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Performance Appraisal
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What is Performance Management
Performance management is the process of creating a work

environment or setting in which people are enabled to perform
to the best of their abilities. Performance management is a
whole work system that begins when a job is defined as needed.
It ends when an employee leaves the organization.

Performance Management System (PMS)
A Performance Management System (PMS) includes the following actions:

• Develop clear job descriptions (JDs).
• Select appropriate people with an appropriate selection process.
• Negotiate requirements and accomplishment-based performance
standards, outcomes, and measures.
• Provide effective orientation, education, and training.
• Provide on-going coaching and feedback.
• Conduct quarterly performance development discussions.
• Design effective compensation and recognition systems that reward
people for their contributions.
• Provide promotional/career development opportunities for staff.
• Assist with exit interviews to understand WHY valued employees leave
the organization.

Defining Performance Appraisal
Performance appraisal is the formal, structured system

of measuring & evaluating an employee’s job related
behaviors & outcomes to discover how & why the
employee is presently performing on the job & how the
employee can perform more effectively in the future so
that the employee as well as the organization can
mutually benefit.

Features of Performance Appraisal
 It is a systematic process, which aims to evaluate performance of the

employees.
 It provides a description of an employee’s job’s relevant strengths &
weaknesses.
 It aims to find out how well the employee is performing the job & tries to
establish a plan for further improvement.
 The appraisal period is carried out periodically according to a definite
plan.

Objectives of Performance Appraisal
 To effect promotions based on competence & performance

 To confirm services of probationary employees upon their completing
the probationary period satisfactorily
 To assess the training & development needs of employees.
 To generate adequate feedback & guidance from the immediate
superior to an employee working under him.
 To decide upon a pay raise where regular pay scales have not been
fixed.
 To provide inputs to system of rewards (comprising salary increments,
transfers, promotions, demotions or terminations) & salary administration.

Objectives of Performance Appraisal
 To let the employees know where they stand insofar as their

performance is concerned & to assist them with constructive criticism &
guidance for the purpose of their development.
 To improve communication by providing a format for dialogue between
the superior & the subordinate, and improves understanding of personal
goals & concerns.
 It can be used to determine whether HR programs such as selection,
training and transfers have been effective or not.
 To generate significant, relevant, free & valid information about the
employees.

Multiple purposes of Performance
Assessment
General Applications Specific Purpose
Developmental uses Identification of individual needs

Performance feedback
Determining transfer & job assignments
Identification of individual strengths &
developmental needs
Administrative Salary
Uses/Decisions Promotion
Retention or termination
Recognition of individual performance
Lay-offs
Identification of poor performance

Multiple purposes of Performance
Assessment
General Applications Specific Purpose
Organizational HR planning
Maintenance/Objectives Determining organization training needs
Evaluation of organizational goal achievement
Information for goal identification
Evaluation of HR systems
Reinforcement of organizational development
needs
Documentation Documentation for HR decisions

Planning the Appraisal
A meaningful performance appraisal is a two-way process that
benefits both the employees & the organization as a whole. The
planning appraisal strategy has to be done:
a. Before the appraisal:
 Establish key task areas & performance goals
 Set performance goals
 Get the facts
 Schedule each appraisal interview well in
advance b. During the appraisal:
 Encourage two-way communication
 Discuss & agree on performance goals for the future
 To think about how one can assist the employee to achieve more at
work.
 Record notes of the interview
 End the interview on an upbeat note
c. After the appraisal:
 Prepare a formal record of the interview
 Monitor performance

Performance Appraisal Process
Objectives of Performance
Objectives of Performance
Appraisal
Appraisal
Establish Job Expectations

Establish Job Expectations
Design the appraisal program
Design the appraisal program
Performance
feedback
Appraise Performances
Appraise Performances
Performance Interviews
Performance Interviews
Use appraisal data for
Use appraisal data for
appropriate purposes
appropriate purposes

Performance Appraisal Methods
Performance appraisal
Performance appraisal
methods
methods
Past Oriented Methods: Future Oriented Methods:

