Prepared by: AAKASH GOSAI -10BBA04 ARPAN PATEL-10BBA14 BHUMIKA PATEL -10BBA24 DARSHAN -10BBA34 DIMPLE PATEL-10BBA44 FORAM

PATEL-10BBA54
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Meaning And Definition Features Objectives Importances Process Problems Methods Essential of an effective performance appraisal Conclusion
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Performance Appraisal is the systematic evaluation

of the performance of employees and to understand the abilities of a person for further growth and development.

Performance appraisal is generally done in systematic

ways which are as follows: 1. The supervisors measure the pay of employees and compare it with targets and plans. 2. The supervisor analyses the factors behind work performances of employees. 3. The employers are in position to guide the employees for a better performance.
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 A systematic and objective way of evaluation both

work related behavior and potential of employees. According to flippo performance appraisal is the systematic, periodic and an impartial rating of an employees excellence in matters pertaining to his present job and his potential for a better job. Performance appraisals are employed to determine who needs what training, and who will be promoted, demoted, retained, or fired.
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3.It is the systematic examination of an employees

strengths and weaknesses in terms of the job.

4.Performance appraisal is a scientific or objective

study. The same approach is adopted for all jobholders so that the results are comparable.
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 The main objective of performance appraisals is to

measure and improve the performance of employees and increase their future potential and value to the company. Other objectives include providing feedback, improving communication, understanding training needs, clarifying roles and responsibilities and determining how to allocate rewards.
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1. Provide Feedback:The feedback received by the employee can be helpful in many ways. It gives insight to how superiors value your performance, highlights the gap between actual and desired performance and diagnoses strengths and weaknesses as wells as shows areas for improvement. 2.Improve Communication:- The method of performance appraisals helps superiors strengthen relationships and improve communication with employees.
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3. Training Needed :These appraisals also identify the necessary training and development the employee needs to close the gap between current performance and desired performance. 4. Clarify Expectations:- Performance appraisals should clarify roles, responsibilities and expectations of all employees. 5. Allocate Rewards:Performance appraisals reduce employee grievances by clearly documenting the criteria used to make organizational decisions such as promotions, raises or disciplinary actions.
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1. Performance Feedback:- Most employees are very interested in knowing how well they are doing at present and how they can do better in a future. They want this information to improve their performance in order to get promotions and merit pay. Proper performance feedback can improve the employee's future performance. It also gives him satisfaction and motivation. 2. Employee Training and Development Decisions:Performance Appraisal information is used to find out whether an employee requires additional training and development. Deficiencies in performance may be due to inadequate knowledge or skills.
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3. Promotions:- Performance appraisal is a way of finding out which employee should be given a promotion. Past appraisals, together with other background data, will enable management to select proper persons for promotion.

4. Transfers:- Performance appraisal is also useful for taking transfer decisions. Transfers often involve changes in job responsibilities, and it is important to find out the employees who can take these responsibilities. Such identification of employees who can be transferred is possible through the performance 11 appraisal.

5. Layoff Decisions:- Performance appraisal is a good way of taking layoff decisions. Employees may be asked to layoff, if the need arises. The weakest performers are the first to be laid off. If there is no performance appraisal, then there are chances that the best men in the department may be laid off. 6. Compensation Decisions:- Performance appraisal can be used to compensate the employees by increasing their pay and other incentives. This is truer in the case of managerial jobs and also in the case of employees in non-unionized organizations. The better performances are rewarded with merit pay. 12

7. Human Resource Planning (HRP):- The appraisal process helps in human resource planning (HRP). Accurate and current appraisal data regarding certain employees helps the management in talking decisions for future employment. Without the knowledge of who is capable of being promoted, demoted, transferred, laid off or terminated, management cannot make employment plans for the future. 8. Career Development:Performance appraisal also enables managers to coach and counsel employees in their career development. 13

9. Validation of Selection Process:Performance appraisal is a means of validating both internal (promotions and transfers) and external (hiring new employees from outside) sources. Organizations spend a lot of time and money for recruiting and selecting employees. Various tools used in the selection process are application blanks, interviews, psychological tests, etc. These tools are used to predict (guess) the candidate's performance on the job. A proper performance appraisal finds out the validity of the various selection tools and so the company can follow suitable steps for selecting employees in future. 14

