Performance Appraisal Method

COURSE CODE:-EM- 549

Performance Appraisal and Compensation Management

SUBMITTED TO
Md. Mosharraf Hossain

Professor
Faculty of Business studies.

University of Dhaka.

SUBMITTED BY
SAKEER HASAN JAMI ID: 3-11-20-041. Batch-20th, MBA Evening Program. Department of Management Studies Faculty of Business studies. University of Dhaka

Performance Appraisal Methods

Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does. According to Flippo, a prominent personality in the field of Human resources, "performance appraisal is the systematic, periodic and an impartial rating of an employees 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. There are many types of performance appraisal methods. Some of them are: 1) Critical incident method 2) Weighted checklist method 3) Paired comparison analysis 4) Graphic Rating Scale 5) Essay evaluation method 6) Behavioral Anchored Rating Scales (BARS) 7) Performance ranking method 8) Management by Objectives (MBO) 9) 360 degree performance appraisal 10) Forced Distribution 11) Behavioral observation scales

1) Critical incident method This format of performance appraisal is a method which is involved identifying and describing specific incidents where employees did something really well or that needs improving during their performance period. The discussion of ratings with employees has, in many companies, proved to be a traumatic experience for supervisors. Some have learned from bitter experience what General Electric later documented; people who receive honest but negative feedback are typically not motivated to do better - and often do worse - after the appraisal interview. Consequently, supervisors tend to avoid such interviews, or if forced to hold

them, avoid giving negative ratings when the ratings have to be shown to the employee. One stumbling block has no doubt been the unsatisfactory rating form used. Typically, these are graphic scales that often include rather vague traits like initiative, cooperativeness, reliability, and even personality. Discussing these with an employee can be difficult. The critical incident technique looks like a natural to some people for performance review interviews, because it gives a supervisor actual, factual incidents to discuss with an employee. Supervisors are asked to keep a record, a "little black book," on each employee and to record actual incidents of positive or negative behavior. For example: Bob Mitchell, who has been rated as somewhat unreliable, fails to meet several deadlines during the appraisal period. His supervisor makes a note of these incidents and is now prepared with hard, factual data: "Bob, I rated you down on reliability because, on three different occasions over the last two months, you told me you would do something and you didn't do it. You remember six weeks ago when I. . ." Instead of arguing over traits, the discussion now deals with actual behavior. Possibly, Bob has misunderstood the supervisor or has good reasons for his apparent "unreliability." If so, he now has an opportunity to respond. His performance, not his personality, is being criticized. He knows specifically how to perform differently if he wants to be rated higher the next time. Of course, Bob might feel the supervisor was using unfairly high standards in evaluating his performance. But at least he would know just what those standards are. There are, however, several drawbacks to this approach. It requires that supervisors jot down incidents on a daily or, at the very least, a weekly basis. This can become a chore. Furthermore, the critical incident rating technique need not, but may, cause a supervisor to delay feedback to employees. And it is hardly desirable to wait six months or a year to confront an employee with a misdeed or mistake. Finally, the supervisor sets the standards. If they seem unfair to a subordinate, might he not be more motivated if he at least has some say in setting, or at least agreeing to, the standards against which he is judged. 2) Weighted Checklist Method : This method describe a performance appraisal method where rater familiar with the jobs being evaluated prepared a large list of descriptive statements about effective and ineffective behavior on jobs. The weighted checklist is another way of approaching behavior-based appraisal. This method provides a list of performance related statements that are weighted. Staff members are judged on a scale indicating the degree to which the statement accurately describes performance.