Past Oriented Methods: Future Oriented Methods:
Management By Objectives
Management By Objectives
Checklists (MBO)
(MBO)
Checklists 360-dgree appraisal
Rating scales 360-dgree appraisal
Psychological appraisals
Rating scales Psychological appraisals
Forced choice Method Assessment centers
Forced choice Method Assessment centers
Critical Incident Method
Critical Incident Method
Behaviorally anchored Scales (BARS) Behaviorally
anchored Scales (BARS) Field Review method
Field Review method
Performance Tests & Observations Performance
Tests & Observations
Annual Confidential reports
Annual Confidential reports
Essay Method
Essay Method
Cost accounting approach
Cost accounting approach
Comparative Evaluation Approach
Comparative Evaluation Approach

Past-Oriented Methods
Checklist Method: Under this method a checklist of statements on the

traits of the employee & his or her job is prepared in two columns
namely; “yes” column and a “no” column. When points are allotted to
the checklist, the technique is known as a Weighted Checklist.
Rating Scales: This is the simplest & the most popular technique for
appraising employee performance. The typical rating scale system
consists of several numerical scales, each representing a job-related
performance criterion such as dependability, initiative, output,
attendance, attitude, cooperation & so on. Each scale ranges from
excellent to poor. The rater checks the appropriate performance
level on each criterion, then computes the employee’s total score.

Forced Choice Method: In this method, the rater is given a
series of statements about the employees. These statements
are arranged in blocks of two or more, and the rater
indicates which statement is most or least descriptive of the
employee.
This approach is known as forced choice method because the

rater is forced to select statements which are readymade. The
advantage of this method is the absence of personal bias in
rating. The disadvantage is that the statements may not be
properly framed & may not also precisely be the descriptive of
the ratee’s traits.
Critical Incident Method: This approach focuses on certain critical
behaviors of an employee that makes the difference between
effective and non-effective performance of a job. These events are
generally noted or recorded by the superiors. One of the major
advantages of this method is that the evaluation is based on actual
job behavior.
Field review Method: This is an appraisal by someone outside the

assessee’s own department, usually someone from the corporate
office or the HR department. The outsider reviews employee records
& holds interviews with the ratee his or her superior.
Performance Tests & Observations: With a limited number of

jobs, employee assessment may be based upon a test of knowledge
or skills. The test may be of the paper & pencil variety or an actual
demonstration of skill.

• Annual Confidential Report: It is mostly
used in Govt. organizations. It is a
descriptive report prepared, generally at
the end of every year, by the employee’s
immediate superior.

Behaviorally Anchored Rating Scales (BARS): Behaviorally Anchored
rating Scales are also known as Behavioral Expectations Scale. These
are rating scales whose scale points are determined by statements of
effective & ineffective behaviors. They are said to be behaviorally
anchored in that the scales represent a range of descriptive
statements of behaviors varying from the least to the most effective.

Essay Method: In this method, the rater must describer the employee
within a number of broad categories, such as a) the rater’s overall
impression of the employee performance, b) the promotability of the
employee c) the jobs that the employee is now able or qualified to
perform, d) the strengths & weaknesses of the employee & e) the
training & development assistance required by the employee.
Cost Accounting Method: This method evaluates performance from

the monetary returns the employee yields to his or her organization.
A relationship is established between the cost included in keeping the
employee & the benefit the organization derives from him or her.
Comparative Evaluation Approaches: These are a collection of

different methods that compare one worker’s performance with that
of his/her coworkers. Comparative appraisals are usually conducted
by supervisors. The usual comparative forms used in this kind of
evaluation are the Ranking Method & the Paired Comparison
Method.

Comparative Evaluation Approaches
Ranking Method: In this method the superior ranks his or her

subordinates in the order of their merit, starting from the best to the
worst. This method is subject to the halo & recency effects, although
rankings by two or more raters can be averaged to help reduce bias.
 Paired-Comparison Method: Here the appraiser compares each

employee with every other employee, one at a time. For example,
there are five employees namely, A, B, C, D, E. the performance of A
st
is 1 compared with that of B & a decision is made about whose
performance is better. Then A is compared with C, D & E in that
order. The same procedure is repeated for other employees. The
number of comparisons can be calculated with the help of a formula,
namely:
N(N-1)/2, where N stands for the number of employees to be
compared.
If there are 10 employees, the comparisons will be 10(10-1)/2=45.

Future-Oriented Appraisal Methods
• Management By Objectives (MBO)

• 360 Degree Feedback Appraisal Systems
• Psychological appraisals
• Assessment Centers

Management By Objectives (MBO)
What is MBO:
Management by Objectives is a process whereby the superior

and subordinate managers of an organization jointly identify
its common goals, define each individual’s major areas of
responsibility in terms of results expected of him & use
these measures as guides for operating the unit and
assessing the contributions of each of its members.

