TABLE OF CONTENTS

I. Introduction

II. Main Text

III. Conclusion

IV. Appendices

V. References

VI. Bibliography
 INTRODUCTION

‘Skill comes so slow, and life so fast doth fly,

We learn so little and forget so much.’
-(Nosche Teipsum, 1599)

The above lines mean that there are so many skills and so much knowledge to acquire
that a lifetime is not enough for it. This may also apply to the world of business wherein
every employee today looks to improve his skills and knowledge and must constantly do
so to keep up but yet it is never enough as the world around us keeps changing.

‘Change is the only constant’. This is an inevitable part of an organization making it

susceptible to strategic, organizational, competitive, technological and occupational
pressures to be developed and improved in order to reinforce the organization’s standing,
position, effectiveness and profitability in its markets. How an employee works in such
an organization in such conditions and how he performs against the standards set by the
organization is measured by his performance appraisal. Performance appraisal is defined
as evaluating an employee’s current or past performance relative to his or her
performance standards.

The appraisal process involves setting work standards, assessing the employee’s actual
performance relative to these standards, providing feedback to the employee with the aim
to eliminate performance deficiencies or continue performance above par. One
sometimes wonders why a performance appraisal is done at all when it is such a terrible
experience for the supervisor as well as for the employees. A logical explanation would
be that it further leads to performance related pay awards, identifies potential, gets a
glimpse into wider organizational development prospects, identifies occupation-person
match and mismatch and looks into the actual and potential problem areas.

Unfortunately, performance reviews are rarely as effective as they should be - and the
process often seems about as pleasant as a visit to the dentist. For many big company
employees, reviews are nothing more than an annual appointment to find out what their
new salary will be.
One may think that an organization’s appraisal scheme consisting of a densely laid out
form covering every aspect from pay and promotions to training and performance would
be the best, but to may it maybe just a blank sheet of paper (although it is highly
impractical in the business world). There are a wide variety of formal appraisal forms and
which one really suits a firm would depend on what it wants to assess and to what extent.
Some methods of appraisal are:-

Graphic Rating Scale Method : It is the simplest and the most popular technique for
performance appraisal. It lists traits ( such as quality and reliability) although many firms
specifies the duties to be appraised. For example appendix A (figure 9-3) shows an
appraisal form of an Administrative Secretary wherein five of her main duties have been
taken from her job description and prioritized. Note that importance ratings are indicated
as a percentage at the top of each of the five categories.

Alternation Ranking Method : Ranking employees from best to worst on a

characteristic or a set of them is usually easier than just ranking them. It may seem
complicated as it involves listing all the subordinates to be appraised and crossing out the
names of those not known well enough to rank. Then highlight the employee who is the
highest on the characteristic being measured and also the one who is the lowest. Then
choose the next highest alternating with the next lowest until all the employees are
ranked.

Paired Comparison Method: This method is more precise. For every trait, every
subordinate is paired with and compared to every other subordinate. For every
comparative trait, a + or – is indicated to show who is the better employee of the pair.
The number of ‘+’ are added up to calculate which employee is best in which trait.

Critical Incidence Method: In this method the supervisor keeps a record of desirable
and undesirable examples or incidents of each subordinate’s work related behavior. Then
every six months they meet to discuss the latter’s performance using the record of
incidents as example.

Behaviorally Anchored rating Scales (BARS): It combines the benefits of narratives,

critical incidents and graphic ratings scale thus providing a better, more sophisticated
appraisal method.

The Management by Objectives Method (MBO): This requires the manager to set
specific measurable goals with each employee and then periodically discuss his or her
progress towards these goals. This method may however be time consuming the
performance of every employee must be looked into after taking time out to set their
individual objectives.
Electronic Performance Appraisal: This modern system of performance appraisal is
being widely approved of all over the world for the sole reason that it saves a lot of time,
it is cheap and it generates a detailed performance report. All that needs to be done by
managers is to make log notes of his employees during the year and rate the employees
on a series of performance traits. The program then generates written texts to support
each of the performance part. Some companies that generates these software are :

Most firms combine various techniques to get the desired form for their organization but
one must remember that whatever be the form of appraisal, its success depends on the
way it is handled.

