Performance Appraisal

Prepared by: Ms. Kamal Deep Kaur

Definition & Concepts People differ in their abilities and their aptitudes. There is always some difference between the quality and quantity of the same work on the same job being done by two different people. Therefore, performance management and performance appraisal is necessary to understand each employee s abilities, competencies and relati!e merit and worth for the organi"ation. Performance appraisal rates the employees in terms of their performance. Performance appraisals are widely used in the society. The history of performance appraisal can be dated back to the #$th century and then to the second world war when the merit rating was used for the first time. %n employer e!aluating their employees is a !ery old concept. Performance appraisals are an indispensable part of performance measurement. Performance appraisal is necessary to measure the performance of the employees and the organi"ation to check the progress towards the desired goals and aims. The latest mantra being followed by organi"ations across the world being & 'get paid according to what you contribute( & the focus of the organi"ations is turning to performance management and specifically to indi!idual performance. Performance appraisal helps to rate the performance of the employees and e!aluate their contribution towards the organi"ational goals. )f the process of performance appraisals is formal and properly structured, it helps the employees to clearly understand their roles and responsibilities and gi!e direction to the indi!idual s performance. )t helps to align the indi!idual performances with the organi"ational goals and also re!iew their performance.

Performance appraisal takes into account the past performance of the

employees and focuses on the impro!ement of the future performance of the employees.

Process of Performance Appraisal

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 organi"ational goals and objecti!es. The standards set should be clear, easily understandable and in measurable terms. )n case the performance of the employee cannot be measured, great care should be taken to describe the standards. COMMUNICATING THE STANDARDS *nce set, it is the responsibility of the management to communicate the standards to all the employees of the organi"ation. The employees should be informed and the standards should be clearly e+plained to the. This will help them to understand their roles and to know what e+actly is e+pected from them. The standards should also be communicated to the appraisers or the e!aluators and if required, the standards can also be modified at this stage itself according to the rele!ant feedback from the employees or the e!aluators.

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. )t is a continuous process which in!ol!es 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 pro!iding assistance rather than interfering in an employees work.

COMPARING THE ACTUAL PERFORMANCE

ITH THE DESIRED

The actual performance is compared with the desired or the standard performance. The comparison tells the de!iations 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 negati!e de!iation in the organi"ational performance. )t includes recalling, e!aluating and analysis of data related to the employees performance. 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 sol!ing and reaching consensus. The feedback should be gi!en with a positi!e attitude as this can ha!e an effect on the employees future performance. The purpose of the meeting should be to sol!e the problems faced and moti!ate the employees to perform better. DECISION MA!ING The last step of the process is to take decisions which can be taken either to impro!e the performance of the employees, take the required correcti!e actions, or the related -. decisions like rewards, promotions, demotions, transfers etc.

Pre"re#$isi%es for Effec%i&e ' S$ccessf$l Performance Appraisal

The essentials of an effecti!e performance system are as follows/ 0 Doc$men%a%ion ( means continuous noting and documenting the performance. )t also helps the e!aluators to gi!e a proof and the basis of their ratings. 0 S%an)ar)s * Goals ( the standards set should be clear, easy to understand, achie!able, moti!ating, time bound and measurable. 0 Prac%ical an) simple forma% " The appraisal format should be simple, clear, fair and objecti!e. 1ong and complicated formats are time consuming, difficult to understand, and do not elicit much useful information. 0 2!aluation technique & %n appropriate e!aluation technique should be selected3 the appraisal system should be performance based and uniform. The criteria for e!aluation should be based on obser!able and measurable characteristics of the beha!ior of the employee. 0 Communication & Communication is an indispensable part of the Performance appraisal process. The desired beha!ior or the e+pected results should be communicated to the employees as well as the e!aluators. Communication also plays an important role in the re!iew or feedback meeting. *pen communication system moti!ates the employees to acti!ely participate in the appraisal process. 0 4eedback & The purpose of the feedback should be de!elopmental rather than judgmental. To maintain its utility, timely feedback should be pro!ided to the employees and the manner of gi!ing feedback should be such that it should ha!e a moti!ating effect on the employees future performance. 0 Personal 5ias & )nterpersonal relationships can influence the e!aluation and the decisions in the performance appraisal process. Therefore, the e!aluators should be trained to carry out the processes of appraisals without personal bias and effecti!ely.