Establishing The Standard

Taking Correct Action

Communicating The Standard

Discussing Appraisal

Measuring The Actual Performance

Comparing The Actual With The Desired Performance

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1. Establishing Standard Performance:The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criterion 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.
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2. 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 them. 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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3. 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.
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4. Comparing The Actual Performance With The Desired Performance:- The actual performance is compared with

the desired or the standard performance. The comparison tells the deviation 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 depict a negative deviation in the organizational performance. It includes recall, evaluate and analysis of data related to the employees performance.
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5. Discussing Appraisal:The result of the appraisal is communicated and discussed with the employees on one-toone 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.
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6. Taking Correct Action:- 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.

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Performance appraisal is important for organizations and employees. Unfortunately, performance appraisals are not on the top of the list of "favorite things to do" for either managers or employees, and there can be a number of problems with their administration. From managers not being trained to conduct performance appraisals effectively to the failure to tie performance appraisal expectations to desired business results, businesses are often challenged to use these tool effectively, the main problems of performance appraisal are as follows:
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1. Poorly Trained Managers: Effective performance appraisal doesn't just happen and organizations shouldn't assume that managers know how to conduct them effectively, even if they have many years of experience as managers. In fact, since the process can differ from organization to organization, it is important that training is provided to introduce managers to the philosophy of performance appraisal at the organization, including a review of the forms, the rating system and how the data gathered is used. Training should take place regularly as a refresher both for new and veteran managers.
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2. Inconsistent Ratings:- Inter-rater reliability is generally very low between managers at any organization. What one manager considers being "acceptable" performance, another may consider "not meeting expectations." This can be a challenge for any organization and is made more of a challenge in situations where the criteria used are subjective and not based on any measurable performance outcomes. 3. Error in rating:Performance appraisal may not be valid indicator of performance and potential of employees due to following types of errors:
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a. Problems with leniency and strictness:- The leniency bias crops when some raters have a tendency to be liberal in their rating by assigning higher rates consistently. Equally damaging one is assigning consistently low rates.

b. Problems with central tendency:- Some raters appraise all the employees around the middle point of the rating scale and they avoid rating the people higher or lower level. They follow play safe policy because of answer ability to management or lack of knowledge about the job and person he is rating or least interest in his job.
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c. Problems with personal prejudice:If the rater dislikes any employee, he may rate them at the lower end and this may distort the rating purpose and affect the career of these employees. d. Problems with halo effect:- To minimizing the halo effect, you should appraise all the employees by one trait before going to rate on the basis of another trait. A person outstanding in one area tends to receive outstanding or better than average ratings in other areas as well, even when such a rating is undeserved.

e. Problems with recent performance effect:- In general, raters remember the recent appraisal of the employee and they usually follow appraisal results last time.
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4. Lack of Outcome-Based Measures :- Performance appraisals that ask managers to rate employees on subjective criteria such as "customer service skills" or "leadership ability" lack specific outcomes that can be tied to measurable results. The best performance appraisals provide the ability for both managers and employees to judge performance based on measurable outcomes that are objective; level of sales, safety records and evaluations from customers are all measurable ways of providing insight into an employee's performance.
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5. Not Used for Performance Improvement:The purpose of performance appraisal is not only to provide input to employees about how they're doing, but also to provide the organization with an indication of areas of employee strength and opportunities for improvement. Unfortunately, few companies actually aggregate and use the results of performance appraisal for performance improvement efforts. By analyzing results and taking advantage of both best practices in areas where employees are performing well and opportunities for improvement in areas where they're not, organizations can receive maximum value from their performance appraisal efforts. 28

