Performance appraisal

Meaning & definition

Performance appraisal is a systematic evaluation of individual with respect to his/her performance on the job and his/her potential for development.

Need for performance appraisal

Identify developmental needs. To plan training based on feedback To recognize potential/promising employee.

Components of performance appraisal

Who of appraisal Immediate supervisors Other supervisor Peers or colleagues Self Subordinates Personnel manager External consultant

What of appraisal
Human beings time frame Personal traits Achieved results Specifics Current performance

When of appraisal
Formal Annually Semi annually Quarterly Informal Weekly Daily Continuously

Why of appraisal
Maintain workforce Determine organizational training needs. Determine personal development opportunities. Basis for promotion, transfers etc.. Basis for pay increase & in recruitment, selection. Feedback & communication mechanism.

Where of appraisal
on the job Bosses office Subordinates place of work Everywhere of the job Consultants office Social or recreational settings Everywhere

Benefits of performance appraisal

Human resource planning Motivation & Satisfaction Training & Development Recruitment & Induction Employee Evaluation Legal Compliance

Persons involved are

Employees Superior Division head Peers & colleagues

Why is it done? A systematic presentation of roles & responsibilities of the position To understand why the position is existing Helps in individual objective setting, performance review & effectiveness mapping

What is it used for?

Competency mapping Recruitment & transfer Position evaluation

2)

Performance objective setting review

This module ensures that the corporate objectives are laid down & individual objectives are simultaneously are laid down in line with corporate goals. All this is done in the form of dialogue between superior & the employee.

Why is it done? To fix objective & give weightage to it. To review objectives To determine the performance related pay & increment To ensure that the objectives are also as may be applicable for consumer, employee, finance & processes. To give overall performance rating.

Process of Performance Appraisal Step 1

Establish and communicate expectations for performance.

List three to five major responsibilities of each position. Focus the appraisal on these responsibilities. Be sure employees know and understand what is expected of them. Employee are most likely to understand and be committed to objectives they helped develop.

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Step 2

Establish and communicate standards for measuring performance.

Each expectation should be measurable. A supervisors task includes deciding how to measure employees performance and then making sure employees know what will be measured.

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

Step 3

Observe and measure individual performance against standards.

A supervisor should continuously gather information about each employees performance. When preparing a performance appraisal, a supervisor compares this information with the standards for the employee being appraised.

McGraw-Hill/Irwin

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

Step 4

Reinforce performance or provide remedies.

Point out to employees where they have performed well. Asking an employee to help solve a problem is often more effective than the supervisor simply stating a remedy.

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

Individual Evaluation Methods

Graphic
The

rating scale

rater is presented with a set of traits The employee is rated on the traits Ratings are assigned points, which are then computed Raters are often asked to explain each rating with a sentence or two

 Forced
Was

choice:

developed because graphic rating scales allowed supervisors to rate everyone high The rater must choose from a set of descriptive statements about employee Supervisors check the statements that describe the employee, or they rank the statements from most to least descriptive Forced choice can be used by superiors, peers, subordinates, or a combination of these

 Essay
The

Evaluation

rater is asked to describe the strong and weak aspects of the employees behavior It can be used by superiors, peers, or subordinates Essay evaluations are flexible; an evaluator can specifically address the ratees skill in any area Comparing essays is difficult
Skilled

writers can paint a better picture

 Critical
Raters

Incident Technique

maintain a log of behavioral incidents that represent effective and ineffective performance for each employee Two factors determine the success of this technique:
The

supervisor must have enough time to observe subordinates during the evaluation period The supervisor must record incidents as they are seen
Logs

can help avoid common rating errors and facilitate discussions about performance improvement

 Checklists
In

its simplest form, the checklist is a set of objectives or descriptive statements

If

the rater believes that the employee possesses a listed trait, the item is checked A rating score equals the number of checks

 Behaviorally

Anchored Rating Scales Smith and Kendall developed the behaviorally anchored rating scale (BARS), or the behavioral expectation scale (BES) The BARS approach uses critical incidents to anchor statements on a scale The rater reads the anchors and places an X at some point on the scale for the ratees These scales rate employee performance in several areas. The supervisor selects the statement that best describes how the employee performs. Each job title in the organization has a different set of rating statements.

