

Coaching and Development Goals:

To counsel and coach subordinates
Develop commitment through discussion of
career opportunities and career planning
Motivation through recognition and respect
Strengthen the supervisor-subordinate relations
Diagnose individual and organizational problems
 Goals of Performance Appraisal

The Individual’s Goals:

Helps them know ahead of time how & on
what basis will they be appraised
Provide an opportunity to see how well
he/she is doing
Helps know about one’s own strengths &
weaknesses
Help set new goals
 Differences between evaluative &
developmental functions of appraisal

Criteria Developmental Function Evaluative function

Performance improvement by Information for decisions like

Purpose advising employees what is salary adjustments, transfers,
expected out of them promotions etc.
Basis for Predetermined standards of Relative to other similar
comparison performance employee

Technique Result oriented approach Employee ranking

Role of
Counselor Judge
supervisor
Distribution of Employee, supervisor, personal
evaluation Employee & supervisor folders, others involved in
information administrative actions
Performance Appraisal

Making Performance Appraisals

Legally Defensible
1. Use job analysis to develop the
appraisal system.
2. Check that the appraisal system is
behavior-oriented, not trait-oriented.
3. Have evaluators follow specific
written instructions when conducting
appraisals.
4. Have evaluators review results with
the ratees.
Who Should Appraise?

Self- rating
Supervisor
Peers
Customers/ Clients
Subordinates
 Appraisal Process

Establish Performance Standards

Communicate performance expectations

Measure Actual Performance

Compare Actual with standards

Discuss the appraisal with the employee

Initiate corrective action

 Appraisal Methods

Performance Appraisal Methods

Individual Multiple-person Other Modern

Evaluation Evaluation Methods

• Confidential Report
• Ranking Method • Management by
• Essay Evaluation
• Paired Comparison Objectives
• Critical incident
• Forced Distribution • 360 degree method
• Checklist
Method • Assessment Centers
• Graphic Rating Scale
• Human resource
• Behaviorally Anchored
accounting
Rating Scales
• Forced Choice Method • Field Review Method
Confidential Report & Essay Evaluation

The assessor writes a brief essay providing an

assessment of the strengths, weaknesses and
potential of the subject.
Factors to be considered while preparing the
essay:
Job Knowledge & potential of employee
Employee’s understanding of company’s
policies, objectives etc.
Employee’s relations with coworkers &
superiors
Employee’s general planning, organizing &
controlling abilities.
Attitudes & perceptions of employee in general.
 Critical Incident Method
Supervisor keeps log of particularly good &
poor examples of work behaviors
A panel of judges evaluate the collection of
potential critical incidents.
Supervisor & subordinate discuss the latter’s
performance, using incidents as examples.
Used mainly as a diagnostic tool.
CONTINUING DUTIES TARGETS CRITICAL INCIDENTS
Schedule Production for Full utilization of personnel& Instituted new production scheduling system;
plant machinery in plant; orders decreased late orders by 10% last month;
delivered on time increase machine utilization in plant by 20%
last month.
Supervise procurement of Minimize inventory costs while Let inventory costs rise 15% last month;
raw material & inventory keeping adequate supplies on overordered parts A & B by 20%;
control hand. underordered Part c by 30%.

Supervise machinery No shutdowns due to faulty Instituted new preventive maintenance system
maintenance machinery for plant; prevented a machine breakdown by
discovering faulty part.
 Checklist
Evaluator uses a list of behavioral descriptions &
checks off those that apply to employee or gives
‘Yes’/’No’ responses.
Checklist scored according to the weights assigned.
Rater and scorer are different

SAMPLE OF CHECKLIST ITEMS FOR APPRAISING SALESCLERKS

ITEMS YES NO

1. Are supervisor’s orders usually followed? ------- ------

2. Does the individual approach customers ------- ------

promptly?
3. Does the individual suggest additional ------- ------
merchandize to customers?
4. Does the individual keep bus when not servicing ------- ------
a customer?
 Forced Choice Rating