C+allen,es Of Performance Appraisal

)n order to make a performance appraisal system effecti!e and successful, an organi"ation comes across !arious challenges and problems. The main challenges in!ol!ed in the performance appraisal process are/ 0 De%erminin, %+e e&al$a%ion cri%eria )dentification of the appraisal criteria is one of the biggest problems faced by the top management. The performance data to be considered for e!aluation should be carefully selected. 4or the purpose of e!aluation, the criteria selected should be in quantifiable or measurable terms 0 Crea%e a ra%in, ins%r$men% The purpose of the Performance appraisal process is to judge the performance of the employees rather than the employee. The focus of the system should be on the de!elopment of the employees of the organi"ation. 0 Lac- of compe%ence Top management should choose the raters or the e!aluators carefully. They should ha!e the required e+pertise and the knowledge to decide the criteria accurately. They should ha!e the e+perience and the necessary training to carry out the appraisal process objecti!ely. 0 Errors in ra%in, an) e&al$a%ion 6any errors based on the personal bias like stereotyping, halo effect 7i.e. one trait influencing the e!aluator s rating for all other traits8 etc. may creep in the appraisal process. Therefore the rater should e+ercise objecti!ity and fairness in e!aluating and rating the performance of the employees 0 Resis%ance The appraisal process may face resistance from the employees and the trade unions for the fear of negati!e ratings. Therefore, the employees should be communicated and clearly e+plained the purpose as well the process of appraisal. The standards should be

clearly communicated and e!ery employee should be made aware that what e+actly is e+pected from him9her.

P$rpose Of Performance Appraisal

Performance %ppraisal is being practiced in :$; of the organi"ations worldwide. <elf,appraisal and potential appraisal also form a part of the performance appraisal processes. Typically, Performance %ppraisal is aimed at/ 0 To re!iew the performance of the employees o!er a gi!en period of time. 0 To judge the gap between the actual and the desired performance. 0 To help the management in e+ercising organi"ational control. 0 To diagnose the training and de!elopment needs of the future. Pro!ide information to assist in the -. decisions like promotions, transfers etc. Pro!ide clarity of the e+pectations and responsibilities of the functions to be performed by the employees. To judge the effecti!eness of the other human resource functions of the organi"ation such as recruitment, selection, training and de!elopment. To reduce the grie!ances of the employees. -elps to strengthen the relationship and communication between superior & subordinates and management & employees.

%ccording to a recent sur!ey, the percentage of organisations 7out of the total organisations sur!eyed i.e. =$8 using performance

appraisal for the !arious purposes are as shown in the diagram below/ The most significant reasons of using Performance appraisal are/

6aking payroll and compensation decisions & >$; Training and de!elopment needs & ?@; )dentifying the gaps in desired and actual performance and its cause & ?A; Deciding future goals and course of action & B#; Promotions, demotions and transfers & B:; *ther purposes & A; 7including job analysis and pro!iding superior support, assistance and counseling8

Approac+es %o Performance De&elopmen%

Performance appraisal " Tra)i%ional approac+ Traditionally, performance appraisal has been used as just a method for determining and justifying the salaries of the employees. Than it began to be used a tool for determining rewards 7a rise in the pay8 and punishments 7a cut in the pay8 for the past performance of the employees. This approach was a past oriented approach which focused only on the past performance of the employees i.e. during a past specified period of time. This approach did not consider the de!elopmental aspects of the employee performance i.e. his training and de!elopment needs or career de!elopmental possibilities. The primary concern of the traditional approach is to judge the performance of the organi"ation as a whole by the past performances of its employees Therefore, this approach is also called as the o!erall approach. )n @:=$s the performance appraisal was recogni"ed as a complete

system in itself and the 6odern %pproach to performance appraisal was de!eloped. Performance appraisal " Mo)ern approac+ The modern approach to performance de!elopment has made the performance appraisal process more formal and structured. Cow, the performance appraisal is taken as a tool to identify better performing employees from others, employees training needs, career de!elopment paths, rewards and bonuses and their promotions to the ne+t le!els. %ppraisals ha!e become a continuous and periodic acti!ity in the organi"ations. The results of performance appraisals are used to take !arious other -. decisions like promotions, demotions, transfers, training and de!elopment, reward outcomes. The modern approach to performance appraisals includes a feedback process that helps to strengthen the relationships between superiors and subordinates and impro!e communication throughout the organi"ation. The modern approach to Performance appraisal is a future oriented approach and is de!elopmental in nature. This recogni"es employees as indi!iduals and focuses on their de!elopment.

