Meaning

 "Performance appraisal is the systematic, periodic and an impartial

rating of an employee’s excellence in the matters pertaining to his
present job and his potential for a better job."

 Performance appraisal is a systematic way of reviewing and

assessing the performance of an employee during a given period of
time and planning for his future.
 Objectives
 To maintain records in order 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 judge the gap between the actual and the desired performance.
 Helps to strengthen the relationship and communication
between superior – subordinates and management – employees.
 To provide feedback to the employees regarding their past
performance.
 To reduce the grievances of the employees.
Importance & Advantages of PA
1. Performance Feedback

2. Employee Training and Development Decisions

3. Validation of Selection Process

4. Promotions

5. Transfers

6. Lay off Decisions

7. Compensation Decisions

8. Human Resource Planning (HRP)

9. Career Development
Traditional methods of Performance
Appraisal

1) ESSAY APPRAISAL METHOD :Under this method, the rate is

asked to express the strong as well as weak points of the
employee’s behavior the rater considers the following factors:

1) Job knowledge and potential of the employee;

2) Employee’s understanding of the company’s programmes,
policies, objectives, etc.;
3) The employee’s relations with co-workers and superiors;
4) The employee’s general planning, organizing and controlling
ability;
5) The attitudes and perceptions of the employee, in general.
2. RANKING METHOD: The ranking method is a performance
appraisal method that is used to evaluate employee performance
from best to worst. There often is no actual standard form used,
and we don’t always have to rank all employees.

 Why and when do we use the ranking method? Managers have

to make evaluative decisions, such as who is the employee of the
month, who gets a raise or promotion, and who gets laid off.

 How do we use the ranking method? The employees ranked in

the top group usually get the rewards (raise, bonus, promotion),
those not at the top tend to have the reward withheld, and those at
the bottom sometimes get punished.
3. PAIRED COMPARISON :A better technique of comparison
than the straight ranking method, this method compares each
employee with all others in the group, one at a time. After all the
comparisons on the basis of the overall comparisons, the
employees are given the final rankings.
4. CRITICAL INCIDENTS METHODS
 This technique of performance appraisal was developed by
Flanagan and Burns.

 The manager prepares lists of statements of very effective and

ineffective behavior of an employee. These critical incidents or
events represent the outstanding or poor behavior of employees on
the job.
• An example of a good critical incident of a sales assistant is the
following:
• July 20 – The sales clerk patiently attended to the customers
complaint. He is polite, prompt, enthusiastic in solving the
customers’ problem.
• On the other hand the bad critical incident may appear as
under:
• July 20 – The sales assistant stayed 45 minutes over on his break
during the busiest part of the day. He failed to answer the store
manager’s call thrice. He is lazy, negligent, stubborn and
uninterested in work.
 This method suffers however from the following limitations:

• Negative incidents may be more noticeable than positive incidents.

• The supervisors have a tendency to unload a series of complaints

about incidents during an annual performance review session.
• It results in very close supervision which may not be liked by the
employee.
 5. CONFIDENTIAL REPORT SYSTEM : Confidential report
system is well known method of performance appraisal system mostly
being used by the Government organizations. In the surprising system
subordinates are assessed and apprised by their superiors basing on their
performance on the job and duties. superiors writes confidential reports
which were not revealed openly and same reports will be forwarded to
the top officials / Management at taking decision against person on
whom confidential report made.
 Confidential reports consist of following key issues.
• His/Her service matters pertaining to job.
• His/Her overall performance in the Job.
• His/Her responsibility and accountability to the Job.
• His/Her achievements in the Job.
• His/Her discipline, conduct and behaviour in the Job.
• Disciplinary action taken against employee.
• Complaints received against him/her in the job.
• His/Her attitude and behaviour with others.
6. CHECKLIST METHOD: The rater is given a checklist of the
descriptions of the behaviour of the employees on job. The checklist
contains a list of statements on the basis of which the rater describes
the on the job performance of the employees. The following are some
of the sample questions in the checklist.

 Is the employee really interested in the task assigned? Yes/No

 Is he respected by his colleagues (co-workers) Yes/No
 Does he give respect to his superiors? Yes/No
 Does he follow instructions properly? Yes/No
 Does he make mistakes frequently? Yes/No
7) GRAPHIC RATING SCALE: This is the very popular,
traditional method of performance appraisal. Under this method,
core traits of employee pertaining to his job are
carefully defined like Attitude, Knowledge of Work, Managerial
Skills, Team Work, Honesty, Regularity, Accountability,
Interpersonal relationships, Creativity and Discipline etc. Theses
traits are allotted with numerical scale to tabulate the scores gained
by appraise (employee) in performance assessment relating to his
job by appraiser (employer) and sum-up to determine the best
performer.
 Performance Trait Excellent Good Average Fair Poor

Attitude 5 4 3 2 1

Knowledge of Work 5 4 3 2 1

Managerial Skills 5 4 3 2 1

Team Work 5 4 3 2 1

Honesty 5 4 3 2 1

Regularity 5 4 3 2 1

Accountability 5 4 3 2 1

Interpersonal 5 4 3 2 1
relationships

Creativity 5 4 3 2 1
Discipline 5 4 3 2 1
8. FORCED DISTRIBUTION: A rating system used by companies
to evaluate their employees. The system requires the managers to
evaluate each individual, and rank them typically into one of three
categories (excellent, good, poor).
Modern Methods of Performance Appraisal
1) Assessment Centre: Generally, employees are given an
assignment similar to the job they would be expected to perform.
The trained evaluators observe and evaluate employees as they
perform the assigned jobs and are evaluated on job related
characteristics.

2) Behaviorally Anchored Rating Scales: It consists of

predetermined critical areas of job performance or sets of
behavioral statements describing important job performance
qualities as good or bad (for e.g. the qualities like inter personal
relationships, adaptability and reliability, job knowledge etc). In
this method, an employee’s actual job behavior is judged against
the desired behavior by recording and comparing the behavior
with BARS.
3) Human Resource Accounting Method: In this method the
Performance appraisal of the employees is judged in terms of
cost and contribution of the employees. The cost of employees
include all the expenses incurred on them like their (compensation,
recruitment and selection costs, induction and training costs etc)
whereas their contribution includes the total value added (in
monetary terms). The difference between the cost and the
contribution will be the performance of the employees.

4) 360 Degree Performance Appraisals: 360 degree respondents for

an employee can be his/her peers, managers, subordinates, team
members, customers, suppliers- anyone who come into contact
with the employee and can provide valuable insight and
information or feedback regarding the “on-the-job” performance of
the employees.
360 Degree Performance Appraisal
1. Self appraisal

2. Superior appraisal

3. Subordinate appraisal & Peer appraisal

5) MANAGEMENT BY OBJECTIVES: The concept of

‘Management by objective’ was first given by Peter Drucker in
1954. It can be defined as a process whereby the employees and
the superior come together to identify common goals, the
employees set their goals to be achieved, the standard to be taken
as the criteria for measurement of their performance and the
contribution and deciding the course of action to be followed.
6. 720 Degree Appraisal: 720 degree feedback, also known as
720 degree assessment, is a type of multi rater performance
evaluation method. It involves 360 degree assessment carried out
twice.
A 720-degree performance appraisal is when an employee “is
appraised from the appraisal meeting is conducted twice (pre and
post feedback) to ensure the efficient performance of the employee.