For instance when we deal with the graphic rating scale appraisals which is still
popular in many organizations, many problems may be faced while using them. First of
all, it may propagate UNCLEAR STANDARDS. This means that the way the traits and
the degree of merits are handled may differ from manager to manager and may lead to
unfair performance judgment unless there are descriptive phrases to indicate the
difference between ‘outstanding’, ‘superior’ and ‘good’ quality of work. The concept of
HALO EFFECT comes into play wherein the supervisor may consciously or
unconsciously rate those employees who are not friendly to him as unsatisfactory as far
as the trait of a “good team worker” goes. Solution lies in first accepting that this
problem exists and then perhaps a supervisory training could be imparted. Many
managers have the tendency of giving an average rating to all employees in their
performance which itself defeats the purpose of an appraisal. This is called CENTRAL
TENDENCY making it less useful for evaluating purposes. Solution lies in ranking them
instead of using the graphic rating scale. LENIENCY OR STRICTNESS is another
problem which is usually inherent in the supervisors and a good way to reduce it is to
infuse the graphic rating scale method with forced distribution method where he has to
distribute performance among employees as ‘excellent’, ‘good’ or ‘fair’. Leniency
persisted in the small mining consultancy firm called ‘SRG Services & Consultancy Pvt
Ltd’ in India where I used to work. The owners of the firm who were from the marketing
field used to appraise all the employees of all departments and it was obvious that the
marketing division were always rewarded in terms of increase in salary and facilities
whether or not they performed well. It was also communicated to all the employees that
the company survived on the marketing personnel, so their decision should not be
questioned. This was leniency in practice! BIAS among supervisors in terms of race, age
and sex could also be a problem in this system. Supervisors should reexamine judgments
to make sure that poor performance is not overlooked due to being uncomfortable about
providing feedback to those different than oneself. If supervisors provide feedback, often
and equally to all members of the workforce, this issue should not prevail. At the same
time, failure to give legitimate feedback because of being feared labeled as sexist, racist,
or discriminatory can demean the importance of the workers career goals and
expectations. The disadvantage does not only lie with the above method but with others
too. For instance, the BARS method is much too complicated and difficult to develop.
The ALTERNATION RANKING method may cause disagreements among employees.
There may be difficulty in choosing the cut off points in the FORCED
DISTRIBUTION method. The relative ranking of employees, maybe tough in the
CRITICAL INCIDENCE method.

Several options lie when deciding who should do the performance appraisal. The first and
most popular option is that of the immediate supervisor or team leader. Peer
appraisals too can be effective in determining the success of future management. The
appraisal of an employee by his co-workers, seem to be quite logical as they would know
better of his knowledge, skills, attitude and abilities (KSAA). The problem of grouping
and rating everyone as ‘good’ may however arise. The best combination in this case
would be is to have one supervisor and three peers to form a group. Some organizations
appoint Rating Committees to evaluate employees. It usually consists of the employees
immediate supervisor and three or four other supervisors. The method of Self rating is
found to be highly impractical as every employee would without doubt rate himself as a
high achiever in the organization. Appraisal by subordinates or upward feedback is
found in many firms where subordinates anonymously evaluate their supervisor’s
performance for developmental purposes. This idea is extended further by many firms to
what they call the 360 degree feedback. In this method, performance information is
collected from all around an employee – peers, supervisors, subordinates and customers
in the form of surveys, then compiled and presented to him.