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1. Confidential report:- This is a traditional form of appraisal used in most government organization. A confident report is a report prepared by the employees immediate superior. It covers the strengths and weakness, achievement and failure, personality and behavior of the employee. This method focus on evaluating rather than developing the employee. If the employee disagrees, a noting to that effect has to be made on the report. 2. 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
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 In this method evaluator assigns a relative ranks to all the

employees in the same work unit doing the same job. The ranking system requires the rater to rank his subordinates on overall performance. This consists in simply putting a man in a rank order. Under this method, the ranking of an employee in a work group is done against that of another employee. Advantages: Employee are ranked according to their performance levels. It is easier to rank the best and the worst employee.
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Limitations:The whole man is compared with another whole man in this method. In practice, it is very difficult to compare individuals possessing various individual traits. This method speaks only of the position where an employee stands in his group. It does not test anything about how much better or how much worse an employee is when compared to another employee. When a large number of employees are working, ranking of individuals become a difficult issue. There is no systematic procedure for ranking individuals in the organization. The ranking system does not eliminate the possibility of snap judgments.
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3. Critical Incident techniques: In this method of Performance appraisal, the evaluator rates the employee on the basis of critical events and how the employee behaved during those incident. It includes both negative and positive points. These critical incidents are identified after through the study of the job and discussion with staff. Under this method, the manager prepares lists of statements of very effective and ineffective behavior of an employee. These critical incidents or events represent the outstanding or poor behavior of employees or the job.
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Advantages:- This method provides an objective basis for conducting a thorough discussion of an employees performance. This method avoids regency bias (most recent incidents are too much emphasized). Limitations :- Negative incidents may be more noticeable than positive incidents The supervisors have a tendency to unload a series of complaints about the incidents during an annual performance review sessions. It results in very close supervision which may not be liked by an employee. 34

4. Checklists and Weighted Checklists:-

The rater is given a checklist of the descriptions of the

behavior of the employees on job. The checklist contains a list of statements on the basis of which the rater describes on the job performance of the employees. There are three types of checklist that can be used: a. Simple checklist b.Weighted checklist c.Forced choice checklist

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Advantages :-

Most frequently used method in evaluation of the

employees performance. Limitations:- This method is very expensive and time consuming Rater may be biased in distinguishing the positive and negative questions. It becomes difficult for the manager to assemble, analyze and weight a number of statements about the employees characteristics, contributions and behaviors.
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5. Graphical rating method:In this method, an employees quality and quantity of work is assessed in a graphic scale indicating different degrees of a particular traits. 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. The rater is given a printed form for each employee to be rated. The form contains several characteristics relating to the personality and performance of employees, intelligence, quality of work, leadership 37 skills, etc are of the characteristics.

Acceptable rating scales should have the following characteristics:- Performance dimensions should be clearly defined. Scales should be behaviorally based so that a rater is able to support all ratings with objective, observable evidence. Abstract trait names such as "loyalty," "honesty," and "integrity" should be avoided unless they can be defined in terms of observable behaviors. Points, or anchors, on each scaled dimension should be brief, unambiguous, and relevant to the dimension being rated. For example, in rating a person's flow of words, it is preferable to use anchors such as "fluent," "easy," "unimpeded," "hesitant," and "labored," rather than "excellent," "very good," "average," "below average," and "poor."
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6. Essay Method: The essay method involves an evaluator's written report appraising an employee's performance, usually in terms of job behaviors and/or results. The subject of an essay appraisal is often justification of pay, promotion, or termination decisions, but essays can be used for developmental purposes as well.

Since essay appraisals are to a large extent unstructured and

open-ended, lack of standardization is a major problem. The open-ended, unstructured nature of the essay appraisal makes it highly susceptible to evaluator bias, which may in some cases be discriminatory. By not having to report on all job-related behaviors or results, an evaluator may simply comment on those that reflect favorably or unfavorably on an employee. This does not usually represent a true picture of the employee or the job, and content 39 validity of the method suffers.