2. Process of weighted checklist HR department and Managers / Supervisors will set up checklist for each position. If the rater believes strongly that the employee possesses a particular listed trait, he checks the item; otherwise, he leaves the item blank. 3. Sample of weighted checklist

 Does he give respect to his superiors? Yes/No Does he follow instructions properly? Yes/No Does he make mistakes frequently? Yes/No The value of each question may be weighted equally or certain questions may be weighted more heavily than others. 1. Identify question: Based on elements of job performance, it designs questions as follows (for example) Employee works overtime when asked to Employee keeps work station well organized Employee listens to advice but seldom follows it Employee cooperatively assists coworkers who need help Employee plans actions before beginning work 2. Design table of checklist Employer should design a table with 5 columns: No, Question, Yes / No, Weight. Then, Using benchmarking to identify weight of each question. Send this form to employees for answer (stick yes or no). Identify result by summarizing all points at weight column. 3) Paired comparison analysis:
A performance appraisal technique that compares the performance of each worker with that of every other worker in the group. It is similar to ranking and the result is a rank ordering of workers, but the comparative judgments are more systematic and controlled.Comparisons are made between 2 people at a time, and a judgment is made about which of the pair is superior. If specific characteristics are to be rated, the comparisons are repeated for each item. When all possible comparisons have been made, an objective ranked list is obtained that is based on the workers score in each comparison.If a supervisor evaluates 6 workers by this technique, comparing each worker with every other worker, 15 paired comparisons must be made because there are 15 possible pairs. The following formula is used: N represents the number of persons to be evaluated: N (N-1) / 2. Advantages: an advantage of this approach over the ranking technique is that the judgmental process is simpler. The supervisor has to consider only one pair of workers at a time. Also it is possible to give the same rank to those of equal ability.

Disadvantages: large number of comparisons required when dealing with many employees. The use of the technique is necessarily restricted to small groups and to a single ranking of overall job effectiveness. Example: To illustrate the method, let us say we have five employees: Mr. Abbott, Mr. Barnes, Mr. Cox, Mr. Drew, and Mr. Eliot. We list their names on the left-hand side of the sheet. We compare Abbott with Barnes on whatever criterion we have chosen, say, present value to the organization. If we feel Abbott is more valuable than Barnes, we put a tally beside Abbott's name. We then compare Abbott with Cox, with Drew, and with Eliot. The process is repeated for each individual. The man with the most tallies is the most valuable person, at least in the eyes of the ratter; the man with no tallies at all is regarded as the least valuable person. Both ranking techniques, particularly when combined with multiple rankings (i.e., when two or more people are asked to make independent rankings of the same work group and their lists are averaged), are among the best available for generating valid order-of-merit rankings for salary administration purposes.

4) Graphic Rating Scale: Graphic rating scales are one of the most common methods of performance appraisal. Graphic rating scales require an evaluator to indicate on a scale the degree to which an employee demonstrates a particular trait, behavior, or performance result. Rating forms are composed of a number of scales, each relating to a certain job or performancerelated dimension, such as job knowledge, responsibility, or quality of work. Each scale is a continuum of scale points, or anchors, which range from high to low, from good to poor, from most to least effective, and so forth. Scales typically have from five to seven points, though they can have more or less. Graphic rating scales may or may not define their scale points. Acceptable rating scales should have the following characteristics: 1. Performance dimensions should be clearly defined. 2. Scales should be behaviorally based so that a rater is able to support all ratings with objective, observable evidence. 3. Abstract trait names such as "loyalty," "honesty," and "integrity" should be avoided unless they can be defined in terms of observable behaviors. 4. Points, or anchors, on each scaled dimension should be brief, unambiguous, and relevant to the dimension being rated. For example, in rating a person's flow of words, it is preferable to use anchors such as "fluent," "easy," "unimpeded," "hesitant," and "labored," rather than "excellent," "very good," "average," "below average," and "poor." Carefully constructed graphic rating scales have a number of advantages:

1. Standardization of content permitting comparison of employees. 2. Ease of development use and relatively low development and usage cost. 3. Reasonably high rater and rates acceptance. A disadvantage of such rating scales is that they are susceptible to rating errors which result in inaccurate appraisals. Possible rating errors include halo effect, central tendency, severity, and leniency. The halo effect occurs when a rating on one dimension of an appraisal instrument substantially influences the ratings on other dimensions for the same employee. As a result of the halo effect, an employee is rated about the same across all performance dimensions. Central tendency is a lack of variation or difference among ratings of different subordinates, wherein most employees tend to be rated as average. Leniency refers to an evaluator's tendency to rate most employees very highly across performance dimensions, whereas severity refers to the tendency to rate most employees quite harshly. 5) Essay evaluation method The essay method involves an evaluator's written report appraising an employee's performance, usually in terms of job behaviors and/or results. The subject of an essay appraisal is often justification of pay, promotion, or termination decisions, but essays can be used for developmental purposes as well. Since essay appraisals are to a large extent unstructured and open-ended, lack of standardization is a major problem. The open-ended, unstructured nature of the essay appraisal makes it highly susceptible to evaluator bias, which may in some cases be discriminatory. By not having to report on all job-related behaviors or results, an evaluator may simply comment on those that reflect favorably or unfavorably on an employee. This does not usually represent a true picture of the employee or the job, and content validity of the method suffers. 6) Behavioral Anchored Rating Scales (BARS): Behaviorally anchored rating scales (BARS) are rating scales whose scale points are defined by statements of effective and ineffective behaviors. They are said to be behaviorally anchored in that the scales represent a continuum of descriptive statements of behaviors ranging from least to most effective. An evaluator must indicate which behavior on each scale best describes an employee's performance. BARS differ from other rating scales in that scale points are specifically defined behaviors. Also, BARS are constructed by the evaluators who will use them. There are four steps in the BARS construction process: 1. Listing of all the important dimensions of performance for a job or jobs

2. Collection of critical incidents of effective and ineffective behavior 3. Classification of effective and ineffective behaviors to appropriate performance dimensions 4. Assignment of numerical values to each behavior within each dimension (i.e., scaling of behavioral anchors)

7) Performance ranking method: Ranking methods compare one employee to another, resulting in an ordering of employees in relation to one another. Rankings often result in overall assessments of employees, rather than in specific judgments about a number of job components. Straight ranking requires an evaluator to order a group of employees from best to worst overall or from most effective to least effective in terms of a certain criterion. Alternative ranking makes the same demand, but the ranking process must be done in a specified manner (for example, by first selecting the best employee in a group, then the worst, then the second-best, then the second-worst, etc). Comparative evaluation systems such as ranking are rarely popular. No matter how close a group of employees is in the level of their performance, and no matter how well they perform on the job, some will rank high and some will end up at the bottom. Evaluators are often reluctant to make such discriminations. Also, rankings are unable to compare employees across different groups. For example, it is difficult to say whether the second-ranked employee in unit A is as good as or better than the second-ranked employee in unit B. Despite the problems of ranking methods, if an organization has a very limited number of promotions or dollars to allocate, rankings can be very useful in differentiating among employees. 8) Management by Objectives (MBO): To avoid, or to deal with, the feeling that they are being judged by unfairly high standards, employees in some organizations are being asked to set - or help set - their own performance goals. Within the past five or six years, MBO has become something of a fad and is so familiar to most managers that I will not dwell on it here. It should be noted, however, that when MBO is applied at lower organizational levels, employees do not always want to be involved in their own goal setting. As Arthur N. Turner and Paul R. Lawrence discovered, many do not want self-direction or autonomy. As a result, more coercive variations of MBO are becoming increasingly common, and some critics see MBO drifting into a kind of manipulative form of management in which pseudo-participation substitutes for the real thing. Employees are consulted, but management ends up imposing its standards and its objectives. Some organizations, therefore, are introducing a work-standards approach to goal setting in which the goals are openly set by management. In fact, there appears to be something of a vogue in the setting of such work standards in white-collar and service areas.

