HUMAN RESOURCE MANAGEMENT

TYBBI

Table of Contents

INTRODUCTION…………………………………………………………………………………………
…………………………………….2

PROCESS OF PERFORMANCE
APPRAISAL……………………………………………………………………………………….3

PERFORMANCE APPRAISAL FOR EMPLOYEES AT DIFF

.LEVELS…………………………………………………………5

PRE-REQUISITES FOR EFFECTIVE & SUCCESSFUL PERFORMANCE

APPRAISAL…………………………………7

CHALLENGES OF PERFORMANCE
APPRAISAL………………………………………………………………………………….8

PURPOSE OF PERFORMANCE
APPRAISAL………………………………………………………………………………………..9

PERFORMANCE APPRAISAL IN GOVT.

ORGANISATION……………………………………………………………………11

PARAMETERS TO APPRAISE PERFORMANCE IN BPO

SECTOR………………………………………………………….12

APPROACHES TO PERFORMANCE
APPRAISAL…………………………………………………………………………………14

METHODS & TECHNIQUES OF PERFORMANCE

APPRAISAL……………………………………………………………..15

360 DEGREE PERFORMANCE

APPRAISAL…………………………………………………………………………………………17

MANAGEMENT BY OBJECTIVES ( MBO )

……………………………………………………………………………………………19

TQM & PERFORMANCE

APPRAISAL…………………………………………………………………………………………………
.21

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RELATIONSHIP BETWEEN PERFORMANCE APPRAISAL & ORGANIZATIONAL

PERFORMANCE ………….23

PERFORMANCE APPRAISAL
INTRODUCTION:-

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.

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.

It is a powerful tool to calibrate, refine and reward the performance of the employee. It helps to
analyze his achievements and evaluate his contribution towards the achievements of the overall
organizational goals.

By focusing the attention on performance, performance appraisal goes to the heart of personnel
management and reflects the management's interest in the progress of the employees.

Objectives Of Performance appraisal:

• To review the performance of the employees over a given period of time.

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• To judge the gap between the actual and the desired performance.

• To help the management in exercising organizational control.

• Helps to strengthen the relationship and communication between superior – subordinates

and management – employees.

• To diagnose the strengths and weaknesses of the individuals so as to identify the training
and development needs of the future.

• To provide feedback to the employees regarding their past performance.

• Provide information to assist in the other personal decisions in the organization.

• Provide clarity of the expectations and responsibilities of the functions to be performed

by the employees.

• To judge the effectiveness of the other human resource functions of the organization such
as recruitment, selection, training and development.

• To reduce the grievances 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

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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 organizational goals and objectives. The
standards set should be clear, easily understandable and in measurable terms. In case the
performance of the employee cannot be measured, great care should be taken to describe the
standards.

COMMUNICATING THE STANDARDS

Once set, it is the responsibility of the management to communicate the standards to all the
employees of the organization.

The employees should be informed and the standards should be clearly explained to the. This
will help them to understand their roles and to know what exactly is expected from them. The
standards should also be communicated to the appraisers or the evaluators and if required, the
standards can also be modified at this stage itself according to the relevant feedback from the
employees or the evaluators.

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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. It is
a continuous process which involves 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 providing assistance rather than
interfering in an employees work.

COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCE

The actual performance is compared with the desired or the standard performance. The
comparison tells the deviations 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 negative deviation in the
organizational performance. It includes recalling, evaluating 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 solving and reaching consensus.
The feedback should be given with a positive attitude as this can have an effect on the
employees’ future performance. The purpose of the meeting should be to solve the problems
faced and motivate the employees to perform better.

,
The last step of the process is to take decisions which can be taken either to improve the
performance of the employees, take the required corrective actions, or the related HR decisions
like rewards, promotions, demotions, transfers etc.

Performance Appraisal For Employees at Different

Levels:-
Performance appraisal is important for employees at all levels throughout the organization.
The parameters, the characteristics and the standards for evaluation may be different, but the
fundamentals of performance appraisal are the same. But as the level of the employees’
increases, performance appraisal is more effectively used as the tools of managing performance.

