Performance & Reward

Management

Dr.Prabjot Kaur
 Performance

• Performance can be regarded as simple the

record of outcomes achieved.

• Performance is defined as the outcomes of work

because they provide the strongest linkage to the
strategic goals of organization, customer
satisfaction , and economic contributions.
 Performance
• Performance is defined as a behavior or action
relevant to the attainment of the organizational
goals that can be scaled, that is measured.

• Performance is dimensional and that each

dimension is characterized by a category of
similar behavior or actions.
 Performance

• Performance = individual attributes ( x ) work

effort ( x ) organizational support

– Individual Attributes (traits of an individual)

– Work Effort ( a determined and organized effort to
control or stop something)
– Organizational Support (Employees belief that
organization values their contribution and cares about
their well being)
 Determinants of Performance

• Performance = Declarative Knowledge x

Procedural Knowledge x Motivation
 Determinants of Performance
• Declarative Knowledge
– Information about facts , labels , principles , goals
– Understanding of task requirements

• Procedural Knowledge
– Knowing What to do it and How to do it ?
– Skills
– Cognitive
– Physical
– Perceptual
– Interpersonal
 Determinants of Performance

• Motivation
– Choices
– Expenditure of effort
– Level of effort
– Persistence of effort
 Factors Influencing Determinants of
Performance
• Individual characteristics
– Procedural Knowledge
– Declarative Knowledge
– Motivation

• HR practices

• Work environment
Job Performance
Approaches to Measuring Performance

• Trait Approach
– Emphasizes Individual traits of employee

• Behavior Approach
– Emphasizes how employees do the job

• Results Approach
– Emphasizes what employees produce
Evolution of Performance Appraisal
 Performance Appraisal

• Performance Appraisal is the systematic

evaluation of the performance of employees and
to understand the abilities of a person for further
growth and development.
 Objectives of Performance Appraisal

• To maintain records in order to determine

compensation packages, wage structure, salaries
raises, etc.

• To identify the strengths and weaknesses of

employees to place right men on right job.

• To maintain and assess the potential present in a

person for further growth and development.
 Objectives of Performance Appraisal

• To provide a feedback to employees regarding their

performance and related status.

• To provide a feedback to employees regarding their

performance and related status.

• It serves as a basis for influencing working habits of

the employees.

• To review and retain the promotional and other

training programmes.
 Developing Performance Appraisal
System
• Evaluate your current performance appraisal
process
• Identify organizational goals
• Set performance expectations
• Monitor and develop their performance
throughout the year ( one on one feedback is a
great way to do this ).
• Evaluate their performance
• Set new performance expectations for the next
year.
Developing Performance Improvement Plans
Performance Improvement Plan consists of the following
components :
• Where are we now ? (Current status ; as is)
– Answered in the Performance Appraisal process

• Where do we want to be (Objective ; to be)

– Requires evaluator and person being evaluated to mutually agree on
areas that can and should be improved

• How does the employee get from Where he or she is now to

where he or she wants to be ? (Means)
– Critical to performance improvement plan
– Manager and employee must agree upon specific steps to be taken
including training or manager’s help
Process of Performance Appraisal
Performance Appraisal Process
 Performance Management v/s Appraisal

• Performance Management is a continous,

comprehensive and flexible approach to manage
teams, organizations, and individuals, that
involves the maximum possible dialogues
between the sides involved.

• Performance Appraisal is a more limited

appraoch that involves carrying out top-down
assessments to rate the performance of their
juniors at annual appraisal meetings.
 Performance Management
•Unlike performance appraisals, a performance
management system looks at the present and the
future of an employee’s position with the
organization and provides ways for employees to
do better in their role with the future in mind.

