Performance appraisal is the process of gathering, recording and critically analysing information about the relative importance of employees to the organisation.
Performance appraisal is study of present achievements and failures, personal strengths and weaknesses, and suitability for incentives, rewards and recognition, increased pay scale, promotion or further training.
Finally it shows the suitability of the person at present job to the organization. Appraisal is the evaluation of worth, quality or merit. Appraisal should measure both performance in accomplishing goals, plans and performance as a manager. It is the evaluation of present performance and future capabilities.
Learn about:- 1. Meaning and Definitions of Performance Appraisal 2. Objectives of Performance Appraisal 3. Purposes 4. Importance 5. Sources 6. Role 7. Process 8. Types of Methods 9. Problems 10. Pre-Requisites for Effectiveness 11. New Trends and Recent Development.
Performance Appraisal: Meaning, Definition, Objectives, Importance, Process, Methods and Recent Trends
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Contents:
- Meaning and Definitions of Performance Appraisal
- Objectives of Performance Appraisal
- Purposes of Performance Appraisal
- Importance of Performance Appraisal
- Sources of Performance Appraisal
- Role of Performance Appraisal System
- Performance Appraisal Process
- Types of Performance Appraisal Methods
- Problems of Performance Appraisal
- Pre-Requisites for Effective Performance Appraisal
- New Trends and Recent Development in Performance Appraisal
Performance Appraisal – Meaning and Definitions Propounded by Alford and Beatty, Flippo, Heyel, Douglass, Newstrom and by Macmillan Dictionary
A performance appraisal is known by other terms like employee appraisal, performance review. It is a method by which the job performance of an employee is measured in terms of quality, quantity, cost, behaviour and time. It is conducted by self, peers, seniors and juniors. But generally in formal method it is conducted by the immediate manager or supervisor under whom the person is directly working.
A performance appraisal is a part of measuring, comparing, finding, guiding, correcting and managing career development of the employees. It is the process of gathering, recording and critically analysing information about the relative importance of employees to the organisation. Performance appraisal is study of present achievements and failures, personal strengths and weaknesses, and suitability for incentives, rewards and recognition, increased pay scale, promotion or further training.
Finally it shows the suitability of the person at present job to the organisation. Appraisal is the evaluation of worth, quality or merit. Appraisal should measure both performance in accomplishing goals, plans and performance as a manager. It is the evaluation of present performance and future capabilities.
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Different experts have defined this concept as follows:
“It is the evaluation or appraisal of the relative worth to the company of a man’s services on his job.” (Alford and Beatty)
“Performance appraisal is a systematic periodic and impartial rating of employee’s excellence in matters pertaining to his present job and to his potentialities for a better job.” (Flippo)
“It is the process of evaluating the performance and qualifications of the employees in terms of the requirements of the job for which he is employed, for purposes of administration including placement, selection for promotions, providing financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally.” (Heyel)
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Performance appraisal is a method of acquiring and processing the information needed to improve an individual employee’s performance and accomplishments. – (Douglass)
Newstrom – It is the process of evaluating the performance of employees, sharing that information with them and searching for ways to improve their performance.
A process in which an individual’s performance is scored and feedback is given. A large component in psychology is trying to measure human behaviour. Performance appraisals are often used in the workplace to inform employees on their work progress. Promotions, bonuses and training needs are often based on the information provided by a performance appraisal.
“Performance appraisal is a meeting between workers and their manager to discuss how well they are doing in their work.” (Macmillan Dictionary)
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Process by which a manager or consultant (1) examines and evaluates an employee’s work behaviour by comparing it with present standards, (2) documents the results of the comparison, and (3) uses the results to provide feedback to the employee to show where improvements are needed and why. Performance appraisals are employed to determine who needs what training, and who will be promoted, demoted, retained, or fired.
Some people confuse performance appraisal with merit rating. But both are basically different. In merit rating, employee’s internal merits and qualities are studied like his nature, physical and mental merits and so on; while in performance appraisal, evaluation is made of quantitative factors based on production quantity, quantity of accepted and unaccepted jobs and strata of work, etc.