The process of performance appraisal, also described by Nicholson in his book ’52
Ways to Motivate Your Staff’ as the ‘learning cycle’ (Fig.3), consists of four major
steps. First comes experience or defining the job wherein the supervisor and his
subordinate agrees on his or her duties and the standards expected. ‘The Times’, a
leading newspaper (16th May, 2005) reports that stress at work is taking a toll on
employees in Britain and one reason for it is ‘an unclear role, including poorly-defined
expectations’ (see appendix C). It is therefore advisable to quantify these expected
standards so that there may not be any further confusion. The next step is reflection or
appraise performance, meaning comparing the performance based on evaluating the
figures generated against the standards set. The third step of conceptualization or
feedback session is just as important, as the subordinate’s performance and progress are
discussed in an interview and plans are made to bring in improvement if it is required.
Then comes experimentation where planning and implementation on the agreed targets
are carried out
 Concrete

Experience

Plan and Review

Experiment and
Reflect

Conclude and
Conceptualize

Fig3. THE LEARNING CYCLE

Conducting performance appraisal interview is hated by managers as much as it is by the

employees. The interview will be more effective and much easier to handle if people
work in an environment where regular feedback is expected. It is thus important that both
parties must be informed ahead of time of the date of the interview. This is necessary
because it would give the employee some time to reflect upon his performance and know
for himself what he did right and where he went wrong. It is also suggested that he could
make his own notes and be mentally prepared to discuss his problems with his manager if
he has any. During the interview the manager must be gentle in his approach and ask
open ended questions so that it triggers off answers that are analytical. Employees should
be encouraged to speak about their strengths and weaknesses in the work area and feel
free to provide reasons for the under achievements. The idea is not to blame but to focus
on further developments.

There are various consequences of appraisal. Some of them are:-

Reward System: Some organizations attach merit pay or some other type of bonus
scheme directly to the appraisal. For instance the recent big news (‘Lite Standard’, 16th
May 2005) was that the leading chain of supermarkets, ‘Tesco’ is rewarding its staff with
approximately GBP 4000 for the profits they have made. The credit of the profits, the
owner says, has to go to baseline staff because they deserve it. At the same time yet
another news hit headlines (‘The Times’, 16th May 2005) which reported that bonus will
be awarded to postmen for helping Royal Mail profits to rise to GBP 1.5m a day (see
appendix D). The Times (3rd June 2005) reported that the owners of the biggest poker
site ‘PartyPoker’ announced a potential GBP 5 billion flotation on the LSE. The 1,100
staff at party Gaming – are prepared to receive GBP 309 million in shares option. This is
a phenomenal achievement for a company which barely existed four years ago but has
gained a strong foot over the years. A word of thanks to the staff! Taco Bell Corp. does
good business when it comes to fast food, but the company needed help finding a fast
way to reward employees who excelled at crunch times. They used a tool called the Taco
Bell Card which is an incentive type card that gives an employee a choice of cash.
Impacts Pension: When appraisal affects salary it can indirectly affect pension, if
pension is affected by salary.

Basis for Promotion: Many companies use appraisals as a basis for further promotions
of an employee.

Basis for Layoffs: Some companies use appraisals as a basis for layoffs. IBM, for
example, has used performance appraisals as a basis for eliminating 5 percent of its work
force. Former General Electric CEO, Jack Welch stated that at least 10 percent of the
workforce must be made redundant at every performance appraisal to prove that it is
effective. This comment however is highly impractical if the firm in consideration is
small with a small workforce. The news on British Telecom (‘Evening Standard’, 17th
May 2005) reported that BT’s failure to win contracts has already forced the telecom
parts maker to axe 800 jobs and instruct bankers Morgan Stanley to look at all options for
the future, including its outright sale to a foreign competitor. An even bigger news was
announced lately which mentioned that the most popular television news channel BBC
will be laying off 4000 of its staff out of its strength of 28,000 odd employees. It is
perhaps obvious that those who lost their jobs were lower performers that the ones who
still maintain theirs.

It is a fact that performance appraisals do not always succeed even if it is carried out
with good intention and conducted in the best interest of the firm. There are some finer
details that may go amiss and the result could be disastrous. Some causes of failure are:

Forgetting that appraisals are not a time to blame: Many managers forget that
appraisals help to improve performance and are not a medium for blaming. They end up
with employees will not trust them or will not be able to tolerate them. In the Mining
Consultancy I worked for, the administration and the accounts unit could not tolerate the
owners because they always blamed the departments and never motivated them in any
way.

Not conducting regular performance communication: It is found that if the supervisor

regularly keeps in touch with the employees and updates him on his performance,
then at the time of conducting the interview, both parties are fairly at ease and will
know exactly what to discuss and there will be no room for surprises.

