Unit 4: Performance Appraisal 4 hours

• Concept, process and benefit of performance appraisal

• Performance appraisal methods
• Appraisal interviews
• Factors affecting performance appraisal
• PA practices in Nepalese organizations
• Improving employee performance
• Counseling employees with problems
 Performance Appraisal : Concept

“Without proper two-way feedback about an employee’s effort and its effect
on performance, we run the risk of decreasing his or her motivation.”

• A performance appraisal (PA), also referred to as a performance

review, performance evaluation,(career) development discussion, or employee
appraisal is a method by which the job performance of an employee is
documented and evaluated. 
• Systematic evaluation of the performance of employees and to understand
the abilities of a person for further growth and development.
Purposes of a Performance Management System
• Performance appraisals must convey to employees how well they have
performed on established goals.
• Equally important to feedback is the issue of development.
• Issue of documentation
 Objectives of PA

1. Setting targets and goals as performance standards

2. Evaluating employee performance
3. Identify training and development needs
4. Rewarding performance
5. Improving performance
 The Appraisal Process

Establish Performance Standards

• Establishment of performance standards in accordance with the organization’s
strategic goals.
• Evolve out of;
– company’s strategic direction
– job analysis
– job description

• Performance standards should be clear and objective enough to be understood

and measured.
• Eg. “a full day’s work” or “a good job.” ?????
 The Appraisal Process contd…..

Communicate Expectations
• Employees should not have to guess what is expected of them.

• Communication is a two way street

The Appraisal Process contd…..

Measure Actual Performance

Compare Actual Performance with Standards
Discuss the Appraisal with the Employee
Initiate Corrective Action if Necessary
 Benefit of Performance appraisal

Targeting Needs
• Target a specific area of weakness that needs evaluation and remediation.
Charting Progress
• Comparing performance appraisals from one benchmark period to another.
– For Salary increases, demotions, promotions and terminations
Building Relationships
• Performance appraisals give the employer and employee the opportunity to sit
down and discuss performance.
Motivating Employees
• The company may offer a bonus or other perk to employees based on PA
 Benefit of performance appraisal contd….

Improving Communication
• Problems that stem from a lack of communication can sometimes be
resolved with a performance appraisal. 

Providing a Career Path

• Perfect opportunity to address long-term goals that may not be on the
everyday to-do list.
Encouraging Good Work and Improvement
Improving Decision-Making Ability
 Performance appraisal methods

• Three approaches exist for doing appraisals: employees

can be appraised against
(1) Absolute standards,
(2) Relative standards,
(3) Outcomes

• No one approach is always best; each has its strengths

and weaknesses.
 Performance appraisal methods contd…..

Evaluating Absolute Standards

• Measuring an employee’s performance against established standards.

• Included in this group are the following methods:

– the critical incident appraisal,
– the checklist,
– the graphic rating scale,
– forced choice, and
– behaviorally anchored rating scales.
 Performance appraisal methods contd…..

Relative Standards Methods

• Evaluating an employee’s performance by comparing the employee

with other employees.

• The most popular of the relative methods are;

– group order ranking
– individual ranking
– paired comparison
 Using Achieved Outcomes to Evaluate Employees

• Employees are evaluated on how well they accomplished a specific set of

objectives determined as critical in the successful completion of their job.

• This approach may be referred to as goal setting but is more commonly

referred to as Management by Objectives (MBO).

• Emphasizes on converting overall objectives into specific objectives for

organizational units and individual members.
— divisional, departmental, and individual
Management by Objectives (MBO)
– A performance appraisal method that includes mutual objective setting and
evaluation based on the attainment of the specific objectives.