360 Degree Feedback Appraisal
Systems
The 360 degree Feedback Appraisal process is the systematic
collection of performance data on an individual or group, derived
from a number of stakeholders-the stakeholder being the immediate
supervisors, team members, customers, peers & the self (self
appraisal).
Grand Parent Appraisal /
Grand Parent Appraisal /
Super Boss Appraisal
Super Boss Appraisal
Uncle-Aunt Appraisal /
Uncle-Aunt Appraisal /
Appraisal by other
Appraisal by other
Departmental heads
Parent Appraisal / Departmental heads
Parent Appraisal /
Boss Appraisal
Boss Appraisal
Client Appraisal / Appraisal by
Client Appraisal / Appraisal by
Suppliers, Distributors, and
Suppliers, Distributors, and
Direct Customers
Direct Customers
Self Peer
Peer
Self Appraisal
Appraisal Appraisal
Appraisal
Peer
Peer
Appraisal
Appraisal
Son / Daughter Appraisal

Son / Daughter Appraisal
(Subordinate Appraisal)
(Subordinate Appraisal)
Future-Oriented Appraisal Methods
Psychological Appraisals:
The appraisal normally consists of in-depth interviews, psychological

tests, discussions with supervisors & a review of other evaluations.
The psychologist then writes an evaluation of the employee’s
intellectual, emotional, motivational & other-related characteristics
that suggest individual potential & may predict future performance.
Assessment Centers:
Assessment center is a mechanism used to identify the potential for
growth of individuals. It is a procedure specifically used, designed to
evaluate an employee’s managerial potential. Its objective is to
reinforce strengths, overcome weaknesses & exploit potential of the
employees through training & development efforts. The assessors
observe the behavior & make independent evaluation of what they have
observed, which results in identifying strengths & weaknesses of the
attributes being studied.

Errors in Performance Appraisal:
Error Type Hallmarks/Features
Halo effect This is a tendency to allow one positive trait of

the employee to color the entire appraisal.
This results in an overall higher rating than
may be warranted.
Horn Effect This is a tendency to allow one negative trait

of the employee to color the entire appraisal.
This results in an overall lower rating than may
be warranted.

Leniency or Strict Some appraisers consistently assign high values to all

Error employees, regardless of merit. This is a leniency error.
The strictness tendency is a reverse situation, where all
individuals are rated too severely and performance is

understated.
Central Tendency This is the most common error that occurs when a rater
assigns mainly middle range scores or values to all
individuals under appraisal. Extremely high or
extremely low evaluations are avoided by assigning
“average ratings” to all.
Spill-over Effect This refers to allowing past performance to influence

the evaluation of present performance.

Personal Bias Perhaps the most important error of all rises from the
fact that very few people are capable of objective
judgments entirely independent of their values &
prejudices.
Recency Effect In this case the rater gives greater weightage to recent
occurrences than earlier performances.
Stereotyping It is a mental picture that an individual holds about a

person because of the person’s age, religion, state,
caste etc.

Challenges of Performance Appraisal
 To create a culture of excellence that inspires every employee to

improve and lend himself or herself to be assessed.
 Align organizational objectives to individual aspirations
 Clear growth paths for talented individuals
 Provide newer challenges to rejuvenate careers that have
reached the plateau stage
 Forge a partnership with people for managing their careers
 Empower employees to make decisions without the fear of
failing
 Embed teamwork in all operational processes.
 Debureaucratise the organization structure for ease of flow of
information.

Performance Appraisals: Legal Issues
Legal Issues Associated with Performance Appraisal:
Performance appraisal data are used to make vital HR decisions as

those of pay, promotion, training, transfer & termination etc. the
appraisal system is a common target of legal disputes by
employees involving charges of unfairness & bias.
Legally defensible appraisal procedures:

 All personal decisions should be based on a formal standardized
performance appraisal system.
 Any performance appraisal process should be uniform for all
employees within a job group, and decisions based on that, the
performance appraisal should be monitored for differences according
to race, sex, national origin, religion etc criteria of the employees.
 All specific performance standards should be formally
communicated to the employees.

Legally defensible appraisal procedures
Legally defensible appraisal procedures (Contd):
 All employees should be able to review their appraisal results.