Performance appraisal of Managers:

Appraising the performance of managers is very important, but at the same time, it is one of the
most difficult tasks in the organization. It is difficult because most of the managerial work cannot
be quantified i.e. it is qualitative in nature like leading his/her team, guiding, motivating,

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planning etc.

Therefore, the two things to be noted and evaluated for the purpose of appraisals are:

• Performance in accomplishing goals, and

• Performance as managers

Performance in accomplishing goals

Managers are responsible for the performance of their teams as a whole. Performance in
accomplishing goals would mean to look at the completion or achievement of the goals set for a
team of employees which is being assigned to or working under a particular manager. The best
measuring criteria for a manager are hi goals, his plans of course of action to achieve them and
the extent of achievement of the goals.

Performance as manager
The responsibilities of managers include a series of activities which are concerned with
planning, organizing, directing, leading, motivating and controlling. Managers can be rated on
the above parameters or characteristics

Criteria for measuring performance at different levels:

The criteria for measuring performance changes as the levels of the employees and their roles
and responsibilities change.

A few examples for each level are described below:

For top level management

• Degree of organizational growth and expansion

• Extent of achievement of organizational goals

• Contribution towards the society

• Profitability and return on capital employed

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For middle level managers

• Performance of the departments or teams

• Co-ordination with other departments

• Optimal use of resources

• Costs Vs. revenues for a given period of time

• The communication with superiors and subordinates

For front line supervisors

• Quantity of actual output against the targets

• Quality of output against the targets

• Number of accidents in a given period

• Rate of employee absenteeism

Pre-requisites for Effective & Successful Performance

Appraisal:-
The essentials of an effective performance system are as follows:

 Documentation – means continuous noting and documenting the performance. It also helps
the evaluators to give a proof and the basis of their ratings.

 Standards / Goals – the standards set should be clear, easy to understand, achievable,

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motivating, time bound and measurable.

 Practical and simple format - The appraisal format should be simple, clear, fair and
objective. Long and complicated formats are time consuming, difficult to understand, and do not
elicit much useful information.

 Evaluation technique – An appropriate evaluation technique should be selected; the

appraisal system should be performance based and uniform. The criteria for evaluation should be
based on observable and measurable characteristics of the behavior of the employee.

 Communication – Communication is an indispensable part of the Performance appraisal

process. The desired behavior or the expected results should be communicated to the employees
as well as the evaluators. Communication also plays an important role in the review or feedback
meeting. Open communication system motivates the employees to actively participate in the
appraisal process.

 Feedback – The purpose of the feedback should be developmental rather than judgmental.
To maintain its utility, timely feedback should be provided to the employees and the manner of
giving feedback should be such that it should have a motivating effect on the employees’ future
performance.

 Personal Bias – Interpersonal relationships can influence the evaluation and the decisions in
the performance appraisal process. Therefore, the evaluators should be trained to carry out the
processes of appraisals without personal bias and effectively.

Challenges Of Performance Appraisal:-

An organization comes across various problems and challenges Of Performance Appraisal in

order to make a performance appraisal system effective and successful. The main Performance
Appraisal challenges involved in the performance appraisal process are:

 Determining the evaluation criteria

Identification of the appraisal criteria is one of the biggest problems faced by the top
management. The performance data to be considered for evaluation should be carefully selected.
For the purpose of evaluation, the criteria selected should be in quantifiable or measurable
terms

 Create a rating instrument

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 development of the employees of the organization.

 Lack of competence
Top management should choose the raters or the evaluators carefully. They should have the

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required expertise and the knowledge to decide the criteria accurately. They should have the
experience and the necessary training to carry out the appraisal process objectively.

 Errors in rating and evaluation

Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait influencing the
evaluator’s rating for all other traits) etc. may creep in the appraisal process. Therefore the rater
should exercise objectivity and fairness in evaluating and rating the performance of the
employees.

