PERFORMANCE APPRAISAL UNIT III Objectives Opportunity to Regularly Discuss Results Supervisor Identifies Strengths and Weaknesses Fair and Equitable Format Basis for Salary/Promotion Recommendations PROCESS OF PERFORMANCE APPRAISAL Establishing performance standards Communicating Standards and Expectations Measuring the actual performance Comparing with Standards Discussing results(Providing Feedback) Decision making - taking corrective actions PROCESS FOR PERFORMANCE APPRAISAL 1)Establishing performance standards: The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in measurable terms. In case the performance of the employee cannot be measured, great care should be taken to describe the standards. b) Communicating the standards: After establishing the standards, it is the responsibility of the management to communicate the standards to all the employees of the organization. The employees should be informed and the standards should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators. PROCESS FOR PERFORMANCE APPRAISAL c) Measuring the actual performance: The most difficult part of the Performance appraisal process is measuring the actual performance of the employees that is the work done by the employees during the specified period of time. It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work d) Comparing the actual with the desired performance: The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the employees from the standards set. The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to the employees’ performance. PROCESS FOR PERFORMANCE APPRAISAL e) Discussing results: The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. The purpose of the meeting should be to solve the problems faced and motivate the employees to perform better. f) Decision making: The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotions, demotions, transfers etc. Performance Appraisal: Uses Performance improvement Identify deficiencies in staffing process Compensation adjustments Placement decisions Detect informational inaccuracies Training & Development needs Diagnose job design errors Avoidance of discrimination Career planning & development External challenges Methods of Performance Appraisal Several methods and techniques are used for evaluating employee performance. These may be classified into broad categories. Performance Appraisal Traditional Methods 1. Confidential Report 2. Free Form or Essay 3. Straight Ranking 4. Paired Comparisons 5. Forced Distribution 6. Graphic rating Scales 7. Checklist Method 8. Critical Incidents 9. Group Appraisal 10. Field Review Modern Methods 1. Assessment Centre 2. Human Resource Accounting 3. Behaviorally Anchored rating Scales 4. Appraisal through MBO TRADITIONAL METHOD 1. Confidential Report This is a traditional form of appraisal used in most government organization. A confidential report is a report prepared by the employee’s immediate superior. It cover the strengths and weaknesses, main achievements and failure, personality and behavior of the employee’. It is descriptive appraisal used for promotion and transfers of employees. 2. Free Form or essay Method Under this method, the evaluator writes a short essay on the employee’s performance on the basis of overall impression. The description is expected to be as factual and concrete as possible. An essay can provide a good deal of information about the employee especially if the evaluator is asked to give examples of each one of his judgments. 3. Straight Ranking Method In this method technique, the evaluator assigns relative ranks to all the employees in the same work unit doing the same job. Employees are ranked from the best to the poorest on the basis of overall performance. The ‘wholeman is compared with the whole man’ without analyzing performance. The relative position of an employee is reflected in his numerical rank. Employee Rank A 2 B 1 C 5 D 4 E 3 Straight ranking is one of the oldest and simplest methods. It is time saving and a comparative evaluation technique of appraisal. 4. Paired Comparisons Method This is a modified from of man to man ranking. Herein, each employee is compared will all the others in pairs one at a time. The number of times an employee is judged better then the others determines his rank. Comparison is made on the basis of overall performance. 5. Forced Distribution Method In this technique, the rater is required to distribute his rating in the form of a normal frequency distribution. The purpose is to eliminate the rater’s basis of central tendency. Here also ranking technique is used. This method is highly simple to understand and easy to apply 45 40 No. of employee 35 30 25 20 15 10 5 0 Poor Below Average Average Good Excellent 6. Graphic Rating Scales It is a numerical scale indicating different degrees of a particular trait. The rate is given a printed from for each employee to bee rated. The form contains several characteristics relating to the personality and performance of employees. Intelligence, quality of work , leadership skills, judgment, etc. are some of these characteristics. The rater records his judgment on the employee’s trait on the scale. The numerical points given to an employee are added up to find out his overall performance a standing in the group. 