• Performance management can be defined as “all

activities which enable staff to perform to the best
of their abilities.”
 Performance Appraisal
• A Performance Appraisal (also called a
performance evaluation) is one small step in a
performance management system. An appraisal
refers to the process of evaluating an employee’s
past work and accomplishments with the
purpose of rating their performance.
Relationship between Job Analysis &
Performance Appraisal
Performance Appraisal Methods
TRADITIONAL METHODS :
PERFORMANCE APPRAISAL
 Rating Scale Method
• Rating scale is created to evaluate the performance
of employee against certain parameters.
• These parameters include his attitude, attendance,
punctuality and interpersonal skills. The rating scale
used in this method ranges from 1 to 10.
• Low score indicates negative feedback and high
score indicates positive feedback.
 Check List Method
• A checklist is prepared. It is comprised of descriptive
statements related to behavior of the employee.
• Each statement has two options, Yes & No or True or
False. The rater can choose one out of two options
which he thinks correctly describes the behavior of the
employee.
 Check List Method
• A checklist is a list of statements that describes
characteristics and performance of employees on
the job.
• The ratter checks to indicate if the behavior of an
employee is positive or negative to each
statement.
• The performance of an employee is rated on the
basis of number of positive checks.
• There are three types of checklist :
– Simple Checklist
– Forced Choice Block
– Weighted Checklist
Simple Check List
Forced Choice Block
Weighted Check List
 Forced Distribution Method
• It is based on the fact that the performance of
employees varies greatly in an organization, some
would be more productive and some would be less
productive.

• In this method, the manager is forced to distribute

employees on the basis of their performance on all
points of the bell shaped scale. Some fall into
outstanding zone, some into average and some into
the bottom region of the curved scale.
Bell shaped scale
 Critical Incident Method
• Critical incident method gives emphasis on
critical behaviors of employees such as the
reaction of employee to a certain situation. So in
this method, the performance is evaluated
against a list of critical behaviors. For example,

– On July 22 the manager efficiently handled an

annoyed customer. He was very prompt and polite in
solving the issue ? It is a positive critical incident.
– On July 22, the manager was very rude in handling an
annoyed customer ? it is a negative critical incident.
Critical Incident Method
Critical Incident Method
 Essay/Free Form Method
• In this method, the rater writes a description
about the behavior and performance of the
employee. The description includes all relevant
information like employee’s attitude, job
knowledge, current performance and potential
for growth.
 Paired Comparison Method
• In this method, one particular trait is considered
to evaluate the employees.
• Based on this trait, each employee is compared
with others on one to one basis, in pairs.
• There are five employees A,B,C,D,E who are to be
evaluated. So on applying the formula 5(5-1)/2,
there will be 10 pairs to be compared.

• A with B ; B with C ; C with D ; D with E

• A with C ; B with D ; C with E
• A with D ; B with E
• A with E
 Field Review Method
• This method is based on superiors' opinion on
the performance, behavior and skills of the
employee.
• The HR specialist asks seniors to answer
questions related to employee's employment
and appraises the employee on the basis of
feedback received from the superiors.
 Field Review Method

• 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.
 Confidential Appraisal Method
• This method is mostly used in government organizations
to make decisions regarding promotion and transfer of the
employees.

• The senior prepares the confidential report on the

performance, behavior and other traits of the employee.

• The report is supposed not to be revealed to anyone.

• It is sent in a sealed cover to the concerned officials who

appraise the employee on the basis of this report and take
decisions accordingly.
 Grading Method
• In this method, certain categories of worth are
established in advance and carefully defined.
• There can be three categories established for
employees: outstanding, satisfactory and
unsatisfactory.
• There can be more than three grades.
• Employee performance is compared with grade
definitions. The employee is, then, allocated to
the grade that best describes his or her perfor-
mance.
 Graphic or Linear Scale
• Graphic scale is also known as linear rating scale. In this
method, the printed appraisal form is used to appraise
each employee.

• The form lists traits (such as quality and reliability) and a

range of job performance characteristics (from
unsatisfactory to outstanding) for each trait.

• The rating is done on the basis of points on the continuum.

The common practice is to follow five points scale.