 Resistance
The appraisal process may face resistance from the employees and the trade unions for the fear of
negative ratings. Therefore, the employees should be communicated and clearly explained the
purpose as well the process of appraisal. The standards should be clearly communicated and
every employee should be made aware that what exactly is expected from him/her.

Purpose Of Performance Appraisal:-

Performance Appraisal is being practiced in 90% of the organisations worldwide. Self-
appraisal and potential appraisal also form a part of the performance appraisal processes.

Typically, Performance Appraisal is aimed at:

 To review the performance of the employees over a given period of time.

 To judge the gap between the actual and the desired performance.

 To help the management in exercising organizational control.

 To diagnose the training and development needs of the future.

• Provide information to assist in the HR decisions like promotions, transfers etc.

• Provide clarity of the expectations and responsibilities of the functions to be performed

by the employees.

• To judge the effectiveness of the other human resource functions of the organization such
as recruitment, selection, training and development.

• To reduce the grievances of the employees.

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• Helps to strengthen the relationship and communication between superior – subordinates

and management – employees.

According to a recent survey, the percentage of organisations (out of the total organisations
surveyed i.e. 50) using performance appraisal for the various purposes are as shown in the
diagram below:

The most significant reasons of using Performance appraisal are:

• Making payroll and compensation decisions – 80%

• Training and development needs – 71%

• Identifying the gaps in desired and actual performance and its cause – 76%
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• Deciding future goals and course of action – 42%

• Promotions, demotions and transfers – 49%

• Other purposes – 6% (including job analysis and providing superior support, assistance
and counseling)

Performance Appraisal in Government Organizations:-

The commitment to the performance appraisal system in public organizations in India is very
low. Low commitment and lack of accountability are the major reasons for the low
institutionalization of the performance appraisal processes in government organizations.
Performance appraisal in Government Organizations is not directly linked to rewards, training
or promotions due to which the approach towards the whole process remains unprofessional.
There is a lack of the appropriate atmosphere and professional approach towards the
performance appraisal system and the objective of the whole exercise is defeated.

 The most common method of Performance appraisal that is used in most of the government
organisations is confidential report (popularly known as CR) written by the superior of the
employees.

The following are the major discrepancies found in the performance appraisal processes being
followed at the government organizations.

o Most of the indicators used for measuring the performance the employees are not
quantifiable in nature, making it difficult to measure the performance.

o Due to the lack of accountability and job security, most government employees have a
laisser faire attitude towards their work.

o Unavailability of the job descriptions for many employees.

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o Most of the objectives in government organisations are unchallenging, unrealistic and not
timely reviewed and updated.

o It is difficult to measure the average performance of the government employees.

o Unprofessional and unstructured approach towards the process.

o There is often a lot of bias and subjectivity involved in the ratings given by the superiors.

o Lack of complete information on appraisal forms due to expertise and relevant training;
often, the appraisals are not conducted on a regular basis.

o In government organisations, team appraisal is often not possible.

o Other HR decisions like rewards, training or promotions are not directly linked to the
results of the performance appraisal process.

Parameters To Appraise Performance in BPO Sector:-

Performa
Business Process Outsourcing (BPO) is relatively a new sector in the
Indian industry, but has established itself well and is growing at a rapid rate.
BPO sector offers handsome initial salary, good growth and many other
benefits to its employees. Keeping in mind the attrition rates in the sector,
the performance measurement and appraisal processes are of extreme
importance in BPO’s. It is often used as one of the tools to retain the
employees.

BPO employees have the advantage of getting performance based

incentives. In most of the BPO organisations, there are well designed

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schemes for awarding the performance based incentives to the individuals

and/or the teams as a whole. An incentive on the completion of the defined
targets is a common practice in BPO’s.

The general parameters for the measurement of employees’ performance

are:

• Speed i.e. process performance,

• Accuracy and

• Productivity of each process,

•
Although the measuring parameters are different for employees at
different level, but the general classification of the above mentioned
parameters for "Customer care Executives" and "Team leaders" are
as follows:

• Average Call Value (the sales made or the revenue collected etc.)