7. Assessement centre method: Assessment centre is a group of employees drawn from different work units. The employees work together on an assignment similar to the one they would be promoted. Evaluators observe and rank the performance of all the participants. Experience managers with proven ability serve as evaluators. an assessment centre generally measures interpersonal skills, communicating ability, ability to plan and organize, etc. Assessment centre is not only a method of appraisal but also help to determine training and development needs of employees and provide data for human resource planning.
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8. MBO -management by objectives: Management by objectives (MBO) involves setting specific measurable goals with each employee and then periodically discussing his/her progress toward these goals. The term MBO almost always refers to a comprehensive organization-wide goal setting and appraisal program that consist of six main steps: Set the organizations goals. Establish organization-wide plan for next year and set goals. Set departmental goals. Here department heads and their superiors jointly set goals for their departments.
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 Discuss and allocate department goals. Department heads

discuss the department's goals with all subordinates in the department (often at a department-wide meeting) and ask them to develop their own individual goals; in other words, how can each employee contribute to the department's attaining its goals? Define expected results (set individual goals). Here, department heads and their subordinates set short-term performance targets. Performance review and measure the results. Department heads compare actual performance for each employee with expected results. Provide feedback. Department heads hold periodic performance review meetings with subordinates to discuss and evaluate progress in achieving expected results.
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 To be effective, a performance appraisal system should

satisfy the following requirements. 1. Mutual trust:- An atmosphere of mutual trust and confidence should be created in the organization before introducing the appraisal system. Such an atmosphere is necessary for frank discussion of appraisal. It also helps to obtain the faith of employees in the appraisal system. 2. Clear objective:The objective and uses of performance appraisal should be made clear and specific. The objective should be timely relevant and open.
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 The appraisal system should be fair so that it is beneficial

to both the individual employee and the organization. 3. Standarisation:- Organization set or decides a standard based upon certain criteria and some factors. The appraisal system should be performance based and uniform. Employees should be made fully aware of performance standards and should involve in setting of the standards. 4. Training:Evaluators should be given training in philosophy and techniques of appraisal. They should be provided with knowledge and skills in documenting appraisals, conducting post appraisal interviews, rating erros, etc. 44

5. Job relatedness:- The evaluators should be focus on attention on job related behavior and performance of employees. In order to focus attention on behavior under the employees control, raters must become familiar with the observed behavior. 6. Documentation:- The raters should be required to justify their rating. Documentation should be encourage the evaluators to make conscious efforts minimizing personal biases. It will also help to impute accountability for ratings.
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7. Feedback and participation: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. The employees should actively participate in managing performance. 8. Individual difference:- While designing the appraisal system, individual differences in organizations should be recognized. Organizations differ in terms of size, nature ,needs and environment. The appraisal system should be tailor made for the organization. 46

9. Post appraisal interview:- After appraisal, an interview with the employees should be arranged. It is necessary to supply feedback, to know the difficulties under which the employees work and to identify their training needs. 10. Review and appeal:- The review may be made by a committee consisting of line executives and personnel experts. The committee will see whether the raters are unusually strict or lenient. It may compare ratings with operating results and may require the raters to give specific examples or tangible proof. Differences if any are discussed.
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This form is used to guide the appraisal process of employees performance. 1. General Requirements: Appraisal time: Weekly, at weekends. At the end of month, carry our general appraisal to give points to each employee. Appraisal method: Perform on basis of form as described herein this Code. Appraisal shall be performed by the head of relevant department.

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2. Employees Details: Name of Employee: Position: Department: Appraiser: Title:

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3. Appraisal Rank:-

A: 1 3 points: Poor

B: 3 5 points: Weak C: 5 6.5 points: Average D: 6.5 8: Fair E: 8 10: Good

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4. Appraisal Criteria:-

4.1. Quality of Work:-

A: Not meet the requirements for more than 3 times/month or 1

2 times but cause material impact on the Company B: Not meet the requirements for 1 2 times/month C: Meet the requirements D: Ensure the good quality of work; receive high appraisal by customers and colleagues E: Perform the work excellently; create high value for the Company.