Uses several sets of pair phrases, two of

which may be positive & two negative.
Rater needs to indicate which of the four
phrases is the most & least descriptive of a
particular worker.
Items are grounded in such a way that the
rater cannot easily judge which statements
apply to the most effective employee.
 Forced Choice Rating

LEAST MOST

A Does not anticipate difficulties A

1 B Grasps explanations easily & quickly B

C Does not waste time C

D Very easy to talk to D

LEAST MOST

A Can be a leader A

2 B Wastes time on unproductive things B

C At all times cool & calm C

D Smart worker D
 Graphic Rating

Lists a number of traits and a range of

performance values for each trait.

Supervisor rates each subordinate by

checking the score that best describes the
subordinate’s performance for each trait.

Total the assigned values for the traits.

100 - 90 90 - 80 80 – 70 70 - 60 Below 60

comments
Performance Appraisal Form
Behaviorally Anchored Rating Scale
(BARS)
BARS combines the benefits of narrative
critical incidents & quantitative ratings by
anchoring a quantified scale with specific
narrative examples of good & poor
performance.

Five Steps of developing BARS

Generate critical incidents
Develop performance dimensions
Reallocate incidents
Scale the incidents
Develop a final instrument
 Behaviorally Anchored Rating
Scales – BARS – F 7-5, p. 227
Position: Patrol officer
Job Knowledge: Awareness of procedures, laws, and court
rulings and changes in them

Could be expected to follow 9 Very High

correct procedures for
evidence preservation at scene
of crime
Could be expected to know
s/he could break down locked
door while in hot pursuit and
thus arrest fleeing suspect
Could be expected to
misinform public on legal
matters though lack of
knowledge
8 Could be expected to be fully
7 aware of recent court rulings and
conduct him/herself accordingly
6
Could be expected to
5 Moderate occasionally have to ask
other officers about points
4 of law
3 Could be expected to search
2 suspect’s car two hours after
suspect was booked
1 Very Low
 Ranking Method

Group-order ranking
Requires the evaluator to place employees
into a particular classification such as “top
one-fifth” or “second one-fifth”

Individual ranking approach

Requires the evaluator merely to list the
employees in order from highest to lowest
 Alternation ranking

Ranking employees from best to worst on a

trait
Alternates between highest and lowest until
all employees to be rated have been
addressed
ALTERATION RANKING SCALE

For the trait: __________________

For the trait you are measuring, list all the employees you want to rank. Put the highest ranking employee’s name on
line 1. Put the lowest ranking employee’s name on line 10. Then list the next highest ranking on line 2, the next
lowest raking on line 9, and so on. Continue until all names are on the scale.

Highest Ranking employee

6. ____________________________________
1. ____________________________________
7. ____________________________________
2. ____________________________________
8. ____________________________________
3. ____________________________________
9. ____________________________________
4. ____________________________________
10. ___________________________________
5. ____________________________________
Lowest Ranking employees
 Paired Comparison
Each employee is compared with every other
employee in the comparison group and rated
as either the superior (+) or weaker(-) member
of the pair
Each employee is assigned a summary
ranking based on the number of superior
scores achieved

FOR THE TRAIT: ‘QUALITY OF WORK’

AS COMPARED TO A B C D

A + + -

B - - -

C - + +

D + + -
 Forced Distribution Method

Placing predetermined percentages of ratees into

performance categories

20
18
16
14
12
Frequency

10
8
6
4
2
0
Lowest 10% Next 20% Middle 40% Next 20% Highest 10%
Management by Objectives (MBO)

Requires the manager to set specific

measurable goals with each employee and
then periodically discuss progress toward
these goals.

