Functions of performance appraisal

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I. Contents of getting functions of performance appraisal

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Think of climbing into an aircraft that doesnt have an aircraft control system and the Air Traffic
Control rooms dont function properly. Would you be willing to go for a free ride in the plane?
If I say risk management functions play the role of Air Traffic Control rooms and provide the
relevant feedback to the business, you would mostly agree. But what are the systems in place to
see whether the risk management functions are fulfilling the role of Air Traffic Control rooms
properly. If Air Traffic Control rooms fail, the planes crash and the same happens in business.
Isnt then performance appraisal of risk management functions critical?
Generally, I have seen risk management functions do an appraisal within the team and sometimes
take feedback from senior management. This is despite the fact that in most surveys conducted,
the business teams respond that they face challenges with risk management functions and
highlight quite a few shortcomings. As the year is ending, the functions would be busy preparing
annual budgets and strategies. This would be the right time to obtain feedback and do a proper
evaluation.
Let us take an example of the fraud department and study the process of performance appraisal
for the department.
1.

Senior Management

Get uncensored honest feedback from the senior management. Not the form filling one, where
meets expectations means havent committed a big blunder till date. Check whether senior

managers are ticking the appropriate boxes to keep the risk management function out of their
hair for another year or is it genuine support for improvement. Ask the probing and difficult
questions to the audit committee and CXO level:
a)

Does the risk management function help you to perform better?

b)

Did the risk management function add value to the business during the year?

c) Where you worried during the year that some unpleasant risks will appear that have not
been identified before?
d) Does the risk management function makes you feel confident that the business is running
on course?
That will give out a message to senior managers that the function is geared to take up a bigger
role in business and partner with them for success.
2. Business Teams
Though the risk management functions issue reports relating to operation risks, the feedback of
business teams is restricted to obtaining their replies to the observations made in the reports. Risk
management functions rarely go back to business teams for an evaluation. One way is to conduct
a yearly survey to obtain business teams assessment on performance. The other way is to
incorporate a value scorecard system. This ensures that after every assignment, the business
teams feedback is obtained in the value scorecard. This enables the function to take corrective
measures promptly to provide better service in the next assignment. Some of the questions to ask
are:
a)

Did the risk management assignment offer value to your business operations?

b) Did the risk management teams partner with you to solve your concerns? For instance, in a
fraud investigation, did the report help them identify the suspect, and give a solution to prevent
future frauds?
c)
Did the risk management team give you a practical solution or recommendation to mitigate
the risks?
d)

Do you get prompt replies to your request for help or advice?

Build a value scorecard with 10-15 questions. A periodic assimilation of the responses will
highlight the strengths and weakness in performance of the risk management functions.
3. Other Risk Management Functions

If one wishes to breakdown the silo approach to risk management, then each risk management
team should be evaluating and giving feedback to the other teams. For instance, a fraud
department should get feedback from compliance and business ethics function.
This is the most beneficial of feedback, because other risk management teams actually
understand the nature of work, issues and challenges. Obtaining feedback opens doors for
sharing best practices and aligning the work. With numerous functions managing business risks,
there are some un-addressed risks as each department assumes that the other is fulfilling the
responsibility. Hence, some relevant questions need to be asked. Here are a few examples:
a)

Do you believe we are complimenting your work or are working at cross purposes?

b) Do you get information on our work to tie up and give a joint strategy to address related
risks?
c)

Do our teams collaborate well together on joint projects?

d)

Do we share our methodologies, knowledge and best practices to benefit each other?

Working in isolation isnt going to help the function, other teams or the business. Hence, taking
feedback from other functions is really important.
4. Risk Management Team
Doing a fair and honest evaluation of team performance is of paramount importance. If possible,
implement a 360 degree performance evaluation system. A top down evaluation system will not
work for risk management function, as most of the interaction with business teams is done by
middle and junior managers. They are aware of business team attitude towards risk management.
Even the office rumour mill gives some useful information of acceptance and popularity of the
risk management function. Some of the questions the team should be asking are:
a) Are we viewed as business partners by operation teams and do they think we add value to
their business?
b)

Are we doing the best possible work to mitigate the risks?

c) Are we using standard tools, methodologies and knowledge to give the best possible
service to business teams?
d)

Do we have a good talent pool that understands the business and associated risks?

Unless the risk management function does an honest self-evaluation, it is unlikely to find the
gaps and improve. Hence, a good deal of time should be spent on it.
Closing thoughts
A good performance appraisal is possible after assimilating the information from all four sources
and asking a lot of probing questions. Rather than shy away and get defensive it is best to take
the feedback in positive light. Without feedback the function is directionless. Here is a small
video pf HCL on performance appraisal. It brings the point home.

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III. Performance appraisal methods

1. Essay Method
In this method the rater writes down the employee
description in detail within a number of broad categories
like, overall impression of performance, promoteability
of employee, existing capabilities and qualifications of
performing jobs, strengths and weaknesses and training
needs of the employee. Advantage It is extremely
useful in filing information gaps about the employees
that often occur in a better-structured checklist.
Disadvantages It its highly dependent upon the writing
skills of rater and most of them are not good writers.
They may get confused success depends on the memory
power of raters.

2. Behaviorally Anchored Rating Scales

statements of effective and ineffective behaviors
determine the points. They are said to be
behaviorally anchored. The rater is supposed to
say, which behavior describes the employee
performance. Advantages helps overcome rating
errors. Disadvantages Suffers from distortions
inherent in most rating techniques.

3. Rating Scale
Rating scales consists of several numerical scales
representing job related performance criterions such as
dependability, initiative, output, attendance, attitude etc.
Each scales ranges from excellent to poor. The total
numerical scores are computed and final conclusions are
derived. Advantages Adaptability, easy to use, low cost,
every type of job can be evaluated, large number of
employees covered, no formal training required.
Disadvantages Raters biases

4. Checklist method
Under this method, checklist of statements of traits of
employee in the form of Yes or No based questions is
prepared. Here the rater only does the reporting or
checking and HR department does the actual evaluation.
Advantages economy, ease of administration, limited
training required, standardization. Disadvantages Raters
biases, use of improper weighs by HR, does not allow
rater to give relative ratings

5.Ranking Method
The ranking system requires the rater to rank his
subordinates on overall performance. This consists in
simply putting a man in a rank order. Under this method,
the ranking of an employee in a work group is done
against that of another employee. The relative position of
each employee is tested in terms of his numerical rank. It
may also be done by ranking a person on his job
performance against another member of the competitive
group.
Advantages of Ranking Method
Employees are ranked according to their
performance levels.
It is easier to rank the best and the worst
employee.
Limitations of Ranking Method
The whole man is compared with another
whole man in this method. In practice, it is very difficult
to compare individuals possessing various individual
traits.
This method speaks only of the position where an
employee stands in his group. It does not test anything
about how much better or how much worse an employee
is when compared to another employee.
When a large number of employees are working,
ranking of individuals become a difficult issue.
There is no systematic procedure for ranking
individuals in the organization. The ranking system does
not eliminate the possibility of snap judgements.

6. Critical Incidents Method

The approach is focused on certain critical behaviors of

employee that makes all the difference in the
performance. Supervisors as and when they occur record
such incidents. Advantages Evaluations are based on
actual job behaviors, ratings are supported by
descriptions, feedback is easy, reduces recency biases,
chances of subordinate improvement are high.
Disadvantages Negative incidents can be prioritized,
forgetting incidents, overly close supervision; feedback
may be too much and may appear to be punishment.

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