• Time and cost per call

• Average Handling Time (talk time and after call wrap up)

• Adherence to Schedule (availability to take calls etc.)

• Percentage of abandoned calls

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• Discipline

• Attendance

According to a recent survey – "The Pay for Performance can be as

much as 22% of the salary." Therefore, performance evaluation,
reviews and appraisal play a vital role in the performance
management in BPO sector and all the above mentioned
parameters are used in performance appraisals to evaluate and
review the performance of the employees.nce Appraisals as
Career Development
Performance appraisal is a part of career development. The latest mantra being followed by
organizations across the world being – "get paid according to what you contribute" – the focus of
the organizations is turning to performance management and specifically to individual
performance. Performance appraisal helps to rate the performance of the employees and evaluate
their contribution towards the organizational goals. Performance appraisal as Career
Development leads to the recognition of the work done by the employees, many a times by the
means of rewards and appreciation etc. It plays the role of the link between the organization and
the employees’ personal career goals.

Potential appraisal, a part of Performance appraisal, helps to identify the hidden talents and
potential of the individuals. Identifying these potential talents can help in preparing the
individuals for higher responsibilities and positions in the future. The performance appraisal
process in itself is developmental in nature.

Performance appraisal is also closely linked to other HR processes like helps to identify the
training and development needs, promotions, demotions, changes in the compensation etc. A
feedback communicated in a positive manner goes a long way to motivate the employees and
helps to identify individual career developmental plans. Based on the evaluation, employees can
develop their career goals, achieve new levels of competencies and chart their career progression.
Performance appraisal encourages employees to reinforce their strengths and overcome their
weaknesses.

Approaches to Performance Appraisal:-

Performance appraisal - Traditional approach

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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
(a rise in the pay) and punishments (a cut in the pay) 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
developmental aspects of the employee performance i.e. his training and development needs or
career developmental possibilities. The primary concern of the traditional approach is to judge
the performance of the organization as a whole by the past performances of its employees

Therefore, this approach is also called as the overall approach. In 1950s the performance
appraisal was recognized as a complete system in itself and the Modern Approach to
performance appraisal was developed.

Performance appraisal - Modern approach

The modern approach to performance development has made the performance appraisal process
more formal and structured. Now, the performance appraisal is taken as a tool to identify better
performing employees from others, employees’ training needs, career development paths,
rewards and bonuses and their promotions to the next levels.

Appraisals have become a continuous and periodic activity in the organizations. The results of
performance appraisals are used to take various other HR decisions like promotions, demotions,
transfers, training and development, reward outcomes. The modern approach to performance
appraisals includes a feedback process that helps to strengthen the relationships between
superiors and subordinates and improve communication throughout the organization.

The modern approach to Performance appraisal is a future oriented approach and is

developmental in nature. This recognizes employees as individuals and focuses on their
development.

METHODS & TECHNIQUES OF PERFORMANCE

APPRAISAL:-

Traditional Methods of Performance Appraisal

1. ESSAY APPRAISAL METHOD
This traditional form of appraisal, also known as "Free Form method" involves a description of
the performance of an employee by his superior. The description is an evaluation of the
performance of any individual based on the facts and often includes examples and evidences to
support the information. A major drawback of the method is the inseparability of the bias of the

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evaluator.

2. STRAIGHT RANKING METHOD

This is one of the oldest and simplest techniques of performance appraisal. In this method, the
appraiser ranks the employees from the best to the poorest on the basis of their overall
performance. It is quite useful for a comparative evaluation.

3. PAIRED COMPARISON
A better technique of comparison than the straight ranking method, this method compares each
employee with all others in the group, one at a time. After all the comparisons on the basis of the
overall comparisons, the employees are given the final rankings.