The term MBO almost always refers to a comprehensive organization-wide goal setting and appraisal program that consist of six main steps: 1. Set the organizations goals. Establish organization-wide plan for next year and set goals. 2. Set departmental goals. Here department heads and their superiors jointly set goals for their departments 3. Discuss and allocate department goals. Department heads discuss the department's goals with all subordinates in the department (often at a department-wide meeting) and ask them to develop their own individual goals; in other words, how can each employee contribute to the department's attaining its goals? 4. Define expected results (set individual goals). Here, department heads and their subordinates set short-term performance targets. 5. Performance review and measure the results. Department heads compare actual performance for each employee with expected results. 6. Provide feedback. Department heads hold periodic performance review meetings with subordinates to discuss and evaluate progress in achieving expected results. 9) 360 degree performance appraisal: The style of 360 degree performance appraisal is a method that employees will give confidential and anonymous assessments on their colleagues. This post also information that can be used as references for such methods of performance assessments of 720, 540, 180 and so on. It Involves combining evaluations from several sources into an overall appraisal. It is called 360-degree feedback. It combines the full circle of ratings from all sources from superiors, subordinates, peers and self, and even evaluations by the organizations customers or clients who have dealings with the person being rated. Data from unique perspectives. May reduce many forms of bias. If all parties are told that their ratings will be compared with those assigned by others, they are likely to be more objective in their assessments.The level of agreement between different ratings appears to vary as a function of type of job, being generally lower for managerial and professional employees than for employees in blue-collar and service jobs. If ratings show a high level of agreement, a manager may be more willing to accept criticism because it comes from sources other than the immediate supervisor. Multisource feedback is more expensive than appraisals from a single source, but there are indications that the combination approach is growing in popularity despite its cost.

10) Forced Distribution: Forced distribution is a form of comparative evaluation in which an evaluator rates subordinates according to a specified distribution. Unlike ranking methods, forced distribution is frequently applied to several rather than only one component of job performance. Use of the forced distribution method is demonstrated by a manager who is told that he or she must rate subordinates according to the following distribution: 10 percent low; 20 percent below average; 40 percent average; 20 percent above average; and 10 percent high. In a group of 20 employees, two would have to be placed in the low category, four in the below-average category, eight in the average, four above average, and two would be placed in the highest category. The proportions of forced distribution can vary. For example, a supervisor could be required to place employees into top, middle, and bottom thirds of a distribution. Forced distribution is primarily used to eliminate rating errors such as leniency and central tendency, but the method itself can cause rating errors because it forces discriminations between employees even where job performance is quite similar. For example, even if all employees in a unit are doing a good job, the forced distribution approach dictates that a certain number be placed at the bottom of a graded continuum. For this reason, raters and rates do not readily accept this method, especially in small groups or when group members are all of high ability. 11) Behavioral observation scales: A performance appraisal technique in which appraisers rate the frequency of critical employee behaviors.Employees also evaluated in terms of critical incidents > similar to BARS. However, the BOS appraisers rate subordinates on the frequency of the critical incidents as they are observed to occur over a given period. The ratings are assigned on a 5-point scale. The evaluation yields a total score for each employee by adding the ratings for each critical incident. The behavioral incidents for the rating scale are developed in the same way as for BARS: through identification by supervisors or other subject matter experts. Similarly, BOS meet equal employment opportunity guidelines because they are related to behaviors required for successful job performance. I/O psychology research comparing BARS and BOS techniques has been inconclusive. Some studies demonstrate the superiority of one technique over the other; other studies fail to confirm these findings, indicating the superiotiy of BOS.

Conclusion
Formal systems for appraising performance are neither worthless nor evil, as some critics have implied: Nor are they panaceas, as many managers might wish. A formal appraisal system is, at the very least, a commendable attempt to make visible, and hence improvable, a set of essential organization activities. Personal judgments about

employee performance are inescapable, and subjective values and fallible human perception are always involved. Formal appraisal systems, to the degree that they bring these perceptions and values into the open, make it possible for at least some of the inherent bias and error to be recognized and remedied. By improving the probability that good performance will be recognized and rewarded and poor performance corrected, a sound appraisal system can contribute both to organizational morale and organizational performance. Moreover, the alternative to a bad appraisal program need not be no appraisal program at all, as some critics have suggested. It can and ought to be a better appraisal program. And the first step in that direction is a thoughtful matching of practice to purpose.