PERFORMANCE APPRAISAL

PERFORMANCE APPRAISAL
Performance appraisal is the systematic
evaluation of the individual with respect to
his performance on the job and his potential
for development.
Normally the evaluation is made by the
individual’s immediate superior in the
organization and this is reviewed in turn by
his superior. Thus everyone in the
organization who rates others is also rated by
his superior.
Applications :
The basic purpose and uses of performance appraisal are as follows :

•Employee performance – Appraisals are an aid to creating and maintaining a

satisfactory level of performance by employees on their present jobs. Appraisal
followed by interview may contribute towards more effective or improved
performance on the part of many individual.
•Employee development - The appraisal may highlight needs and opportunities
for growth and development of the person. Growth may be accomplished by self
study, formal training courses or job related activities.
•Supervisory understanding - A formal and periodic appraisal encourages
supervisors to observe the behaviour of their subordinates. Encouraged by the
proper top-management attitude, they can be motivated to take an interest in each
person and to help him.
•Guide to job changes - An appraisal aids decision making for promotions,
transfers, layoffs, and discharges for inadequate performance
•Wage and salary treatment - The size and frequency of pay increases are often
related to the rating of appraisal process
Hence the uses of performance appraisal can
be classified mainly into two categories – one
category concerns obtaining of evaluation data
on the employees for decision making for
various personnel functions such as pay
increases, transfers, promotions etc and the
other for employee development including
performance improvement, training, coaching
and counselling
Necessity of performance appraisal :

Performance appraisal is necessary :

•To monitor the efforts of individuals

•To integrate and coordinate endeavour
•To provide protection and feedback to individuals
•To provide a means of correcting or commending
the efforts of the individuals
•To provide a equitable and consistent basis of
distribution of rewards and penalties
• Performance • Performance
Management Appraisal
– Processes used to – The process of evaluating
identify, encourage, how well employees perform
measure, evaluate, their jobs and then
improve, and reward communicating that
employee performance. information to the
employees.
– Formal & Informal

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o Performance is the resultant behavior of the
subordinate on the task which can be observed or
evaluated

o Potential on the other hand is an employee’s ability to

fit into future roles

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 Traditional
Performance
Appraisal Process

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1. IMMEDIATE SUPERVISOR
-Is the traditionally accepted form of employee appraisal
PROS
-Supervisor is the best judge of an employee’s performance
-Supervisor is responsible for the performance of the entire
unit
-Training is often the responsibility of the supervisor &
appraisal programmes & employee development are closely
related
CONS
-Neglect certain aspects of the employee’s performance
-Manipulation
-Geographical boundaries & distance between the supervisor &
subordinate makes the process of appraisal more difficult

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2. SUBORDINATES
-Historically & culturally appraisal by subordinates has been
viewed negatively
-Change & shift in work-culture & values
PROS
-Subordinates are in an excellent position to view their
manager's effectiveness
-Managers will become conscious of their work group needs &
better their functioning
CONS
-Employees are fearful of rating their supervisors
-Requires anonymity in the process

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2. SUBORDINATES
-Historically & culturally appraisal by subordinates has been
viewed negatively
-Change & shift in work-culture & values
PROS
-Subordinates are in an excellent position to view their
manager's effectiveness
-Managers will become conscious of their work group needs &
better their functioning
CONS
-Employees are fearful of rating their supervisors
-Requires anonymity in the process

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3. PEERS
-Use of teams those which are self directed
PROS
-Team members know each other’s performance better
-Peer pressure is a powerful motivator
-Members show commitment & productivity
-Peer review involves numerous opinions
CONS
-Unfair criticism
-Infrequent interaction
-Improper appraisal training
4. SELF APPRAISAL
-Employee participation & development
-Contain the blind-sidedness of the managers

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5. CUSTOMER APPRAISAL
-Customer behavior determines a firm’s degree of success
-This approach demonstrates the org. commitment to the
customers & hold employees accountable to such a
commitment
-Improve the rating for accurate delivery, service quality etc.

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o For the Appraisee
-Better understanding of his role in the org.
-Clear understanding of his strengths & weaknesses
-Increased motivation, job satisfaction
-Opportunity to discuss & overcome work problems
-Opportunity to discuss aspirations & any guidance or training required
to fulfill those aspirations
-Improved working relationships with superiors

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o For the Management
-Identification of performers & non-performers
-Opportunity to prepare employees for assuming higher responsibilities
-Opportunity to improve communication between the employees &
management
-Identification of training & development needs
-Ideas for improvement
-Better identification of career plans
o For the Organization
-Improved performance
-Creation of a culture of continuous improvement
-Conveyance of a message that people are valued

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1. LACK OF OBJECTIVITY
-Traditional PA systems lack objectivity
-Personality, appearance & attitude are difficult to measure
-While subjectivity will always exist in appraisal methods,
employee appraisal primarily on personal characteristics
will place the company in untenable positions