4. CRITICAL INCIDENTS METHODS

In this method of Performance appraisal, the evaluator rates the employee on the basis of critical
events and how the employee behaved during those incidents. It includes both negative and
positive points. The drawback of this method is that the supervisor has to note down the critical
incidents and the employee behaviour as and when they occur.

5. FIELD REVIEW
In this method, a senior member of the HR department or a training officer discusses and
interviews the supervisors to evaluate and rate their respective subordinates. A major drawback
of this method is that it is a very time consuming method. But this method helps to reduce the
superiors’ personal bias.

6. CHECKLIST METHOD
The rater is given a checklist of the descriptions of the behaviour 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

In 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. For example a trait like Job Knowledge may be judged on the range of average,
above average, outstanding or unsatisfactory.

8. FORCED DISTRIBUTION

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To eliminate the element of bias from the rater’s ratings, the evaluator is asked to distribute the
employees in some fixed categories of ratings like on a normal distribution curve. The rater
chooses the appropriate fit for the categories on his own discretion.

Modern Methods of Performance Appraisal

ASSESSMENT CENTRES -
An assessment centre typically involves the use of methods like social/informal events, tests and
exercises, assignments being given to a group of employees to assess their competencies to take
higher responsibilities in the future. Generally, employees are given an assignment similar to the
job they would be expected to perform if promoted. The trained evaluators observe and evaluate
employees as they perform the assigned jobs and are evaluated on job related characteristics.

The major competencies that are judged in assessment centres are interpersonal skills,
intellectual capability, planning and organizing capabilities, motivation, career orientation etc.
assessment centres are also an effective way to determine the training and development needs
of the targeted employees.

BEHAVIORALLY ANCHORED RATING SCALES

Behaviorally Anchored Rating Scales (BARS) is a relatively new technique which combines the
graphic rating scale and critical incidents method. It consists of predetermined critical areas of
job performance or sets of behavioral statements describing important job performance qualities
as good or bad (for eg. the qualities like inter personal relationships, adaptability and reliability,
job knowledge etc). These statements are developed from critical incidents.

In this method, an employee’s actual job behaviour is judged against the desired behaviour by
recording and comparing the behaviour with BARS. Developing and practicing BARS requires
expert knowledge.

HUMAN RESOURCE ACCOUNTING METHOD

Human resources are valuable assets for every organization. Human resource accounting method
tries to find the relative worth of these assets in the terms of money. In 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 expenses incurred on them like their
compensation, recruitment and selection costs, induction and training costs etc whereas their
contribution includes the total value added (in monetary terms). The difference between the cost
and the contribution will be the performance of the employees. Ideally, the contribution of the
employees should be greater than the cost incurred on them.

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360 Degree Performance Appraisals:-

360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive
appraisal where the feedback about the employees’ performance comes from all the sources that
come in contact with the employee on his job.

360 degree respondents for an employee can be his/her peers, managers (i.e. superior),
subordinates, team members, customers, suppliers/ vendors - anyone who comes into contact
with the employee and can provide valuable insights and information or feedback regarding the
"on-the-job" performance of the employee.

360 degree appraisal has three integral components:

1. Self appraisal
2. Superior’s appraisal
3. Subordinate’s appraisal

Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his
achievements, and judge his own performance.

Superior’s appraisal forms the traditional part of the 360 degree performance appraisal where
the employees’ responsibilities and actual performance is rated by the superior.

Subordinates appraisal gives a chance to judge the employee on the parameters like
communication and motivating abilities, superior’s ability to delegate the work, leadership
qualities etc. Also known as internal customers, the correct feedback given by peers can help to
find employees’ abilities to work in a team, co-operation and sensitivity towards others.

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Self assessment is an indispensable part of 360 degree appraisals and therefore 360 degree
Performance appraisal have high employee involvement and also have the strongest impact on
behavior and performance. It provides a "360-degree review" of the employees’ performance and
is considered to be one of the most credible performance appraisal methods.

