Performance Appraisal

PERFORMANCE APPRAISAL

• Performance appraisal is the process of assessing the

performance and progress of an employee or of a
group of employees on a given job and his potential
for future development.

• According to flippo, “performance appraisal is the

systematic, periodic and an impartial rating of an
employee’s excellence in matters pertaining to his
present job and his potential for a better job.”
 Introduction
• Employees generally see performance evaluations
as having a direct effect on their work lives.
• The performance management systems need to
include:
– decisions about who should evaluate
performance
– what format should be used
– how the results should be utilized
 Performance Management Systems

Purposes of a Performance Management System

– Feedback - let employees know how well they have
done and allow for employee input.
– Development – identify areas in which employees
have deficiencies or weaknesses.
– Documentation - to meet legal requirements.
Essentials of Performance Management system

• HRM practices must be bias free, objective and job-

related.
• Valid performance appraisals are conducted at
established intervals
• Must be done by trained appraisers.
 LIMITATIONS OF PERFORMANCE APPRAISAL

Errors in rating
•Halo effect
•Stereotyping
•Central Tendency: It means assigning average
ratings to all the employees in order to avoid
commitment or involvement. In this rater has not
to justify the ratings and the ratings are clustered
around the midpoint.
 LIMITATIONS OF PERFORMANCE APPRAISAL

• Constant error: Some evaluators tend to be

lenient while others a re strict. So performance
can be overrated or underrated. This tendency
may be avoided by holding meetings so that the
raters understand what is required of them.
• Personal bias: due to some regional or religious
beliefs, and habits or interpersonal conflict the
rater dislikes an employee. E.g. recent
experience of first impression.
 LIMITATIONS OF PERFORMANCE APPRAISAL

2. Lack of reliability: Lack of consistency over time and

among different raters may reduce the reliability of
performance appraisal. Inconsistent use of measuring
standards and lack of training in appraisal techniques
may also reduce reliability.

3. Incompetence of rater
4. Negative approach: performance appraisal loses its
value when the focus of Management is on punishment
rather than development of employees.
5. Multiple Objectives:
Rater may get confused due to unclear and too
many objectives of performance appraisal.

6. Resistance:
Trade union may resist performance appraisal on
the ground that it involves discrimination among
its member. It may affect interpersonal relations.
The Appraisal Process
 The Appraisal Process
• Establishment of performance standards
– Derived from company’s strategic goals.
– Based on job analysis and job
description.
• Communication of performance standards
to employee.
 The Appraisal Process
• Measurement of performance using
information from:
– personal observation
– statistical reports
– oral reports
– written reports
• Comparison of actual performance with
standards.
 The Appraisal Process
• Discussion of appraisal with employee.
• Identification of corrective action where
necessary.
– Immediate action deals with symptoms.
– Basic corrective action deals with
causes.
 Appraisal Methods
• Traditional method
• Modern method
 Appraisal Methods
Evaluating through traditional approaches:
• An employee’s performance is measured
against established standards.
• Evaluation is independent of any other
employee.
 Appraisal Methods

1. Essay Appraisal: Appraiser writes narrative

describing employee performance &
suggestions.
2. Critical Incident Appraisal: The supervisor
keeps a written record of critical events and how
different employees behaved during such events. The
rating of an employee depends on his negative/positive
behaviors during these critical events like fire, a sudden
breakdown of machinery a serious accidents. In this
feedback is from actual events.
Critical Incidents
Method
Ability to work with others
16/10/21 12/03/21

Mary stayed after hours to help Pat

finish a project
Mary asked to not be
assigned to work on a
19/12/21 particular project with
When several office staff were ill
today. Mary helped reorganise work
Carol (for personal
so deadlines could be met. reasons)
21/02/21-28/02/21
Mary willingly assisted new
employee to settle in and become
familiar with work tasks as well as
completing her own work tasks.
 Appraisal Methods
3. Checklist Appraisal: Appraiser checks off
behaviors that apply to the employee.
4. Adjective Rating Scale Appraisal:
Appraiser rates employee on a number of job-
related factors. (Also known as Graphic scale)

Keeps up with current

policies and regulations.
1 2 3 4 5

Completely Fully
Unaware Informed
Rating checklist
Yes No
Trait
Initiative
1 Does the individual frequently need guidance and direction from others?

2 Is the individual able to determine what course of action to follow without

having to be told?
3 Is the individual a leader?

