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.