BARS usually contains these features:

Six

to 10 performance dimensions identified and defined by raters and ratees The dimensions are anchored with positive and negative critical incidents Each ratee is then rated on the dimensions Ratings are fed back using the terms on the form
It takes two to four days to construct a BARS that is jargon free and closely related to the requirements of the job

 Behavioral
Developed
Like

Observation Scales (BOS)

by Latham and associates

BARS, the BOS uses critical incidents Instead of identifying which behaviors occurred, the rater identifies how they occurred
The

hope was that BARS and BOS would yield more objective ratings than other scale formats
Most

researchers find that the format of the rating scale has little effect on the quality of a performance appraisal system

Work Standards Approach: A performance appraisal in which the appraiser compares the employees performance to objective measures of what an employee should do.

This type of appraisal requires the supervisor to establish objective measures of performance.
A typical work standard would be the quantity produced by an assembly-line worker. The supervisor then compares the employees actual performance with the standards. This approach works best with production workers.

In organizations where MBO is used to set goals and objectives for employees, the supervisor will use this approach for performance appraisal also. The appraisal is based on whether or not the employee has met his or her objectives. The advantage is that employees know what to expect. The supervisor focuses on results rather than more subjective criteria. The MBO approach emerged from the beliefs of McGregor, Drucker, and Odiorne With MBO, managers and subordinates plan, organize, control, communicate, and debate The subordinate has a course to follow and a target to shoot for

Management by Objectives (MBO)

 An

MBO program follows a systematic process:

Superior/subordinates

define tasks and set objectives The superior, consulting with subordinates, sets criteria for assessing objective accomplishment Dates to review progress are agreed upon and used Superior and subordinates make any required modifications in the original objectives A final evaluation by the superior is made The superior meets with the subordinate in a counseling, encouraging session Objectives for the next cycle are set

 For

MBO and other performance management programs to work:

Both

the manager and subordinate must be actively involved in objective formulation They must also agree on what measures will be used to evaluate success and failure

Agents by Someone Other than the Supervisor

360-degree Feedback: Performance appraisal that combines assessment from several sources. Because the supervisor cannot know all of an employees behaviors and their impact on others in the organization, the supervisor may combine his or her appraisal with selfassessments by the employee or with appraisals by peers or subordinates.

Combining several sources of appraisals is called 360-degree feedback. The self-assessment may be done before the interview. Then the supervisor and employee can compare the employees appraisal with his or her own evaluation.

Multiple-Person Evaluation Methods

Ranking
A

supervisor is asked to rank subordinates in order on some overall criterion

It

is easier to rank the best and worst employees than average ones

Alternative
Pick

rankings can help with this difficulty

the top employee first, then the bottom one The second best is chosen, then the second worst Follow this process until everyone has been ranked

 Paired
The

Comparison

supervisor reviews a series of cards; each contains two subordinates names The higher performer in each pair is chosen Final ranking is made by counting how many times a given employee was chosen as the better performer A major limitation is the number of paired comparisons that must be made

 Forced

Distribution

Employees

are rated on a pre-existing distribution of pre-determined categories The predetermined distribution must be followed, regardless of how well the employees performed A supervisor with all exceptional subordinates will be forced to rate some poorly
A

supervisor with mediocre subordinates must rate some highly

This technique is similar to grading on a curve

 Point
A

allocation technique (PAT)

variation of forced distribution Each rater is given a number of points per employee The points must then be allocated on a criterion basis The total number of points cannot exceed the number of points per employee times the number of employees evaluated

Which Technique to Use

The

most commonly used evaluation techniques:

The

graphic rating scale The essay method Checklists

Used

by about 5 percent of firms:

Forced

choice, critical incident, BARS, BOS, field review, MBO

Used

by 10 to 13 percent of firms:
paired comparison

Ranking,

Balanced Scorecard
Financial Perspective

The Strategy

If we succeed, how will we look to our shareholders?