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4.2. Completion time: A: Not complete the work within the time limits for more than 3 times/month or Not complete the work within the time limits for 1 2 times/month but cause material impact on the Company B: Not complete the work within the time limits for 1 2 times/month C: Complete the work on time D: Complete the work before due date E: Complete the work before due date and this creates high value for the company
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4.3. Innovation:-

A: (Not count) B: (Not count) C: 5 points if have minor innovation D: Have innovation which can be measured in value to
be 1million VND or more E: Innovation with in-value measure to be more than 5 million VND

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4.4. Regulation Abidance:A: Serious violation, 2 times a month B: Serious violation, 1 time a month. Or non-serious violation for more than 2 times C: Non-serious violation for 1 time a month D: No violation E: Not violation + discovery of violation

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5. Appraisal Form Design:The Form should include the following columns: Number Appraisal Criteria Point Sum-up Coefficient (If any)

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 With rewards being directly linked to achievement of

objectives, goal setting and Performance Appraisal assumes utmost importance. The Performance Appraisal System has been professionally designed and it is monitored by HRD. The implementation is the responsibility of each and every employee along with their supervisor. A well-designed performance appraisal system supports an integrated human resource strategy which enables the attainment of organizational and business goals.
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In conclusion, a Performance Appraisal is a very

important tool used to influence employees. A formal Performance review is important as it gives an opportunity to get an overall view of job performance and staff development. It encourages systematic and regular joint-stocking and planning for the future. Good performance reviews therefore dont just summarize the past they help determine future performance.

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Meaning Definition Purpose Step involve in potential appraisal

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 The potential appraisal refers to the appraisal

i.e. identification of the hidden talents and skills of a person. The person might or might not be aware of them. Potential appraisal is a future oriented appraisal whose main objective is to identify and evaluate the potential of the employees to assume higher positions and responsibilities in the organizational hierarchy.

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 Potential appraisal helps to identify what can

happen in future so that it can be guided and directed towards the achievement of individual and organizational growth and goals. Therefore, potential should be included as a part of the Performance appraisal in organizations.

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 A process of determining an employee's

strengths and weaknesses with a view to use this as a predictor of his future.

Potential Appraisal is the process of

tracking unrevealed skills and abilities in a person which even he/she is unaware of.

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 To advise employees about their overall career

development and future prospects

Help the organization to chalk out succession

plans. Motivate the employees to further develop their skills and competencies.

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1.ROLE DESCRIPTIONS:- A good Potential Appraisal System would be based on the clarity of roles and the functions associated with them in the organization. This requires extensive job descriptions to be available for each job. These job descriptions should spell out the various functions involved in performing the jobs.

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2. QUALITIES REQUIRED TO PERFORM THE ROLES: These qualities may be broadly divided into three categories: A) Technical knowledge and skills B) Managerial capabilities and qualities and C) Behavioral dimension

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3. INDICATOR OF QUALITIES:A good Potential Appraisal System, besides listing the functions and qualities, would also have various mechanisms of judging these qualities in a given individual. Some of the mechanisms of judging these qualities are: a) Rating by others b) Psychological tests c) Simulation games and exercises d) Performance appraisal records
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4. ORGANIZING THE SYSTEM:Once the functions, the qualities required performi ng these functions, indicators of these qualities and mechanisms of generating these indicators are clear, the organization is in a sound position to establish and operate the Potential Appraisal System. Such an establishment of the system requires clarity in the organizational policies and systematization of its efforts.
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5. FEEDBACK ON POTENTIAL APPRAISAL F OR CAREER DEVELOPMENT:A good Potential Appraisal System should provide an opportunity for every employee to know the results of this assessment.

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 He should be helped to understand the

qualities actually required for performing the role for which he thinks he has the potential, the mechanisms used by the organization to appraise his potential, and the results of such an appraisal. A good potential appraisal system provides opportunities continuously for the employee to know his strengths and weaknesses.

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To assess the existing performance of an

employee and to make a projection through intuition, to find out where he can be well fit and groom to shoulder future organizational responsibilities. To assist organizations to assess and develop executives or leaders for management succession in order to have growth without any friction and minimum overlapping of work.
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 Potential Appraisal is forward looking process

whether performance appraisal is backward looking process. Any good or worse assessment results of performance appraisal may not be a good factor for potential appraisal. But current performance of an employee could show evidence somewhere whether he/she is flexible for new working conditions.

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 Performance appraisal is the procedure done

after the performance of the current year or by monthly basis also Potential appraisal is done with the skills which are present in the individual. Eg.:- Leadership qualities, Communication Skills etc. A performance appraisal looks at what already happened and for evaluation. A potential appraisal is about something yet to happen and is subject to evaluation and observation before appraisal.
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