7. Checklist Method A checklist is a list of statements that describe characteristics and performance of employee on the job. The ratter checks to indicate if the behavior of an employee is positive or negative to each statement. The performance of an employee is rated on the basis of number of positive checks. There are three types of checklist. 1.Simple Checklist 2. Forced Choice Block 3. Weighted Checklist Simple Checklist 1. Is the employee regular on the job Yes/No 2. Is the employee respected by his subordinates Yes/No 3. Is the employee always willing to help his peers Yes/No 4. Does the employee follow instruction properly Yes/No 5. Dose the employee keep the equipment in order Yes/No Forced Choice Block 1. Regularity on the job Most (a) Always regular √ (b) Informs in advance for absence/delay √ Least (c) Newer regular √ (d) Remains absent without prior notice √ (e) Neither regular nor irregular Weighted Checklist Traits Weights 1. Attendance 0.5 1. Knowledge of the job 1.0 1. Quantity of work 1.0 1. Quality of work 1.5 1. Dependability 1.5 1. Interpersonal relation 2.0 1. Organization loyalty 1.5 1. Leadership potential 1.5 Performance Ratings 8. Critical Incidents Method In this method the supervisor keeps a written record of critical events and how different employee behaved during such events. The rating of an employee depends on his positive/negative behavior during these events. 9. Group Appraisal Method Under this method, a group of evaluators assesses employees. This group consists of the immediate supervisor of the employee, other supervisor having close contact with employee’s work, head of the department and a personnel expert. The group determines the standers of performance for the job , measures actual performance of an employee, analyses the causes of poor performance and offers suggestions for improvement in future. 10. Field Review Method In this method, a training officer from the personal department interviews line supervisors to evaluate their respective subordinates. The interviewer prepares in advance the questions to be asked. By answering these questions a supervisor gives his opinions about the level of performance of his subordinate, the subordinate’s work progress, his strengths and weaknesses, promotion potential, etc. Modern Methods 1. Assessment Centre Method An assessment centre is a group of employees drawn from different work units. These employees work together on an assignment similar to the one they would be handling when promoted. Evaluates observe and rank the performance of all the participants. Experienced managers with proven ability serve as evaluators. This group evaluators all employees both individually and collectively by using simulation techniques like role playing, business games and in basket exercises. Employees are evaluated on job related characteristics considered important for job success. The evaluators observe and evaluate employees as they perform jobs. 2.Human Resource Accounting Method Human resources are a valuable asset of any organisation. This asset can be valued in terms of money. When competent, and well-trained employees leave an organisation the human asset is decreased and vice versa. Under this method performance is judged in terms of costs and contribution of employees. Costs of human resources consist of expenditure on human resource planning, recruitment, selection, induction, training, compensation, etc. Contribution of human resources is the money value of labour productivity or value added by human resources is the money value of labour productivity or value added by human resources. 2.Human Resource Accounting Method Human resources are a valuable asset of any organisation. This asset can be valued in terms of money. When competent, and well-trained employees leave an organisation the human asset is decreased and vice versa. Under this method performance is judged in terms of costs and contribution of employees. Costs of human resources consist of expenditure on human resource planning, recruitment, selection, induction, training, compensation, etc. Contribution of human resources is the money value of labour productivity or value added by human resources is the money value of labour productivity or value added by human resources. 3. Behavioral Anchored Rating Scales Employee or trainee rating system in which they are graded according to their display or absence of specific behavioral patterns Behaviourally Anchored Rating Scales (BARS) are designed to bring the benefits of both qualitative and quantitative data to the employee appraisal process. BARS compare an individual’s performance against specific examples of behaviour that are anchored to numerical ratings. 3. Behavioral Anchored Rating Scales Performance Point Extremely good 7 Good 6 Above average Average 5 Below average Poor 3 Extremely poor 1 4 2 Behavior Can expect trainee to make valuable suggestions for increased sales and to have positive relationships with customers all over the country. Can expect to initiate creative ideas for improved sales. Can expect to keep in touch with the customers throughout the year. Can manage, with difficulty, to deliver the goods in time. Can expect to unload the trucks when asked by the supervisor. Can expect to inform only a part of the customers. Can expect to take extended coffee breaks & roam around purposelessly. 