4 Is the individual a follower?

5 Does the individual accept work willingly?

Quality of work
1 Is the individual’s work error-free most of the time?

2 Does a considerable amount of work have to be redone?

3 Is the individual’s work completed on time?

4 Do the individual’s work habits frequently disrupt the flow of work

because of poor quality of work?
 Appraisal Methods
5. Forced-Choice Appraisal: Appraisers choose from sets of
statements which appear to be equally favorable, the
statement which best describes the employee.

6. Confidential report: Prepared by employee’s immediate

superior. It covers strengths, weaknesses, achievements
failure, personality and behavior of the employee’s. It mainly
focuses on evaluating rather than developing the employee.
The employee who is apprised never knows his weaknesses
and the opportunities available for overcoming them.
7. Straight ranking method: The evaluator
assigns different ranks to all the employees in
the same work unit, doing the same job
employees are ranked from best to poorest. It
is time saving but it only indicates how a
person stands in relation to others, but how
much he is better or worse, it does not tell.
 Appraisal Methods
8. Paired Comparison:
• Each individual is compared to every other.

• Final ranking is based on number of times the

individual is preferred member in a pair.
Paired Comparison Approach

EMPLOYE

EMPLOYE

EMPLOYE
EMPLOYE
EMPLOY
EE A

EB

EC

ED

EE
  - -
EMPLOYEE A

EMPLOYEE B - - - -
-   -
EMPLOYEE C

  -
EMPLOYEE D

   -
EMPLOYEE E
9. Group appraisal method: in this a group of
evaluators assesses employees. This group consists
of immediate supervisor of employee, other
supervisors having close relation with employee’s
work, HOD and a personnel expert, due to
multiple evaluators, personal bias is minimized.
But very time consuming.
10. Field review method:

In this a training offices from the human resource department

interviews line supervisors to evaluate their respective
subordinates. The interviewers prepares in advance the
questions to be asked. Like give opinion about level of
performance of his subordinate, work progress, strength and
weaknesses of him etc.
• Personal bias of supervisor is reduced due to involvement of HR
offices.
• So, we can see that traditional systems of appraisal are based on
judgment role of supervisor.
 Modern Methods
1. Behaviorally Anchored Rating
Scales (BARS):
• BARS are descriptions of various degrees of behavior relating
to specific performance dimension. The rater records the
observable job behavior of an employee and compare these
observations with BARS. In this way an employee’s actual job
behavior is judged against the desired behavior.

• Person with knowledge of job to be appraised (supervisors)

describe specific examples of both effective and ineffective job
behaviors.
Behaviourally anchored rating scale (BARS)

JOB
Job knowledge
DIMENSION:
Excellent (7) Knows everything there is to know about the job; nevery has to
be told how to do anything nor ever has to ask questions about
the job
Very good (6) Knows almost everything there is to know about the job; knows
when assistance is needed and asks for it

Good (5) Knows the most important elements of the job and quite a few of
the less important job elements

Average (4) Knows some of the most important elements of the job and a few
of the less important elements

Below average Lacks knowledge about some of the most important job elements
(3) and most of the less important job elements

Very poor (2) Lacks knowledge about basic job elements but is willing to learn

Unacceptable Lacks knowledge about basic job elements and is unwilling to

(1) learn
 Appraisal Methods
2. Assessment centre method: It is a group of employees
from different work units. These employees work
together on an assignment similar to the one they
would be handling when promoted. Evaluator observe
and rank the performance of all the participants.
Experienced manager:- Evaluators
Individually
Group evaluated collectively both
• Evaluators prepare a summary reports for them.
 Appraisal Methods
3. HR accounting method
• Human resources : Asset of company
When it leaves organization: Loss of human asset
• Under this method, performance is judged in terms of
costs and contributions of employees. Costs of human
resources consist of expenditure, planning, training
recruitment etc.
• Contribution is money value of labor productivity or
value added by human resources. Different between
cost and contributions reflects the performance of
employee.
 Appraisal Methods
4. Appraisal through MBO: (developed by peter
Drucker in 1954)
“ A process whereby the supervisor and
subordinate managers jointly identify its common
goals, define each individual’s major areas of
responsibility in terms of results expected of him
and use these measures as guides for operating
the unit and assessing the contribution of each of
its members.”
 MBO
Steps in performance appraisal through MBO
•Set organizational goals mutually.
•Designing performance target.
•Performance reviews.
•Feedback : Through this they can regulate their
performance.
 The 360 degree appraisal technique

• It involves evaluation of a manager by everyone above,

alongside and below him.
• Questionnaires are used to collect response from
– Bosses
– Peers
– Subordinates
• Each is manager assessed by minimum 15 collegues.
• 2 bosses 4 peers 6-8 subordinates
• Then responses presented in the form of charts and
graphs. e.g. Reliance industries, Wipro, Infosys, etc.
 360 degree appraisal has 4 components

1.self appraisal: (done by himself/herself.)