 There should be a formal appeal process for the ratee to rebut rater
judgments.
 All raters should be provided with written instructions & training on
how to conduct appraisals properly to facilitate systematic, unbiased
appraisals.
 All personnel decision-makers should be well-informed of anti-
discrimination laws.

Legally defensible appraisal contents
 Any performance appraisal content should be based on

a Job Analysis
 Constraints on an employee’s performance that are
beyond the employee’s control should be prevented
from influencing the appraisal so as to ensure that the
employee has an equal opportunity to achieve any
given performance level.
 Specific job-related performance dimensions should be
used
 The performance dimensions should be assigned
weights so as to reflect their relative importance in
calculating the composite performance scores.

Legally defensible documentation of
appraisal results
 A thoroughly written record of evidence leading to

termination decisions should be maintained
 Written documentation for extreme ratings should be required
& they must be consistent with the numerical ratings.
 Documentation requirements should be consistent among
the raters

Legally defensible raters
 The Raters should be trained in “how to use an appraisal

system.”
 The raters must have the opportunity to observe the ratee first-
hand or to review important ratee performance products.
Use of more than one rater is desirable in order to lessen the

amount of influence of any one rater & to reduce the effects of
biases. Peers, subordinates, customers & clients are possible
such sources.

Essential Characteristics of an effective
Performance Appraisal system
Reliability & validity: Appraisal system should provide consistent,
reliable & valid information & data, which can be used to defend
the organization to appraise the employees even in case of legal
challenges.
 Job Relatedness: The appraisal technique should measure the
performance and provide information in job related areas.
 Standardization: appraisal forms, procedures, administration of
techniques, ratings etc should be standardized as appraisal decisions
affect all employees of the group.
 Practical Applicability: The techniques should be practically
viable to administer, possible to implement & economical to
undertake continuously.
 Legal Sanction: Appraisals must meet the legal statutory norms &
regulations.
 Training to appraisers: As appraisal is important & sometimes
difficult, it would be useful to provide training to appraisers viz
some insights & ideas on the rating, documenting appraisals &
conducting appraisal interviews.

Essential Characteristics of an effective
Performance Appraisal system
 Open communication: Most employees want to know how well they are
performing the job. The appraisal interviews should permit both parties to
learn about the gaps & prepare themselves for the future.
 Employee access to results: Employees should receive adequate
feedback on their performances. If performance appraisals are meant for
improving employee performance, then withholding appraisal results
would not serve any fruitful purpose.
Due Process: It follows then that formal procedures should be developed
to enable employees who disagree with appraisal results. They must have
the means for pursuing their grievances & having them addressed
objectively.

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Performance Appraisal

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Performance management is the process of creating a work

Click here to get your free novaPDF Lite registration key

A Performance Management System (PMS) includes the following actions:

Click here to get your free novaPDF Lite registration key

Performance appraisal is the formal, structured system

Click here to get your free novaPDF Lite registration key

 It is a systematic process, which aims to evaluate performance of the

Click here to get your free novaPDF Lite registration key

 To effect promotions based on competence & performance

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 To let the employees know where they stand insofar as their

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General Applications Specific Purpose

Developmental uses Identification of individual needs

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General Applications Specific Purpose

Documentation Documentation for HR decisions

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Establish Job Expectations

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Past Oriented Methods: Future Oriented Methods:

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Checklist Method: Under this method a checklist of statements on the

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This approach is known as forced choice method because the

Field review Method: This is an appraisal by someone outside the

Performance Tests & Observations: With a limited number of

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Click here to get your free novaPDF Lite registration key

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Cost Accounting Method: This method evaluates performance from

Comparative Evaluation Approaches: These are a collection of

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Ranking Method: In this method the superior ranks his or her

 Paired-Comparison Method: Here the appraiser compares each

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• Management By Objectives (MBO)

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Management by Objectives is a process whereby the superior

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Son / Daughter Appraisal

The appraisal normally consists of in-depth interviews, psychological

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Halo effect This is a tendency to allow one positive trait of

Horn Effect This is a tendency to allow one negative trait

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Leniency or Strict Some appraisers consistently assign high values to all

individuals are rated too severely and performance is

Spill-over Effect This refers to allowing past performance to influence

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Stereotyping It is a mental picture that an individual holds about a

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 To create a culture of excellence that inspires every employee to

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Performance appraisal data are used to make vital HR decisions as

Legally defensible appraisal procedures:

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Legally defensible appraisal procedures (Contd):

 All employees should be able to review their appraisal results.