Thus, in merit rating the stress is on what he is, while in performance appraisal the emphasis is on what he does and what potentiality does he possess.
Performance appraisal is mainly used for:
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(a) As a basis of reward allocation such as salary increments, promotion and other rewards, etc. In performance appraisal systems slow and fast working employees are identified. Under compensation, rewards and recognition plans the employees are given higher pay scales, higher incentives for better performance and appreciation for the work. Sometime the cases of good performers are recommended for further promotion. It leads to development and motivation of employees.
(b) Performance appraisal will point out the weaknesses of employees and will spot the areas where development efforts are needed. The weaknesses in initiatives, leadership quality, problem-solving approach, behaviour, discipline, difficulties faced during the work and competencies for performing the tasks.
The deficiencies can be pinpointed. Performance appraisal is a tool for identification of deficiencies. On the basis of identification the remedial action can be taken to overcome the deficiencies. This way the performance of employees may improve to a good extent.
(c) It can be used for the selection and development programme. It will differentiate satisfactory performers from unsatisfactory ones. The performance appraisal will help the management to perform functions relating to selection, development, salary, promotion, penalties, lay off and retrenchment.
Performance Appraisal – Objectives
Every person differs in his abilities, attitude and aptitudes. There is always some difference in inputs, outputs and quality of outputs when two or more persons are working on the same job. It becomes very difficult to know who is more suitable to the job. Management is putting efforts for proper utilization of men, machines and materials.
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Except manpower other resources are non-living resources. Once they are in use then full utilization is possible. But in case of manpower, when people are employed their full utilization may be possible sometime. The efforts will be to find out the weak element that contributes to the accomplishment of objectives. The need for contribution assessment of every person has been felt.
This is only called performance appraisal. Performance appraisals of employees are necessary to understand each employee’s abilities, competencies and relative merit and worth for the organisation. Performance appraisal rates the employees in terms of their performance. Performance appraisal takes into account the performance of one year, looks critically into the strengths, weaknesses and deficiencies in the performance given.
The focus is on improvement in future performance of the employees. Performance appraisal shows relative worth of an employee. The focus of the performance appraisal is measuring, analyzing and improving the actual performance of the employee and also to find out the potentials of the employees for future assignments.
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It is a powerful tool to calibrate, refine and reward the performance of the employee. It helps to analyse his achievements and evaluate his contribution towards the achievements of the overall organisational goals.
By focusing the attention on performance, performance appraisal goes to the heart of human resource management and reflects the management’s interest in the progress of the employees as well as organisation. It is the process of receiving, recording and critically studying information about the relative importance of employees to the organisation.
It finds out the present achievements, and failures, personal strengths and weaknesses, and suitability for incentives, rewards and recognition, increased pay scale, promotion or further training. Finally it shows the suitability of the person at present job to the organisation.
Performance Appraisal – Purpose
Employee assessment or appraisal is done periodically for fulfilling several purposes as given below:
i. To provide employees with the feedback on their performance for further improvement.
ii. To categorize the employees as high, moderate and low performers.
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iii. To identify the need for employee training.
iv. To decide on the criteria for organizational rewards.
v. To take personnel decisions such as monetary, non-monetary benefits, disciplinary actions, etc.
vi. To facilitate communication and reciprocity between employees and management.
vii. To plan for future requirements of human resources.
viii. To have a good human resource policies and selection techniques.
ix. To enhance employee performance through counselling, coaching and motivation.
Performance Appraisal – Importance: Assessment of Employee Performance, Improvement of Performance, Designing Training & Development and a Few Others
Performance appraisal provides important and useful information relating to employee’s skill, knowledge, ability and overall job performance. This information helps in decision making in areas like promotion, training and development, wage and salary determination and so on.
1. Assessment of Employee Performance:
Performance appraisal helps supervisors to assess the work performance of their subordinates. The strength, weaknesses and potentialities of employees, level of performance are disclosed through performance appraisal.
2. Improvement of Performance:
The performance of employees are continuously scanned and reviewed. This creates a psychological pressure on employees to perform well, as well as motivates the employees. Performance appraisal helps to improve the performance of the employees.