Comparing staff with each other: At the time of performance appraisal many managers
damage the morale of employees by constantly comparing them with others in the staff.
This makes the situation so competitive that they will be able to work as a team. It creates
friction among staff and hatred develops for the manager as well.

Thinking that appraising by rating is an impartial tool: Many firms like the mining
firm I worked for had performance appraisal form that had a 1-5 rating system. They do
that because it's faster than doing it right. It is found that it is subjective and if two people
rate the same employee, their ratings would normally be different. Further there is a
tendency to give an average rating which poses a problem when considering promotions
or bonuses.

Stopping performance appraisal when a person's salary is no longer tied to the

appraisals: Many managers conduct appraisals so long as they have to do so to
justify or withhold a pay increase. When staff hit their salary ceiling, or pay is not
connected to appraisal and performance, managers don't bother. Performance
appraisal is FOR improving performance. It is not just about pay (although some
think it is ONLY about pay). If nothing else, everyone needs feedback on their
jobs, whether there is money involved or not.

Believing they are in position to accurately assess staff: Most managers aren't in a
position to monitor staff consistently enough to be able to assess well. The job of
appraising performance is only meant for those who are in constant touch with
their employees.

Canceling or postponing appraisal meetings: Many managers are not fully committed
to the process of the appraisal. They keep postponing the appraisal meetings with
the thought that it is unimportant. Some even avoid it in case the employee points
out to some fault in their management system. One of the basic reasons of
workplace stress is that employees have no one to speak to if they are facing any
problems.

Measuring or appraising the trivial: The easiest things to measure or evaluate are the
least important things with respect to doing a job. Managers are quick to define customer
service as "answering the phone within three rings", or the likes. That's easy to measure if
you want to. What is not easy to measure is the overall quality of service that will get and
keep customers. Measuring overall customer service is difficult, so many managers don't
do it. But they will measure the trivial.

Surprising employees with immediate appraisals: In some firms like the mining firm I
worked for, the dates for the performance appraisal are not announced earlier.
One fine afternoon at work, employees are called in for an appraisal discussion.
This is not only an unpleasant surprise but also they are mentally unprepared for a
discussion. In Littlewoods (the firm I am currently working for) however, it is a
routine to report to the team leader every week about the current week’s progress
and meet at least once in two weeks for a face to face interview.

Thinking all employees and all jobs should be assessed in exactly the same way
using the same procedures: All employees do not need the same things to
improve their performance. Some need specific feedback, some don't and some
need more communication than others since all jobs are different Do you think we
can evaluate the CEO of Ford using the same approach as we use for the person
who cleans the factory floor? Ofcourse not. So, therefore managers should not
insist on evaluating the receptionist using the same tools criteria as the civil
engineers in the office. This is however practiced in most of the organization, so
 that they do not have to go through the pains of creating separate forms for
different job profiles.

Almost every concept has its pros and cons and performance appraisal too has its share of
it. Some advantages of the system are:

Acts as a tool for Career Planning: It gives an insight into the past and future for
reviewing experience, strengths and weaknesses, direction and career planning. It
motivates him to do a better job or keep up with his performance.

Defines Job Targets hence avoiding confusion: It enables a detailed appraisal, not only
of the individual’s performance, but of the job itself and reflects upon the targets to be
achieved.

Strengthens manager-employee relationship: The interview provides a significant

amount of time to concentrate exclusively on the employee and it help in developing a
better understanding between the two.

Creates a platform for receiving bonuses or other reward systems: ‘Evening

Standard’ (17th May 2005) headlines “mail millionaires” states ‘Postal services GBP 537
million profit triggers fat cat row as six Directors are awarded huge payouts’. This was
the performance related bonus for Royal Mail’s top ranking executives.

Provides an opportunity to resolve conflicts: It gives employees an opportunity in

advance to reflect on the past and raise any issues for which there is hardly an appropriate
moment at other times. At Littlewoods, if any employee like me needs to take an
examination break, then the most appropriate time is to speak to my manager when we
meet to discuss performance. We work out an emergency working schedule so that I
could get my leave, get my work done before my leave and get paid during the exam
week.