Customer Perspective
To achieve our vision, how must we look to our customers? Internal Perspective To satisfy our customers, which processes must we excel at? Learning & Growth Perspective To achieve our vision, how must our organization learn and improve?

Financial Perspective
In private companies, the financial perspective is the main objective (ultimate goal) without having to sacrifice the interests of other relevant stakeholders (community, environment, government, etc.) In the financial perspective, the strategic goal is the long-term shareholder value. This goal is driven by two factors, namely : revenue growth and cost efficiency.

Customer Perspective
This perspective is very instrumental, because without customers, how can a company survive? Customer perspective covers the following elements: Customer acquisition

Customer retention
Customer profitability Market share Customer satisfaction

Internal Process Perspective

This perspective reflects the processes in key business that should be optimized in order to meet the needs of the customers. There are four main themes in this perspective, namely: Operations Management Process Customer Management Process Innovation Process Regulatory and Social Process

Learning & Growth Perspective

This perspective reflects the capability that a company should have, namely: Human Capital Organization Capital

Information Capital

This perspective shows us that good human resource development system, organizational system and information system forms a solid foundation for improving company performance.

The Appraisal Interview

The purpose of holding an appraisal interview is to communicate information about the employees performance. An interview is an appropriate setting because if sets aside time to focus on and discuss the appraisal in private. It is a two-way communication with the supervisor and employee working together to devise ways to improve performance.

The Process of Conducting a Performance Appraisal Interview

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

Guidelines for Conducting the Interview

Begin the interview session by an attempt to put the employee at ease.

A refreshment and small talk may help break the ice.

Review the employees self-evaluation first, if there is one.

Ask for reasons for the various ratings. Then the supervisor describes his or her evaluation of the employee.

Start with an overall impression, then explain the contents of the appraisal forms. Most employees are waiting for the bad news, so it is probably most effective to describe areas for improvement first. Then describe the employees strengths.

Allow time for the employee to respond to the performance appraisal.

The employee should be allowed to agree or disagree with the supervisors conclusions, as well as to ask questions. It is important for the supervisor to keep an open mind and listen to the employee. After the interview is over, the supervisor continues to appraise performance. Training and coaching for improvement should ensue. The follow-up is an ongoing process.

Guidelines for Assessing the Effectiveness of an Interview

During the interview:

To what extent did the supervisor really try to understand the employee? Were broad and general questions used at the outset? Was the supervisors feedback clear and specific? Did the supervisor learn some new thingsparticularly about deep feelings and values of the subordinate? Did the subordinate disagree and confront the supervisor? Did the interview end with mutual agreement and understanding about problems and goals for improvement?

Performance Evaluation Problems

No technique is perfect; they all have limitations

Bias in Appraising Performance

Performance appraisals should be free of bias, but this is impossible.

There are several identifiable biases in the performance appraisals by supervisors. Harshness Bias: Rating employees more severely than their performance merits. Leniency Bias: Rating employees more favorably than their performance merits. Proximity bias, or assigning similar scores to items that are near each other on a questionnaire, can result in misleading appraisals.

Similarity Bias: The tendency to judge others more positively when they are like oneself. The halo effect refers to the tendency to generalize one positive or negative aspect of a person to the persons entire performance, resulting in either a higher or lower rating than the employee deserves.

Use of Performance Appraisals

_ Feedback _ Personnel Training _ Wage/Salary Allocation (Compensation) _ Placement _ Promotions _ Discharge/Termination _ Personnel Research _ Legal Defense