4.Appraisal by Results or MBO The concept of management by objectives(MBO) was developed by Peter Drucker in 1954. He called it management by objectives and self control’. Since then MBO has became an effective and operational technique of performance appraisal and a powerful philosophy of managing. It is also known as Work Planning and Review or Goal setting approach to appraisal. Management by objectives has been defined as “a process whereby the superior and subordinate managers of an organisation 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” In other words.MBO involves appraisal of performance against clear, time bound and mutually agreed job goals. Criteria for Judging effectiveness of performance appraisal 1) Relevance: Relevance refers to the correspondence between the elements identified as a critical to job performance and performance standards. In short, relevance is determined by answering the questions “What really makes the difference between success and failure on a particular job and according to whom”. The answer is simple – the customer. Customers may be internal (eg your immediate boss, workers in another department) or external( those who buy your company products or services) It is important to pay attention to the things that the customer believes are important(eg: On time delivery, zero defects) Relevance also implies the periodic maintenance and updating of job analysis, performance standards and appraisal systems. 2) Sensitivity: Performance appraisal system should be prepared according to different jobs and to meet all the purpose of the organisation. If same performance system is followed for different kinds of job then the evaluation will not be correct. Criteria for Judging effectiveness of performance appraisal 3)Reliability The consistency of a performance measure; the degree to which a performance measure is free from random error. This can be done only if the rater must have adequate opportunity to observe what the employees has done and the conditions under which he or she has done it, otherwise unreliability may be confused with unfamiliarity 4)Acceptability The extent to which a performance is deemed to be satisfactory or adequate by those who use it. So the appraisal system should be made after getting acceptance from the employees which in turn will increase motivation ,improve performance and increased trust for top management 5) Specificity The extent to which a performance measure gives detailed guidance to employees about what is expected of them and how they can meet those expectations. Importance of performance appraisal 1)Identify and deal with Problem Employees: It helps to identify and deal with problem employees to either turn those employees in to valuable, productive workers or lay the groundwork for discipline and if necessary termination. 2) Performance Improvement: It helps in improving the performance of employees through work planning, skill identification and potential development 3) Compensation adjustment: Employees exhibiting superior performance are rewarded through increase in their compensation to motivate them to further excel in their jobs. Employees showing weaker performance are given lesser compensation. 4)Determining informational accuracies: It provides an opportunity to employees and their managers to share information, ideas, requirements, expectations and feedback to remove any misconception or misunderstanding between the manager and the employee.This foster greater bondage between the employees and Importance of performance appraisal and managers and results in increased employee commitment to organizational mission and objectives. 5) Making Placement Decisions: It helps in placement decisions like promotion,transfer, relocation, reassignment etc., 6) Career Planning and Development: It provides reliable data and information on the current performance level, potentialities and developmental need of employees. Based on it, Career planning and developmental needs are identified. 7) Identifying Staffing process Deficiencies: Since it helps in identifying present performance and potentialities for future development of employees, therefore the accuracy and reliability of recruitment and selection process can be judged. It helps in finding whether right man for the right job has been placed or not? Organization can take decisions for rehabilitation or separation of wrongly selected and posted employees so that operational inefficiencies can be eliminated. Importance of performance appraisal 8) Training and Developmental needs: Poor performance may indicate the need for retraining. Likewise, good performance may indicate untapped potential that should be developed. 9) Diagnose Job Design Errors: Poor performance may also due to ill conceived job design, appraisal helps to diagnose these errors. 10) Identifying factors affecting performance: Sometimes performance is influenced by factors inside and outside the work place such as matters related to family, health,working conditions etc. If it is known through appraisal, HR department may be able to provide assistance. 