2. Subordinate’s appraisal: The purpose of it is to get first
hand assessment of how the subordinate’s perceive
their superior to be in terms of style of functioning.

3. Peer appraisal: it is significant because peer play a

crucial role in life of any employee . organization select
right peers from within the department as well as from
other department which are directly connected with the
working of employee’s department.
• Superior’s Appraisal: it is heavy weight component of
this system. Superior must communicate to the
employee in clear way what organization plans for him.
It is superiors responsibility to share with employee the
realistic picture gives his SWOT, experience ,
qualification.

360 degree appraisal is a logical and systematic way of

looking at appraisals in current content.
 Creating More Effective Performance
Management Systems
Use Behavior-Based Measures:
• Measures based on specific descriptions of behavior are
more job-related and elicit more inter-rater agreement
than traits, such as “loyalty” or “friendliness”.

Combine Absolute and Relative Standards:

• Absolute standards tend to be positively lenient; relative
standards suffer when there is little variability.
• Combining the standards tends to offset the weaknesses
of each.
 Creating More Effective Performance
Management Systems
Provide Ongoing Feedback:
• Expectations and disappointments should be shared with
employees on a frequent basis.
 Creating More Effective Performance
Management Systems
Use Multiple Raters:
• Increasing the number of raters leads to more reliable
and valid ratings.
– Use peer evaluations: Coworkers offer constructive
insights and more specific evaluations.
– Upward appraisals allow employees to give their
managers feedback.
– 360-Degree appraisals: Supervisors, peers,
employees, team members, customers and others
with relevant information evaluate the employee.
 Creating More Effective Performance
Management Systems
Rate Selectively
– Appraisers only evaluate in those areas about which
they have sufficient knowledge.
– Appraisers should be organizationally as close as
possible to the individual being evaluated.
– More effective raters are asked to do the appraisals.

Train Appraisers:
• Untrained appraisers who do poor appraisals can
demoralize employees and increase legal liabilities.
Creating More Effective Performance
Management Systems
 POTENTIAL APPRAISAL
• Potential Appraisal - Refers to the abilities present
but not utilized currently.
• PA is a process of determining the SW (strength &
weakness) of employees for the future job. Done to
evaluate the ability to take up the future role.
• Potential of the employees is judged on the basis of
– Present performance
– Personality traits
– Relooking the past experience
– Considering age & experience
– Explaining unused knowledge and skills of an employee
– It focuses on the future job assignment for the
employees
Factors that can Distort Appraisals
Factors that can Distort Appraisals
• Leniency error
– Each evaluator has his/her own value
system.
– Some evaluate high (positive leniency)
and others, low (negative leniency).
• Halo error: Evaluator lets an assessment
of an individual on one trait influence
evaluation on all traits.
Factors that can Distort Appraisals
• Similarity error: Evaluator rates others in
the same way that the evaluator perceives
him or herself.
• Low appraiser motivation: Evaluators
may be reluctant to be accurate if
important rewards for the employee
depend on the results.
Factors that can Distort Appraisals
• Central tendency: The reluctance to use the
extremes of a rating scale and to adequately
distinguish among employees being rated.
• Inflationary pressures: Pressures for equality
and fear of retribution for low ratings leads to
less differentiation among rated employees.
• Inappropriate substitutes for performance:
Effort, enthusiasm, appearance, etc. are less
relevant for some jobs than others.
Factors that can Distort Appraisals
Attribution Theory
• Evaluations are affected based on
whether someone’s performance is due
to
– internal factors they can control
– external factors which they cannot
• If poor performance is attributed to
internal control, the judgment is harsher
than when it is attributed to external
control.
Factors that can Distort Appraisals
• Impression management:
• If employee positively influences the
relationship with the supervisor, he/she is
likely to receive a higher rating.