3. Designing Training and Development Programme:
Performance appraisal helps in designing training and development programme for the employees. Training and development programme are designed considering the existing skill, knowledge, capability and performance of the employees as disclosed by performance appraisal. This enables to improve the performance of the work force. Performance appraisal also helps to assess the effectiveness of training and development programme by analysing employee performance before and after training.
4. Determination of Pay:
Often the pay structure of employees is linked to performance of employees and their productivity. Bonus and increment of salary is determined on the basis of performance of employees.
5. Decision Regarding Promotion and Transfer:
Performance appraisal helps in decision making regarding promotion and transfer. Performance appraisal on a continuous basis helps to evaluate the improvement of employee performance, their skill, knowledge, capability so that they can be allotted a new job.
Performance Appraisal – Sources: Manager, Peer Appraisals, Subordinate Appraisal, Self-Appraisal, Customer Appraisal and 360° Appraisal
After choosing a particular appraisal system or a set of systems to assess the performance of employees, it is necessary to decide whom to use as the appraiser. The primary sources are managers, peers, subordinates, self and customers.
1. Manager/Supervisor Appraisal:
Here, performance appraisal is done by an employees’ manager and often reviewed by a manager one level higher.
(i) Most people opine that performance appraisal must be done by the immediate supervisor or manager who is most familiar with the employee’s performance.
(ii) The supervisor is probably best to relate the individual’s performance to objectives of the organizations.
(iii) As the manager/supervisor is responsible for reward (and punishment) decisions, supervisor’s feedback is highly relevant.
(iv) When managers do not have time to fully observe the performance, they can rely on performance records of the employees.
(v) Getting the appraisals reviewed by the supervisor’s supervisor (next higher person), reduces the chances of superficial or biased appraisals.
2. Peer Appraisals:
With many firms going in for self-managing teams, peer appraisal is becoming popular. It is performance appraisal done by fellow employees/colleagues. Employees of equal rank who work together are asked to evaluate each other. It is mainly used when the immediate supervisor is unable to observe the work behaviour of his subordinates directly.
Peers are an excellent source of information in a job where the supervisor does not always observe the employee. Peers have expert knowledge of job requirements and opportunity to observe their colleagues in day-to-day activities.
Advantages:
(i) Co-workers offer more constructive insight to each other so that, as a unit, each will improve.
(ii) The recommendations tend to be more specific regarding job behaviour.
Disadvantages:
(i) There are chances for friendship to bias ratings.
(ii) When evaluations are used for administrative purposes, it is uncomfortable to be both a rater as well as a ratee.
Though peer appraisal is effective, it is not used frequently for several reasons:
(i) Peer appraisals are considered as simply a popularity content.
(ii) Managers are reluctant to give up control over the appraisal of their subordinates.
(iii) Employees receiving low ratings from their colleagues may retaliate.
(iv) Mostly stereotype ratings are used.
It is not advisable to use peer appraisal for administrative decisions such as promotion or bonuses when peers are in competition with one another such as with sales persons. Further, employees must safeguard confidentiality in handing review forms as any breach of confidentiality can create interpersonal rivalries and hostility among fellow workers.
3. Subordinate Appraisal (Upward Feedback):
It is an appraisal of assessing the managers by their own subordinates. It is claimed that subordinates are in a better position than anybody else to assess their manager because they are in frequent touch with them. Subordinates are in a unique position to observe most of performance-related behaviour of managers.
(i) The dimensions which could be ideally assessed are leadership, oral communication, delegation of authority, coordination of team efforts and interest in subordinates. However, the subordinate may not be able to appraise the managers in respect of specific job tasks such as planning and organizing, budgeting, creativity, and analytical ability.
(ii) Because subordinate appraisals give power over their managers, managers will hesitate to approve such appraisals for administrative purposes. However, they may accept these for developmental purposes.
(iii) To avoid potential problems, subordinate appraisals could be submitted anonymously.
(iv) As with peer appraisal, subordinate evaluation could be used for developmental purposes.