360 degree performance appraisal is also a powerful developmental tool because when
conducted at regular intervals (say yearly) it helps to keep a track of the changes others’
perceptions about the employees. A 360 degree appraisal is generally found more suitable for the
managers as it helps to assess their leadership and managing styles. This technique is being
effectively used across the globe for performance appraisals. Some of the organizations
following it are Wipro, Infosys, and Reliance Industries etc.

Arguments Against 360 Degree Performance Appraisal

Despite the fact that 360 degree appraisals are being widely used throughout the world for
appraising the performance of the employees at all levels, many HR experts and professionals
argument against using the technique of 360 degree appraisals. The main arguments are:

 360 performance rating system is not a validated or corroborated technique for Performance
appraisal.

 With the increase in the number of raters from one to five (commonly), it become difficult to
separate, calculate and eliminate personal biasness and differences.

 It is often time consuming and difficult to analyze the information gathered.

• The results can be manipulated by the employees towards their desired ratings with the
help of the raters.

• The 360 degree appraisal mechanism can have a adversely effect the motivation and the
performance of the employees.

• 360 degree feedback – as a process requires commitment of top management and the
HR, resources(time, financial resources etc), planned implementation and follow up.

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• 360 degree feedback can be adversely affected by the customers perception of the
organisation and their incomplete knowledge about the process and the clarity of the
process.

• Often, the process suffers because of the lack of knowledge on the part of the participants
or the raters.

MANAGEMENT BY OBJECTIVES:-
The concept of ‘Management by Objectives’ (MBO) was first given by Peter Drucker in 1954.
It 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 achieved, 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 MBO is participative goal setting, choosing course of actions and decision
making. An important part of the MBO is the measurement and the comparison of the
employee’s actual performance with the standards set. Ideally, when employees themselves have
been involved with the goal setting and the choosing the course of action to
be followed by them, they are more likely to fulfill their responsibilities.

THE MBO PROCESS

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UNIQUE FEATURES AND ADVANTAGES OF MBO

The principle behind Management by Objectives (MBO) is to create empowered employees who
have clarity of the roles and responsibilities expected from them, understand their objectives to
be achieved and thus help in the achievement of organizational as well as personal goals.

Some of the important features and advantages of MBO are:

 Clarity of goals – With MBO, came the concept of SMART goals i.e. goals that are:

Specific
Measurable
Achievable
Realistic, and
Time bound.

The goals thus set are clear, motivating and there is a linkage between organizational
goals and performance targets of the employees.

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 The focus is on future rather than on past. Goals and standards are set for the performance
for the future with periodic reviews and feedback.

 Motivation – Involving employees in the whole process of goal setting and increasing
employee empowerment increases employee job satisfaction and commitment.

 Better communication and Coordination – Frequent reviews and interactions between

superiors and subordinates helps to maintain harmonious relationships within the
enterprise and also solve many problems faced during the period.

TQM and Performance Appraisal:-

According to Sashkin and Kiser, "Total Quality Management (TQM) may be defined as
creating an organisational culture committed to the continuous improvement of skills, teamwork,
processes, product and service quality and customer satisfaction." TQM refers to the continuous
improvement in the quality of work of all employees with the focus on satisfaction of the
customers.

Elements of TQM are:

 Meeting customers requirements,

 Continuous improvement

 Empowerment of employees.

Both TQM and Performance appraisal/ evaluation are focused on increasing the productivity of
the organisation through continuous improvement. They both facilitate the systematic
management of all the processes, actions and practices at all levels in the organisation.

Some of the benefits of both the performance appraisal and TQM are:

• Improvement in the performance of the employees

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• Brings quality consciousness

• Better utilization of resources

• Commitment to higher quality

But there also exists a few other schools of thought which refute the compatibility of the TQM
and performance appraisal. According to them, both TQM and Performance appraisals differ
in their fundamental nature, characteristics and requirements making it impossible to combine
them.

Some fundamental differences between the two are as follows:

• TQM is team – based whereas performance appraisals are designed for individuals i.e. it
undermines teamwork.