11) Equal Employment Opportunity: Accurate performance appraisals that actually measure job related performance ensure that internal placement decisions are not discriminatory. Problems of performance appraisal Bias. Bias is simply a personality-based tendency, either toward or against something. In the case of performance assessment, bias is toward or against an individual employee. All human beings have biases, but supervisors especially cannot afford to allow their biases to enter into their evaluation of subordinates in the firm. This is very easy to say, but very difficult to do. Biases make the evaluation process subjective rather than objective, and certainly provide the opportunity for a lack of consistency in effect on different groups of employees. So to overcome the bias problem, we need to be objective and not let our feelings of liking or disliking the individual influence our assessment Stereotyping. Stereotyping is mentally classifying a person into an affinity group, and then identifying the person as having the same assumed characteristics as the group. So we can avoid stereotyping by getting to know each employee as an individual and objectively evaluating individual employees based on their actual performance Problems of performance appraisal 3)Halo error. This error occurs when the evaluator has a generally positive or negative (negative halo error is sometimes called “horns error”) impression of an individual, and the evaluator then artificially extends that general impression to many individual categories of performance to create an overall evaluation of the individual that is either positive or negative. In other words, if employees are judged by their supervisor to be generally “good” employees, and the supervisor then evaluates each of the areas of their performance as good, regardless of any behaviors or results to the contrary, the supervisor is guilty of halo error. We can avoid halo error by remembering that employees are often strong in some areas and weaker in others, and we need to objectively evaluate individual employees based on their actual performance for each and every item of assessment. Problems of performance appraisal 4)Distributional errors. These errors occur in three forms: severity or strictness, central tendency, and leniency. They are based on a standard normal distribution, or the bell curve that we are all so familiar with. In severity orstrictness error, the rater evaluates everyone, or nearly everyone, as below average. Central tendency error occurs when raters evaluate everyone under their control as average—nobody is either really good or really bad. Finally, leniency error occurs when the rater evaluates all others as above average. Leniency error, therefore, is basically a form of grade inflation. We can avoid distributional errors by giving a range of evaluations. The distribution is often based on the ranking method of evaluation and forced distribution 5) Similarity error. This error occurs when raters evaluate subordinates that they consider more similar to themselves as better employees, and subordinates that they consider different from themselves as poorer employees. We can avoid similarity error by embracing diversity and objectively evaluating individual employees based on their actual performance, even if they are different from us and don’t do things the same way that we do. Problems of performance appraisal 6)Proximity error. This error states that similar marks may be given to items that are near (proximate to) each other on the performance appraisal form, regardless of differences in performance on those measures. We can avoid proximity error by objectively evaluating employees’ actual performance on each and every item on the assessment form. 7) Recency error. This error occurs when raters use only the last few weeks or month of a rating period as evidence of their ratings of others. We can avoid the recency error by evaluating the employee based on the entire assessment period, commonly 6–12 months. Using the critical incidents method really helps our recall and assessment of the entire period more objectively. 8) Contrast error. In contrast error, the rater compares and contrasts performance between two employees, rather than using absolute measures of performance to measure each employee. For example, the rater may contrast a good performer with an outstanding performer, and as a result of the significant contrast, the good performer may seem to be “below average.” This would be a contrast error. We can avoid contrast error by objectively evaluating individual employees based on their actual performance Problems of performance appraisal 9) Attribution error. In simplified terms, attribution is a process where an individual assumes reasons or motivations (such as attitudes, values, or beliefs) for an observed behavior. So, attribution error in performance appraisal might occur when the rater observes an employee action—such as an argumentative answer to a question—and assumes that the individual has a negative attitude toward the job and is a poor performer. This may not be true, and in such a case the rater would be guilty of an attribution error. We need to avoid attribution error because it is based on our subjective conclusion. When in doubt, we shouldn’t assume we know why the employee did or didn’t do something. We should talk to employees to find out so that we can objectively evaluate employees based on their actual performance.