4. Self-Appraisal:
Nowadays many firms ask their employees to evaluate themselves on a self-appraisal form. It is done before performance interview.
Merits:
(i) It is beneficial when managers seek to increased employee’s involvement in review process.
(ii) This helps the employees to judge their strengths and weaknesses to discuss about barriers to effective performance.
(iii) This works well when the manager and employee jointly establish future performance goals.
(iv) When used with other methods, self-appraisals can be a valuable source for appraisal information.
The major problem is that employees usually rate themselves higher than their supervisors or peers. Hence, it could be used mostly for developmental purposes rather than administrative purposes such as pay-rise, promotion etc.
5. Customer Appraisal:
In service industry, the supervisors, peers and subordinates do not have the Opportunity to observe employee behaviour. It is only the customers who observe employees’ behaviours directly. Hence, customer appraisal could be the best source of performance information in service industries.
Customer evaluations of employee performance is appropriate when an employee’s job requires direct service to the customer and When the firm is interested in gathering information on customers’ preferences of goods and services. Customer evaluations are useful not only for evaluating the employee but also to suggest changes in other HRM activities.
The limitations are-
(i) customers’ objectives cannot be expected to correspond completely with the organization’s objectives, and
(ii) it is costly and time-consuming.
In addition to the above, some firms use Committee appraisal. It is an extension of peer appraisal. The team or committee usually consists of employee’s immediate supervisor and a 3 or 4 other supervisors. Committee appraisal may reduce problems of bias on the part of individual raters. It also provides a chance to include different facets of an employee’s performance observed by different appraisers.
6. 360° Appraisal:
This is a performance appraisal system which includes self-evaluations as well as evaluations from the supervisors, subordinates, peers and customers.
This is generally done for development rather than for pay raise. The general appraisal process is to collect the appraisals, from all the sources on time and the computerized systems compile all the feedback into individualized reports that go to the raters. The employee concerned may meet with his or her supervisor to develop a self-improvement plan.
Performance Appraisal – Top 4 Roles: Performance Needs of Organisation, Gaining Skills and Knowledge, Manage the Motivation and Immediate Feedback Providing
Performance appraisal systems in any organisation formally analyses, reviews and evaluate performance of an employees in achieving the organisations mandated objectives. Human capital is the most valuable and sustainable competitive asset.
Appreciation of talent by an organisation could be possible if it employ, proactively effective performance management systems integrating both the individuals and the groups. But an organisation’s appreciation of its talent cannot stop with the basic understanding. Individual performance measurement systems are so selected so that it can facilitate team performance.
Role of performance management is to focus on accomplishing certain thing as under:
1. Performance needs of the organisation
2. Guide the development of individuals for skill and knowledge
3. Motivate individuals
4. Provide data about the condition of human capital
Role # 1. Performance Needs of Organisation:
Without knowing as to what needs to be done, it is nearly impossible to develop and motivate individuals, and then channel their performance to support the organisation’s business strategy. So the role of the performance management system is explicitly, identify objectives and the measurement criteria.
Since many knowledge based organisations, do not have bureaucratic control structures and detailed job description, through performance management systems and necessary to avoid confusion about what each employee should do and what constitutes individual and overall effective performance.
Role # 2. Gaining Skills and Knowledge:
The various steps are:
i. Identify existing competencies
ii. Realise the type of performance employees are capable of
iii. Contribution individual workers to talent strategy
iv. Quantum of training required
Skill assessment helps employees understand which skills they need and help managers create a development and reward plan for acquiring those skills.
Role # 3. Manage the Motivation:
It is the most important pre requisite for performance management. The skilled employees tend to perform at high levels and exceed expectations, only if they are properly motivated. High levels of motivation require directly linking success to employee valued rewards.
These motivational awards are of two types – viz. internal and external, achievement and self-esteem. External awards are tangible things employees’ value such as Praise from Manager or a Salary increase.
To realise internal rewards employees need performance feedback. External rewards should be large enough so the employees feel their efforts are worthwhile and helping the organisation to fulfill its mission.