• TQM focuses on customer satisfaction whereas performance appraisal focuses on the

improving the performance of the employees.

• Performance appraisal generally results in some rewards like increased pay etc. whereas
TQM may or may not yield visible results.

Performance appraisal can sometimes, encourage an employee to focus on his personal goals
(like his promotion) rather than the organisational goals. Therefore, the suitable practice should
be chosen carefully by the top management and the leaders of the organisation.

Appraisal as Employee Motivation Mechanism

Keeping in mind the growing attrition rates and the employee dissatisfaction among the
employees, the HR professionals are approaching and using the performance appraisal as a fuel
to motivate employees. The latest trend being followed by the HR professionals is to use the
performance appraisal and review process as a motivating mechanism. Various surveys and
studies have testified the relationship between performance review, pay and motivation.

Other than the traditional goal of accessing the performance of the employees, Performance
appraisals and reviews can be used as a tool to reinforce the desired behaviour and competent
performance of the employees.

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One of the most motivating factors for the employees, in the Performance appraisal processes is
to receive a fair an accurate assessment of their performance. Inaccurate evaluation is one reason
because of which most employees dread going through performance appraisals. An employee
always expects his appraiser to recognize and appreciate his achievements, support him to
overcome the problems and failures.

The discrepancies and the inaccuracies in the performance review can demotivate the employees,
even if there has been an increase in the salary. Such inaccuracies can kill the innovating and risk
taking enthusiasm and spirit in the employees. Similarly, inaccurate reviews with no hike in
compensation can increase the attrition rate in the organisation, forcing the employees to look
out for other options.

An employee prefers an accurate performance review with no increase in the salary over
inaccurate performance review with an increase in salary.

Employees, who receive both accuracy and a pay increase during their performance review, are
likely to be the most motivated. Therefore, performance appraisal (review and its consequence in
the form of compensation adjustments) has the potential of motivating employees and
increasing their job satisfaction.

Relationship Between Performance Appraisal and

Organizational Performance:-
Performance appraisal processes are one of the central pillars of the performance management
which is directly related to the organizational performance and have a direct impact on it.
Employee performance ultimately effects the organizational performance and objectives.

Relationship between Appraisal and Organizational Performance:

According to a few HR professionals, the appraisals have no value for the organisation as there
is no direct relationship in performance appraisals and the organizational performance. Also,
there is no strong evidence to prove that appraisals positively impact the performance of the
employees. But the HR professionals who see the organizational performance as a result or sum
of the employee’s performance, argue that apart from the direct benefits to the organisation,
appraisals contribute to employee satisfaction, which in turn leads to improved performance.

For an organisation to be effective, the goals, the standards and the action plans need to be

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planned well in advance. Thus, performance appraisal facilitates the achievement of

organizational goals. It also facilitates the optimal use of the organizational resources.

Performance appraisal is the strength of performance management, which in turn effects the
organizational performance. It helps to identify and overcome the problems faced by the
employees in their work.

Performance appraisals a double edged sword

Performance appraisal is like a double edged sword for an organisation. Although it has many
benefits for the organisation, various studies have also revealed that performance appraisals have
the equal probability of having a bad impact on the organizational as well as the employee
performance.

Where the performance appraisal improves the work performance and employee satisfaction, it
can also demotivate employees and leaving a bad impression on the good employees. Most of the
employees do not approve of continuous performance monitoring and performance appraisals,
and also consider it as a burdensome activity. According to Professor Kuvaas "Performance
appraisals and other tools which involve feedback and target management should be adapted to
the employee’s individual needs and characteristics. Otherwise, there is a risk of harming the
good employees without being able to help the less good."

Performance appraisal processes can create a sense of insecurity in the working environment and
can become an obstacle in achieving the required changes in the attitudes and the performance of
the employees. The element of bias in the appraisals can also worsen the situation.

Therefore, performance appraisals can effect the organizational performance both positively and
negatively, and should be dealt with care and expert knowledge and experience.

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THANK
U !!!!!

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