2. BIAS
-Rater Bias is a huge challenge to the PA process
-Halo error occurs when a manager generalizes one positive
performance to the entire evaluation process
-Horn effect & Spillover effect
-Rater Bias can make the entire PA process a mere gamble

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3. LENIENCY/STRICTNESS
-Giving an underserved high performance appraisal rating to an
employee is termed as leniency
-Research has shown that managers tend to be more lenient in
their ratings when they rate their subordinates for
administrative purposes in comparison to employee
development
-Being unduly critical of an employee’s performance is termed
as strictness
-Evaluation inflation

4. CENTRAL TENDENCY
-Employees are incorrectly rated near the average or middle of
the scale
-Ratings normally fall in the satisfactory range

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5. RECENT BEHAVIOR BIAS
-Individual’s generally put in more effort when the PA is due
-Tendency to remember the most recent behavior on the part
of managers while rating & assessing their subordinates

6. PERSONAL BIAS (STEREOTYPING)

-Discrimination on the basis of caste, religion, gender,
-The process or phenomenon of glass ceiling
-Hell raisers

7. MANIPULATION OF EVALUATION
-Supervisors control the PA process
-Manipulation is common but may defeat the very purpose of
the PA system in the org.

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 Comparative Methods
Category Rating Methods
-Ranking
-Graphic Rating Scale
-Forced Distribution
-Checklist
-Work Standards

PA Methods

Narrative Methods
Behavioral/objective Methods
-Critical Incident
-BARS
-Essay
-MBO
-Field Review
These methods require a manager to mark an employee’s level
of performance on a specific form divided into categories of
performance
Graphic Rating Scale
– A scale that allows the rater to indicate an employee’s performance
on a continuum of job behaviors.
– Aspects of performance measured:
• Descriptive categories, job duties, and behavioral dimensions
• Behavioral rating scales
– Drawbacks
• Restrictions on the range of possible rater responses
• Differences in the interpretations of the meanings of scale items and
scale ranges by raters
• Poorly designed scales that encourage rater errors
• Rating form deficiencies limit effectiveness of the appraisal

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• Checklists
– A performance appraisal tool that uses a
list of statements or work behaviors that
are checked by raters.
• Can be quantified by applying weights to
individual checklist items.
– Drawbacks
• Interpretation of item meanings by raters
• Weighting creates problems in appraisal
interpretation
• Assignment of weights to items by persons
other than the raters
Methods that require a manager to directly compare their
employees against one another
• Ranking
– A listing of all employees from highest to lowest in
performance.
– -Paired Comparison is a method where the performance of
each employee is compared with every other employee in the
group
– Drawbacks
• Does not show size of differences in performance between
employees
• Implies that lowest-ranked employees are unsatisfactory
performers.
• Becomes an unwieldy process if the group to be ranked is large.

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Forced Distribution
– Performance appraisal method in which ratings of employees
are distributed along a bell-shaped curve.
– -Microsoft, GE, HP, Sun Microsystems
– -GE follows the top 20% middle 70% & poorest 10% method
– Drawbacks
• Assumes a normal distribution of performance.
• Resistance by managers to placing individuals in the lowest or
highest groups.
• Providing explanation for placement in a higher or lower grouping
can be difficult. Legal issues (Ex: Goodyear Tire & Rubber
Company)
• Is not readily applicable to small groups of employees.

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Forced Distribution on a Bell Shaped Curve
Work Standards Method
-A performance appraisal method that compares each employee’s
performance to a predetermined standard or expected level of
output
-Mainly used for production jobs.
Advantages:
-Objectivity in appraisal criteria
Problems
-Employees should clearly understand how the standards are set

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Work Standards Method
-A performance appraisal method that compares each employee’s
performance to a predetermined standard or expected level of
output
-Mainly used for production jobs.
Advantages:
-Objectivity in appraisal criteria
Problems
-Employees should clearly understand how the standards are set

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• Critical Incident
– Manager keeps a written record of highly
favorable and unfavorable employee
actions.
– Drawbacks
• Variations in how managers define a “critical
incident”
• Time involved in documenting employee actions
• Most employee actions are not observed and
may become different or change if observed
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• Essay
– Manager writes a short essay describing an
employee’s performance.
– Drawback
• Depends on the managers’ writing skills and
their ability to express themselves.
• Field Review Technique
Manager obtains information about the work performance of the
employee by interviewing the individual, his peers & his
supervisors

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• Management by Objectives
– Specifying the performance goals that an individual and his
or her manager agree the employee will to try to attain
within an appropriate length of time.
– Coke
• Key MBO Ideas
– Employee involvement creates higher levels of commitment
and performance.
– Encourages employees to work effectively toward achieving
desired results.
– Performance measures should be measurable and should
define results.
 OBJECTIVE SETTING
In an MBO, good goals are SMART goals:

S specific
S
U
M measurable C
WORK A achievable HAVE C
E
R result oriented
S
T time-related S
 WHAT IS MBO ?
Peter Drucker, (1954, “The Practice of Management”)
• Is a systematic and organized approach that
allows management to focus on achievable
goals and attain the best possible results from
available resources
• Aims to increase individual and organizational
effectiveness by aligning organizational goals
and subordinate objectives
• Clarifies and quantifies objectives to allow for
monitoring, evaluation, and feedback
throughout the hierarchy of objectives
 IN SIMPLE WORDS,
MBO IS…
• MBO emphasises the
importance of objectives as a
tool to be used by managers in
fulfilling their managerial roles
(accomplish their tasks)
• Divide problem into
manageable, “bite-size” chunks
 Core Concepts of MBO
• According to Drucker managers should "avoid the
activity trap", getting so involved in their day to day
activities that they forget their main purpose or
objective. Instead of just a few top-managers, all
managers should:
• participate in the strategic planning process, in order to
improve the implementability of the plan, and
• implement a range of performance systems, designed
to help the organization stay on the right track.
 Managerial Focus
• MBO managers focus on the result, not the
activity. They delegate tasks by "negotiating a
contract of goals" with their subordinates
without dictating a detailed roadmap for
implementation. Management by Objectives
(MBO) is about setting yourself objectives and
then breaking these down into more specific
goals or key results.
 Main Principle of MBO
• The principle behind Management by Objectives
(MBO) is to make sure that everybody within the
organization has a clear understanding of the aims, or
objectives, of that organization, as well as awareness of
their own roles and responsibilities in achieving those
aims. The complete MBO system is to get managers
and empowered employees acting to implement and
achieve their plans, which automatically achieve those
of the organization.
 Where to Use MBO
• The MBO style is appropriate for knowledge-based
enterprises when your staff is competent. It is
appropriate in situations where you wish to build
employees' management and self-leadership skills and
tap their creativity, tacit knowledge and initiative.
Management by Objectives (MBO) is also used by chief
executives of multinational corporations (MNCs) for
their country managers abroad.
 MBO PRINCIPLES
1.Cascading of organizational goals and
objectives
2.Specific objectives for each team
member
3.Participative decision making
4.Explicit time period
5.Performance evaluation & feedback
 The MBO Process

Job Review and Agreement

Development of Performance Standards

Objective Setting

Continuing Performance Discussions

The Five-Step MBO Process
 STEPS FOR MBO
STEP 1: SET GOALS STEP 2: DEVELOP PLANS
•Corporate Strategic goals
•Departmental goals Action Plans
•Individual goals

Review Progress &

Take Corrective Action

Appraise
Performance STEP 3: REVIEW PROGRESS
STEP 4: APPRAISE
OVERALL PERFORMANCE
 MBO; FRAMEWORK CONCEPT

Supervisor

Jointly plan Individually act Jointly control

• Setting • Performing • Reviewing

and objectives tasks results
• Setting (subordinate) • Discussing
standards • Providing implications
• Choosing support • Renewing MBO
actions (supervisor) cycle

Subordinate
 ESSENTIAL STEPS FOR MBO
• Set Goals (The most difficult step)
– What are we trying to accomplish?
• Develop Action Plans
– “What do we need to do to get
there?”
– Groups and individuals
• Review Progress
– “How are we doing?”
– Periodically (How Often?)
– Does plan need to be tweaked?
• Appraise Performance
– Rewards?
 ADVANTAGES OF MBO
• Improves employee motivation
• Improves communication in the
organisation
• Flags up and highlights training needs
required to achieve objectives
• Improves overall performance and
efficiency
• Attainment of goals can lead to the
satisfaction of Maslow’s higher order
needs
 DISADVANTAGES OF MBO
• May demotivate staff if targets are too high
and unrealistic, also if imposed rather than
agreed
• Requires the cooperation of all employees to
succeed
• Can be bureaucratic and time consuming
(meetings, feedback)
• Can encourage short-term rather a more
focused long-term growth
• Objectives may go out of date and can restrict
staff initiative and creativity
• Setting targets for certain specialised
employees may be difficult
BARS
– Assesses employees’ behaviors instead of other
characteristics
– Consists of a series of scales created by:
• Identifying important job dimensions
• Creating statements describing a range of desired and
undesirable behaviors (anchors)
Advantages:
• Tailor made to suit the org. needs & is more objective
Disadvantages:
• Activity oriented rather than results oriented
• Time consuming
Behaviorally Anchored Rating Scale
(BARS)
Composed of job dimensions (specific
descriptions of important job
behaviors) that “anchor” performance
levels on the scale.
Developing a BARS
Identify important job dimensions
Write short statements of job behaviors
Assign statements (anchors) to job
dimensions
Set scales for anchors