When managers or regional managers set goals, they need to keep in mind the difficulty of the goal is a key determinant of performance when goals are set too low, individuals settle for low levels of performance, conversely, when goals are set too high employees give up, because they do not believe they can succeed or they cheat to give the impression of success. Goals that are achievable but challenging should be the objective as they are the most motivating and produce the highest level of performance.
Role # 4. Immediate Feedback Providing:
Information, from individual’s skills assessments needs to become a matter of record in the organisation. The best way to do this is to have an intranet-based system that profiles each individual is the organisation, including information about their knowledge / competencies / performance goals / development objectives and work histories.
Performance Appraisal – Top 5 Steps Involved in the Process of Performance Appraisal: Establish Job Expectations, Design Appraisal Programme and a Few More Steps
Performance Appraisal Process, each step in the process is crucial and is arranged logically. The process as shown below is somewhat idealized. Many organizations make every effort to approximate the ideal process, resulting in first-rate appraisal systems. Unfortunately, many others fail to consider one or more of the steps and, therefore, have less-effective appraisal system.
Objectives of appraisal as stated above include effecting promotions and transfers, assessing training needs, awarding pay increases, and the like. The emphasis in all these is to correct the problems. These objectives are appropriate as long as the approach in appraisal is individual. Appraisal, in future, would assume systems orientation. In the systems approach, the objectives of appraisal stretch beyond the traditional ones.
In the systems approach, appraisal aims at improving the performance, instead of merely assessing it. Towards this end, appraisal system seeks to evaluate opportunity factors.
Opportunity factors include:
The physical environment such as noise, ventilation and lightings; available resources such as human and computer assistance; and social process such as leadership effectiveness. These opportunity variables arc more important than individual abilities in determining work performance.
1. Establish Job Expectations:
The second step in the appraisal process is to establish job expectations. This includes informing the employee ‘what is expected of him or her on the job’. Normally, a discussion is held with his or her superior to review the major duties contained in the job description. Individuals should not be expected to begin the job until they understand what is expected of them.
2. Design Appraisal Programme:
Designing an appraisal programme poses several questions which need answers.
They are:
i. Formal versus informal appraisal;
ii. Whose performance is to be assessed?
iii. Who are the raters?
iv. What problems arc encountered? How to solve the problems?
v. What should be evaluated?
vi. When to evaluate?
vii. What methods of appraisal are to be used?
3. Formal Versus Informal Appraisal:
The first step in designing an appraisal programme is to decide whether the appraisal should be formal or informal. Formal appraisals usually occur at specified time periods- once or twice a year. Formal appraisals are most often required by the organization for the purpose of employee evaluation. Informal performance appraisal can occur whenever the supervisor feels the need for communication.
For example, if the employee has been consistently meeting or executing standards, and informal appraisal may be in -order to simply recognize this fact. Discussions can take to be ensuring that the discussion in held in private.
Many organizations encourage a mixture of both formal and informal appraisals. The formal appraisal is most often used as primary evaluation. However, the informal appraisal is very helpful for more performance feedback. Informal appraisals should not take the place of formal performance evaluation.
4. Appraisee Performance and Performance Review:
Answering the following questions can look into these two aspects – Whose performance should be rated?
To the question whose performance should be rated; the answer is obvious-employees. When we say employees, is it individuals or teams? Specifically, the rate may be defined as the individual, work group, division, or organization. It is also possible to define the rate at multiple levels. For example, under some conditions, it may be desirable to appraise performance both at the workgroup level for merit pay increases and at the individual level tosses training needs.
Who are Raters?
Raters can be immediate supervisors, specialists from the HR department, subordinates, peers, committees, clients, self-appraisals, or a combination of several. Immediate supervisor is the fit candidate to appraise the performance of his or her subordinates. There are three reasons in support of this choice. No one is more familiar with the subordinate’s performance than his or her superior. Another reason is that the superior has the responsibility of managing a particular unit.
When the task of evaluating a subordinate a given to another person, the superior authority may be undermined seriously. Finally, training and development of subordinates is an important element in every supervisor may be the logical choice to conduct the performance evaluation.