Tra)i%ional Me%+o)s of Performance Appraisal

./ ESSA0 APPRAISAL METHOD

This traditional form of appraisal, also known as '4ree 4orm method( in!ol!es a description of the performance of an employee by his superior. The description is an e!aluation of the performance of any indi!idual based on the facts and often includes e+amples and e!idences to support the information. % major drawback of the method is the inseparability of the bias of the e!aluator. 1/ STRAIGHT RAN!ING METHOD This is one of the oldest and simplest techniques of performance appraisal. )n this method, the appraiser ranks the employees from the best to the poorest on the basis of their o!erall performance. )t is quite useful for a comparati!e e!aluation. 2/ PAIRED COMPARISON % better technique of comparison than the straight ranking method, this method compares each employee with all others in the group, one at a time. %fter all the comparisons on the basis of the o!erall comparisons, the employees are gi!en the final rankings. 3/ CRITICAL INCIDENTS METHODS )n this method of Performance appraisal, the e!aluator rates the employee on the basis of critical e!ents and how the employee beha!ed during those incidents. )t includes both negati!e and positi!e points. The drawback of this method is that the super!isor has to note down the critical incidents and the employee beha!iour as and when they occur. 4/ FIELD RE5IE )n this method, a senior member of the -. department or a training officer discusses and inter!iews the super!isors to e!aluate and rate their respecti!e subordinates. % major drawback of this method is that it is a !ery time consuming method. 5ut this method helps to reduce the superiors personal bias.

6/ CHEC!LIST METHOD The rater is gi!en a checklist of the descriptions of the beha!iour 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.

7/ GRAPHIC RATING SCALE )n this method, an employee s quality and quantity of work is assessed in a graphic scale indicating different degrees of a particular trait. The factors taken into consideration include both the personal characteristics and characteristics related to the on, the,job performance of the employees. 4or e+ample a trait like Dob Enowledge may be judged on the range of a!erage, abo!e a!erage, outstanding or unsatisfactory. 8/ FORCED DISTRIBUTION To eliminate the element of bias from the rater s ratings, the e!aluator is asked to distribute the employees in some fi+ed categories of ratings like on a normal distribution cur!e. The rater chooses the appropriate fit for the categories on his own discretion.

Mo)ern"Me%+o)
ASSESSMENT CENTRES " %n assessment centre typically in!ol!es the use of methods like social9informal e!ents, tests and e+ercises, assignments being gi!en to a group of employees to assess their competencies to take higher responsibilities in the future. Fenerally, employees are gi!en an assignment similar to the job they would be e+pected to perform if promoted. The trained e!aluators obser!e and e!aluate employees as they perform the assigned jobs and are e!aluated on job related characteristics. The major competencies that are judged in assessment centres are interpersonal skills, intellectual capability, planning and organi"ing capabilities, moti!ation, career orientation etc. assessment centres are also an effecti!e way to determine the training and de!elopment needs of the targeted employees. BEHA5IORALL0 ANCHORED RATING SCALES

5eha!iorally %nchored .ating <cales 75%.<8 is a relati!ely new technique which combines the graphic rating scale and critical incidents method. )t consists of predetermined critical areas of job performance or sets of beha!ioral statements describing important job performance qualities as good or bad 7for eg. the qualities like inter,personal relationships, adaptability and reliability, job knowledge etc8. These statements are de!eloped from critical incidents. )n this method, an employee s actual job beha!iour is judged against the desired beha!iour by recording and comparing the beha!iour with 5%.<. De!eloping and practicing 5%.< requires e+pert knowledge. HUMAN RESOURCE ACCOUNTING METHOD -uman resources are !aluable assets for e!ery organi"ation. -uman resource accounting method tries to find the relati!e worth of these assets in the terms of money. )n 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 e+penses incurred on them like their compensation, recruitment and selection costs, induction and training costs etc whereas their contribution includes the total !alue added 7in monetary terms8. The difference between the cost and the contribution will be the performance of the employees. )deally, the contribution of the employees should be greater than the cost incurred on them.
360-Degree-Performance-Appraisal Method Management y !b"ecti#es$M !% Method

269 DEGREE PERFORMANCE APPRAISALS

GA$ degree feedback, also known as Hmulti,rater feedbackH, is the

most comprehensi!e appraisal where the feedback about the employees performance comes from all the sources that come in contact with the employee on his job. GA$ degree respondents for an employee can be his9her peers, managers 7i.e. superior8, subordinates, team members, customers, suppliers9 !endors , anyone who comes into contact with the employee and can pro!ide !aluable insights and information or feedback regarding the 'on,the,job( performance of the employee. GA$ degree appraisal has four integral components/ @. #. G. B. <elf appraisal <uperior s appraisal <ubordinate s appraisal Peer appraisal.

<elf appraisal gi!es a chance to the employee to look at his9her strengths and weaknesses, his achie!ements, and judge his own performance. <uperior s appraisal forms the traditional part of the GA$ degree appraisal where the employees responsibilities and actual performance is rated by the superior. <ubordinates appraisal gi!es a chance to judge the employee on the parameters like communication and moti!ating abilities, superior s ability to delegate the work, leadership qualities etc. %lso known as internal customers, the correct feedback gi!en by peers can help to find employees abilities to work in a team, co,operation and sensiti!ity towards others.