A suitable atmosphere for feedback: It enables employers to provide feedback, in an

atmosphere of privilege exchange of views, other factors that affect their performance
and that of their department. It is like a ‘confidential ritual’ that propagates honesty and
protection.

Helps further development of employee: Any deficiencies that the appraisal may have
revealed , is corrected by making further development plans.

Improves Organization’s performance: It helps to better manage and improve the

organization’s performance. After Taco Bell Corp. introduced the incentive card system
for deserving employees, Laurie Cortes, director of compensation for the Irvine, Calif.-
based division of Tricon Global Restaurants Inc., the parent company of Taco Bell says,
"In the nearly three years we've used various incentive-type cards," Cortes said, "we've
seen increased job enthusiasm among employees and evidence that they realize what they
do is linked to our corporate business results, that their actions have an impact on the
company's performance.

The flip side of performance appraisals are as follows:

It is demotivating: . "Work is sacred to people," Coens said. "So if you trivialize what
they do with ratings and once-a-year conversations that point out their failings, the
damage is so great it really outweighs any benefits from an evaluation." Most employees
would believe that they have given in their best only to be upset later when they find out
that they were less than average.

It takes up significant time: Planning and conducting appraisals especially for large
organizations would take up a lot of time and sometimes to save time the appraisal may
not yield good results.

It creates friction among staff members: Sometimes peer appraisals may cause a
friction among the staff and probably they may not be able to work as a team anymore. If
two colleagues are rated differently and one is given a bonus while the other is given a
warning, it is understood that a feeling of jealousy would creep in.

Results may be incorrect: Raters tend to have different expectations. Some rate very
low while others are lenient and rate very high. Some raters may not even be familiar
with the people they are to rate and their working conditions. This is true for fast food
restaurants like KFC where the performance appraisal is done by a person who comes
into the store as a ‘surprise shopper’. He watches staff serving for sometime, then
reveals his identity and gives his feedback (See appendix E). However some say that the
‘shopper’ is not a store member so he will not know really how well the store runs.

It is too risky for Planning a career out of it: Sometimes it is too risky to plan a career
out of a performance appraisal. If, for instance an employee does have the necessary
skills to do well in the marketing line, a faulty performance appraisal may just make him
feel as if he is not meant be in this field.
 CONCLUSION

Whatever be the disadvantages, performance appraisals are one of the greatest personnel
management tools available, provided they are done on a regular basis and must possess
the attributes of clarity, openness, and fairness. This is because reviews are a regular and
organized way to give constructive feedback, to let employees know how their
contributions are making a difference and what they can expect in the future. With
constant change of organization structures and competition in the world market the
methods of corporate reviews must be reexamined to suit the existing system. This
system would other prove to be a burden, a waste and to a large extent unaffordable. The
outlook of managers must change if they think that appraisals are dreaded by employees
only because they have under performed and that appraisals are equated with hard work.
 REFERENCES

BOOKS

Desseler G, 8th edition, Human Resource Management, prentice Hall, pp 320-350.

Nicholson T, 2001, 52 Ways to motivate your staff, Management books 2000 Ltd., pp
156-159.
Flavell Linda & Roger, 1993, Dictionary of proverbs and their origin, Kyle Cathie Ltd,
pp 6-7.
Pettinger R, 2002, Mastering Employee Development, Palgrave, pp 28-32.

NEWSPAPERS

Lite Standard, 16th May 2005, ‘Tesco hands out GBP 4000 bonus to every worker’, p1.
The Times, 16th May 2005, ‘Bonus for postmen as Royal mail profit rises to GBP 1.5m a
day’, p 41.
The Times, 16th May 2005, ‘Britain counts GBP 100 bn cost of stress in the workplace’,
p24.
Evening Standard, 17th May 2005,’Marconi warns as it counts cost to BT blow’, p 30.

INTERNET SOURCES

1. hesthttp://www.work911.com/performance/particles/stupman.htm

2. http://www.channel.aeis.com/Case_Studies.html#222