Subordinates can assess the performance of their superiors. The use of this choice may be useful in assessing an employee’s ability to communication, delegate work, allocate resources, disseminate information, resolve intra-personal conflict, and deal with employees on a fair basis. But the problem with subordinate evaluation is that the supervisors tend to become more popular, not effective leadership, but by mere gimmicks.
Peers are in a better position to evaluate certain facts of job performance that the subordinates or supervisors cannot do. Such facts include contribution to workgroup projects, interpersonal effectiveness, communication skills, reliability and initiative. Unfortunately, friendship or animosity may result in distortion of evaluation.
Further, when reward allocation is based on peer evaluation, serious conflicts among co-workers may develop. Finally all peers may join together to rate each other highly
Although clients are seldom used for rating employee performance, nothing prevents and organization from using this source. Clients may be members within the organization who have direct contact with the rare and make use of an output (good and services) this employee provides, Interest, courtesy, dependability and innovativeness are but few of the qualities for which clients can offer rating information. Clients, external to the organization, can also offer similar kinds of information.
Where superiors, peers, subordinates and clients, make appraisal it-is called the 360-degree system of appraisal. First developed at General-Electric, Us in 1992, the system has become popular in our country too. Most of the companies like GB (India), reliance Industries, Crompton Greaves, Godrej soaps, Wipro, Infosys, Thurman and Thomas Cook etc. are using the method with greater benefits.
Many employers use rating committees to evaluate employees. These committees are often composed of the employee’s immediate supervisor and three or four other supervisors who come in contact with the employee. This choice is welcome when an employee, in the course of his or her job, performs a variety of tasks in different environments.
In self-appraisal, the employee himself for herself evaluates his or her own performance. Indian Telephone industries (ITT), had been following the self-appraisal system for executives. Texas Instruments too ask their employees to prepare their own appraisals. On the positive side, it may be stated that in self-appraisal there is an opportunity to participate in evaluation.
What should be Rated?
One of the steps in designing an appraisal programme is to determine the evaluation criteria. It is obvious that the criteria should be related to the job.
The six criteria for assessing performance are:
I. Quality – The degree to which the process or result of carrying out an activity approaches perfection in terms of either conforming to some ideal way of performing the activity, or fulfilling the activity’s intended purpose.
II. Quantity – The amount produced, expressed in monetary terms, number of units, or number of competed activity cycles.
III. Timeliness – The degree to which an activity is completed or a result produced, at the earliest time desirable from the standpoints of both coordinating with the outputs of others and of maximizing the time available for other activities.
IV. Cost of effectiveness – The degree to which the use of the organizations resources e.g. human, monetary, technological and material) is maximized in the sense of getting the highest gain or reduction in loss from each unit or instance of use of a resource.
V. Need for supervision – The degree to which a job performer can carry out a job function without either having to request supervisory assistance or requiring supervisory intervention to prevent an adverse outcome.
VI. Interpersonal impact – The degree to which a performance promotes feeling of self-esteem, goodwill and cooperation among co-workers and subordinates.
These criteria relate to past performance and behavior of an employee. There is also the need for assessing, the potential of an employee for future
5. Timing of Evaluation:
How often should an employee be assessed? The general trend is to evaluate once in three months, or six months, or once in a year. According to a survey conducted in 1997 by Arthur Anderson, 70 per cent of the organizations conduct performance appraisal once a year. Newly hired employees are rated more frequently that the older ones. Frequent assessment is better than phased evaluation.
Feedback in the latter is delayed and the advantages of timely remedial measures by the employee are lost. Frequent evaluation gives constant feedback to the rate, thus enabling him or her to improve performance if there is any deficiency. The performance of trainees and probationers should be evaluated at the end of respective programs.
Performance Appraisal – 8 Main Types of Methods: Ranking Method, Paired Comparison Method, Forced Distribution Method, Grading, Check List and a Few Others
There are many kinds of performance appraisal available. But, the management wants to adopt only one of the types of performance appraisal. The appraisal is done adopting any one of the two approaches. These two approaches are traits and results. The traits approach refers to appraising the employee on the basis of his attitudes. The results approach refers to appraising the employee on the basis of results or his accomplishment of a job.