<elf assessment is an indispensable part of GA$ degree appraisals and therefore GA$ degree Performance appraisal ha!e high employee in!ol!ement and also ha!e the strongest impact on beha!ior and performance. )t pro!ides a IGA$,degree re!iewI of the employees performance and is considered to be one of the most credible performance appraisal methods. GA$ degree appraisal is also a powerful de!elopmental tool because when conducted at regular inter!als 7say yearly8 it helps to keep a track of the changes others perceptions about the employees. % GA$ degree appraisal is generally found more suitable for the managers as it helps to assess their leadership and managing styles. This technique is being effecti!ely used across the globe for performance appraisals. <ome of the organi"ations following it are Jipro, )nfosys, and .eliance )ndustries etc.

MANAGEMENT B0 OB:ECTI5ES
The concept of K6anagement by *bjecti!es 765*8 was first gi!en by Peter Drucker in @:=B. )t can be defined as a process whereby the employees and the superiors come together to identify common goals, the employees set their goals to be achie!ed, the standards to be taken as the criteria for measurement of their performance and contribution and deciding the course of action to be followed. The essence of 65* is participati!e goal setting, choosing course of actions and decision making. %n important part of the 65* is the measurement and the comparison of the employee s actual performance with the standards set. )deally, when employees themsel!es ha!e been in!ol!ed with the goal setting and the choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities. UNI;UE FEATURES AND AD5ANTAGES OF MBO The principle behind 6anagement by *bjecti!es 765*8 is to create empowered employees who ha!e clarity of the roles and responsibilities e+pected from them, understand their objecti!es to be achie!ed and thus help in the achie!ement of organi"ational as well as personal goals. <ome of the important features and ad!antages of 65* are/

Clarity of goals & Jith 65*, came the concept of <6%.T goals i.e. goals that are/ <pecific 6easurable %chie!able .ealistic, and Time bound. The goals thus set are clear, moti!ating and there is a linkage

between organi"ational goals and performance targets of the employees.

The focus is on future rather than on past. Foals and standards are set for the performance for the future with periodic re!iews and feedback. 6oti!ation & )n!ol!ing employees in the whole process of goal setting and increasing employee empowerment increases employee job satisfaction and commitment. 5etter communication and Coordination & 4requent re!iews and interactions between superiors and subordinates helps to maintain harmonious relationships within the enterprise and also sol!e many problems faced during the period

Assessmen% Cen%res
%ssessment centre refers to a method to objecti!ely obser!e and assess the people in action by e+perts or -. professionals with the help of !arious assessment tools and instruments. %ssessment centers simulate the employee s on,the,job en!ironment and facilitate the assessment of their on,the,job performance. %n assessment centre typically in!ol!es the use of methods like social9informal e!ents, tests and e+ercises, assignments being gi!en to a group of employees to assess their competencies and on,the,job beha!iour and potential to take higher responsibilities in the future. Fenerally, employees are gi!en an assignment similar to the job they would be e+pected to perform if promoted. The trained e!aluators obser!e and e!aluate employees as they perform the assigned jobs and are e!aluated on job related characteristics. %n assessment centre for Performance appraisal of an employee typically includes/

Social*Informal E&en%s ( %n assessment centre has a group of participants and also a few assessors which gi!es a chance to the employees to sociali"e with a !ariety of people

and also to share information and know more about the organisation.

Informa%ion Sessions ( information sessions are also a part of the assessment centres. They pro!ide information to the employees about the organisation, their roles and responsibilities, the acti!ities and the procedures etc. Assi,nmen%s" assignments in assessment centres include !arious tests and e+ercises which are specially designed to assess the competencies and the potential of the employees. These include !arious inter!iews, psychometric tests, management games etc. all these assignments are focused at the target job.

The following are the common features of all assessment centres/

The final results is based on the pass9fail criteria %ll the acti!ities are carried out to fill the targeted job. 2ach session lasts from @ to = days. The results are based on the assessment of the assessors with less emphasis on self,assessment immediate re!iew or feedback are not pro!ided to the employees.

%n organi"ation s human resources can be a !ital competiti!e ad!antage and assessment centre helps in getting the right people in right places. The major competencies that are judged in assessment centres are interpersonal skills, intellectual capability, planning and organi"ing capabilities, moti!ation, career orientation etc. assessment centres are also an effecti!e way to determine the training and de!elopment needs of the targeted employees