Six Steps:
Set the organization’s goals
Set departmental goals
Discuss departmental goals
Define expected results
Conduct performance
reviews & measure results
Provide feedback
 360- degree Appraisal

Collecting performance information on an

employee from subordinates, supervisors,
peers, and internal and external customers.
 Balanced Scorecard

A method of measuring performance

channelizes the efforts of people to achieve
organizational goals.
 Human Resource Accounting

To measure (in financial terms) the

effectiveness of HR activities & the use of
people in the organization.
Shows the investments the company makes
in it people and how the value of these people
change over time.
Costs incurred on employees (in hiring,
training, compensating, developing) are
compared to the contributions of employee to
the company (labor productivity)
Human Resource Accounting

RANK RATING PERCENTAGE OF

SURPLUS/ DEFICIT OF
CONTRIBUTION TO
COST OF EMPLOYEE
1 Extremely good performance Over 200

2 Good performance 150 – 200

3 Slightly good performance 100 – 150

4 Neither poor nor good 0 – 100

5 Slightly poor performance 0

6 Poor performance 0 – (- 50)

7 Extremely poor performance (-50) – (-100)

 Field Review Method

A trained, skilled representative of HR

department goes into the field and assist line
supervisors with their ratings of their
respective subordinates.
Ratings done on standardized forms.
HR specialist requests from the immediate
supervisor specific information about the
employee’s performance.
Experts prepares report, which is sent to
supervisor for review, changes, approval &
discussion with ratee.
Quantitative Performance Criteria for sales
personnel
1. Sales volume
a. Percentage of increase
b. Market share
c. Quotas obtained
2. Average sales calls per day
3. New customers obtained
4. Gross profit by product, customer, and order size
5. Ratio of selling costs to sales
6. Sales orders
a. Daily number of orders
1) Total
2) By size, customer classification, and
product
b. Order to sales-call ratio
c. Goods returned
 Qualitative Performance Criteria for sales
personnel
1. Sales Skills 3. Personal traits
a. Finding selling points a. Attitude
b. Product knowledge b. Empathy
c. Listening skills c. Human relations
d. Team spirit
d. Obtaining
e. Appearance
participation
f. Motivation
e. Overcoming objections
g. Care of car
f. Closing the sale h. Self-improvement
2. Territorial management
a. Planning
b. Utilization
c. Records
d. Customer service
e. Collections
f. Follow-up
 APPRAISAL FEEDBACK INTERVIEW

Objectives
Let employees know where they stand
Help employees perform better by clarifying
what is expected of them
To plan opportunities for development & growth
Strengthen relationships by developing mutual
agreement of goals
Opportunity for employees to express
themselves on performance related issues
 The Appraisal Interview

The tell-and-sell method

Communicates to employees their
performance as accurately and directly as
possible with little return feedback, but
can lead to defensiveness

The tell-and-listen interview

Communicates to employees their
strengths and weaknesses, but also allows
for return feedback
 The Appraisal Interview

The problem-solving interview

Playing the role of helper more so than
judge, the manager creates an
environment through which the employee
can discover his or her own developmental
needs
The mixed-model interview
Allows for the problem solving interview in
the beginning, where the subordinate leads
off, and finishes with the tell-and-sell or
tell-and-listen approaches if the
subordinate has missed some important
areas of his or her performance
 Halo Effect
Unclear Central
Standards Tendency

Common Leniency/
stringency
Bias
Appraisal effect

Problems
Primacy Effect Stereotyping

Culture Recency effect

 Potential Appraisal

Future-oriented appraisal by which the

potential of an employee to occupy higher
positions and to assume higher
responsibilities is evaluated.
Help the extension staff to know their
strengths and weaknesses and can motivate
them to further develop their skills
Helps in planning overall career development
of employees.
 Potential Appraisal

Potential appraisals are required to:

Inform employees about their future
prospects
Help organization chalk out a suitable
succession plan
Update training efforts from time to time
Advice employees about what they must do
to improve their career prospects
 Steps of potential appraisal

Role descriptions
Qualities needed to perform the roles
Rating mechanisms
Rating by others
Tests
Games
Records
Organizing the system
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