• The rater rates each appraisee by checking the score that

best describes his or her performance for each trait all
assigned values for the traits are then totaled.
 Forced Choice Distribution Method
• Under this method, the rater is forced to answer
the ready-made statements as given in the
blocks of two or more , about the employees in
terms of true or false.
• Once he is done with the list , it is forwarded to
the HR department for the final assessment of
the employee.
 Forced Choice Distribution Method
• This method was developed to eliminate bias
and the preponderance of high ratings that might
occur in some organizations. The primary
purpose of this method is to correct the
tendency of the rater to give extreme ratings.
• This method makes use of several sets of pair
phrases, two of which may be positive and two
negative and the rater is asked to indicate which
of the four phrases is the most and least
descriptive of a particular worker.
 Group Appraisal Method
• An employee is appraised by a group of
appraisers. This group consists of the immediate
supervisor of the employee, other supervisors
who have close contact with the employee’s
work, manager or head of the department and
consultants.
Drawbacks of Traditional Methods
• Halo Effect
• Leniency and Strictness
• Miscellaneous Biases
• Central Tendency
Modern Methods
 Management By Objectives (MBO)
• In this method, first the organizational goals are
defined then individual goals are defined for the
employees.
• The performance of the employees is reviewed
against achievement of individual goals.
• The management measures the performance of
employees and compares it with the expected
performance to appraise the employees.
 Assessment Centre
• Assessment centre is a place where several activities
are organized for the employees by the
management to evaluate job related skills.
• These activities usually include social events,
assignments, business games and role play.
• This technique mainly gives emphasis on evaluating
interpersonal skills, intelligence and planning and
organizing skills.
• The potential of an employee for a new job as well
as his training and development needs are evaluated
by this method.
 Behaviorally Anchored Rating Scale

• This method gives emphasis on the job related

behaviors of employee.
• The general behavior not related to job is not
considered.
• This method breaks down the job into different
behaviors on behaviorally anchored rating scale.
• Then the behaviors of the employee are
compared with the behaviors rated on the scale.
 BARS
• In a company the positive behaviors of a
customer care executive job are to receive the
call within five seconds, greet the customer in a
polite way. So, the employees who are showing
these behaviors will be anchored to excellent
numerical ratings on the scale and who are not
will be anchored to poor numerical ratings on
the scale.
BARS
 360 degree Performance Appraisal
• This method makes the appraisal more
transparent and participative.
• The performance of employee is appraised by
different people with whom he interacts in his
job.
• The specialty of this method is that apart from
other parties the employee also appraises his
performance.
• People of any department who are in contact with
employee can be a part of this method.
 360 degree Performance Appraisal

• The six parties that are mainly involved in this

method are top management, seniors, peer group,
subordinates, customers and the employee himself.
• Structured questionnaires are prepared to collect
feedback from different parties about the
performance of the employee.
• Employee also appraises himself by answering the
questionnaire.
• On the basis of this feedback, the employee is
appraised positively or negatively.
 Human Resources Accounting Method
• This method aims to find out the net contribution of
employee to the company in monetary terms.
• The cost of employee is calculated by adding the
expenses incurred on the employee like his
compensation, cost of recruitment and training and
development.
• After this, the monetary contribution of employee is
found out. The difference between contribution and
cost of employee indicates the performance of
employee.
• If the contribution is more the employee will be
appraised positively.
 Cost Accounting Method
• This method evaluates an employee’s
performance from the monetary benefits the
employee yields to his/her organization.
• This is ascertained by establishing a relationship
between the costs involved in retaining the
employee, and the benefits an organization
derives from Him/her.
 Cost Accounting Method
• While evaluating an employee’s performance
under this method, the following factors are also
taken into consideration:

– Unit wise average value of production or service.

– Quality of product produced or service rendered.
– Overhead cost incurred.
– Accidents, damages, errors, spoilage, wastage caused
through unusual wear and tear.
– Human relationship with others.
– Cost of the time supervisor spent in appraising the
employee.