Common Elements in MBO Programs

• Four ingredients are common to MBO programs:
– specific goals, participative decision making, a specific time period, and
performance feedback.
 360 Degree Appraisal
• Employee performance review in which subordinates, co-workers, and
managers all anonymously rate the employee.
• The 360 degree performance appraisal method provides a holistic
approach towards the performance of employee.
• The employee himself or herself also takes part in this appraisal with the
help of self assessment.
 Appraisal Interviews/Meeting

• Prepare for and schedule the appraisal in advance

• Explain the purpose of the meeting in advance and create a supportive
environment to put employees at ease
• Describe the purpose of the appraisal to employees
• Involve the employee in the appraisal discussion
• Focus discussion on work behaviors, not on the employee.
• Support your evaluation with examples
• Give both positive and negative feedback
• Ensure that employees understand what was discussed in the appraisal
• Generate a development plan
 Factors affecting performance appraisal

Leniency Error
• Performance appraisal distortion caused by evaluating employees against
one’s (evaluator) own value system.
• Some evaluators mark high (Positive leniency error), while others mark low
(negative leniency error).

Halo error
• Assessment of an individual on one trait influence evaluation of that
person on other specific traits.
Factors affecting performance appraisal contd…
 Factors affecting performance appraisal contd…

Similarity Error
Evaluating employees based on the way an evaluator perceives himself or
herself.
– Projecting self-perceptions onto others.

Low Appraiser Motivation

• If poor appraisal could significantly hurt the employee’s future the evaluator may be
reluctant to give a realistic appraisal.
 Factors affecting performance appraisal contd…

Central tendency
• The tendency of a rater to give average ratings.
• Occurs when a rater refuses to use the two extremes (for instance,
outstanding and unacceptable, respectively).

Inflationary Pressures
• “Equality” values have grown in importance in our society, as well as
fear of retribution from disgruntled employees.
 Factors affecting performance appraisal contd…

Inappropriate Substitutes for Performance

• Example:
– Teachers – enthusiasm may be important
– Accountant – it may not be so.

• An appropriate substitute for performance in one job may be totally

inappropriate in another.
 Factors affecting performance appraisal contd…

Attribution theory

• A theory of performance evaluation based on the perception of who is in

control of an employee’s performance.

• Attribution theory attempts to differentiate between

– Elements the employee controls (internal) versus those the employee
cannot control (external).
 PA practices in Nepalese organizations

1. Low Priority – in case of HRM

2. Informal and subjective
3. Promotion-oriented purpose - no feedback to employees
4. Lack of transparency – not discussed with employees
Improving Employee Performance
Improving Employee Performance contd…..

Use Behavior-Based Measures

Combine Absolute and Relative Standards
Provide Ongoing Feedback
– “The best surprise is no surprise.” - This phrase clearly applies to
performance appraisals.
Improving Employee Performance contd…..

Rate Selectively
• Appraisers should rate only in those areas in which they have job
knowledge.
• For example,
– When professors evaluate secretaries within a university, they often use
such criteria as judgment, technical competence, and conscientiousness
(carefulness).
– Whereas peers (other secretaries) evaluate, job knowledge,
organization, cooperation with co-workers, and responsibility.
Improving Employee Performance contd…..

Train Appraisers

• If you cannot find good raters, the alternative is to develop good raters.
Why should management bother to train these individuals?
– A poor appraisal is worse than no appraisal at all.
– They can demoralize employees, decrease productivity, and create a
legal liability for the company.
 Counseling employees with problems
What is a Problem Employee?
• One who is consistently unwilling or unable to follow the rules or meet
performance standards.
Two Types of Problem Employees;
1) Employees Causing Problems
2) Employees With Problems

Most Common Types of Problems

• Absenteeism and tardiness
• Insubordination and uncooperativeness
• Alcohol and drug abuse
• Workplace violence
• Theft
Counseling
• Benefits of counseling
– Improved job satisfaction and motivation
• Appropriate times to counsel
– When employees need help in determining how to resolve a problem that is
affecting their work.

Counseling Techniques
Directive counseling
– The supervisor asks the employee questions about the specific problem;
– when the supervisor understands the problem, he suggests ways to handle it.
Nondirective counseling
• The supervisor primarily listens, encouraging the employee to look for the
source of the problem and propose possible solutions.

The Counseling Interview

• Discussion of the problem
• Consideration of possible solutions
• Select a solution
• Scheduling follow-up meeting