A brief explanation of the types of performance appraisal is given below:
Type # 1. Ranking Method:
This method is very old and a simple from of performance appraisal. An employee is ranked one against the other in the working group under this method. For example, if there are 10 workers in the working group, the most efficient worker is ranked as number one and the least efficient worker is ranked as number ten. All the workers in the working group are ranked as 1, 2, 3 and so on.
Advantages:
i. Each employee or worker can be compared with the other person.
ii. A small organisation can get maximum benefits through the ranking method.
Disadvantages:
i. A big organisation is not able to get sizeable benefits from the ranking method.
ii. Ranking method does not evaluate the individuality of an employee.
iii. It lacks objectivity in the assessment of employees.
Type # 2. Paired Comparison Method:
This method is a part of ranking method. Paired comparison method has been developed to be used in a big organisation. Each employee is compared with other employees taking only one at a time. The evaluator compares two employees and puts a tick mark against an employee whom he considers a better employee. In the same way, an individual is compared with all other existing employees.
Finally, an employee who gets maximum ticks for being a better employee is considered the best employee. The number of comparison is calculated by a formula i.e., n (n-1) / 2, where N stands for the number of persons to be compared. The following table illustrates the number of persons compared and the number of paired comparisons.
Advantages:
i. This method is suitable for big organisations.
ii. Individual traits are evaluated under this method.
Disadvantages:
i. The understanding of this method is difficult one.
ii. It involves considerable time.
Type # 3. Forced Distribution Method:
A method which forces the rater to distribute the ratings of the overall performance of an employee is known as Forced Distribution Method. Groupwise, rating is done under this method. For example, a group of workers doing the same job would fall into same group as superior, at and above average, below average and poor.
The rater rates 15% of the workers as superior, 35% of the workers as at and above average, 35% of workers as below average and 15% of workers as poor. This method is suitable to large organisation. But the individual traits could not be appraised under this method.
Type # 4. Grading:
Certain categories of abilities or performance of employees are defined well in advance to fall in certain grades under this method. Such grades are very good, good, average, poor and very poor. Here, the individual traits and characteristics are identified.
Type # 5. Check List:
The appraisal of the ability of an employee through getting answers for a number of questions is called the method of check list. These questions are related to the behaviour of an employee. The evaluation is done by a separate department known as personnel department. But, the duty of collection of check list answers is given to a person who is designated as a rater. The rater indicates the answers of an employee against each question by putting a tick mark. There are two columns provided to each question as yes or no.
Type # 6. Forced Choice Method:
A series of groups of statements are prepared positively or negatively under this method. Both these statements describe the characteristics of an employee. But the rater is forced to tick any one of the statements either out of positive statements or out of negative statements. The degree of description of the characteristics of an employee varies from one statement to another.
The following are the positive statements:
i. The employee completes the job in time usually.
ii. The employee has the ability to complete the job and complete the job as and when there is need.
In this way, the negative statements are also prepared. The final rating is done on the basis of all such statements. But, the rater does not know the statements which are for final rating.
Type # 7. Critical Incident Method:
The performance appraisal of an employee is done on the basis of the incidents occurred really to the concerned employee. Some incidents occurred due to the inability of the employee. But, the rating is done on all the events occurred in a particular period.
Some of the events or incidents are given below:
i. Refused to co-operate with other employees.
ii. Unwilling to attend further training.
iii. Got angry over work or with subordinates.
iv. Suggested a change in the method of production.
v. Suggested a procedure to improve the quality of goods.
vi. Suggestion of a method to avoid or minimise wastage, spoilage and scrap.
vii. Refused to obey orders.
viii. Refused to follow clear cut instructions.
Type # 8. Field Review Method:
An employee’s performance is appraised through an interview between the rater and the immediate superior or supervisor of a concerned employee. The rater is attached with the personnel department. The rater asks the supervisors questions about the performance of an employee. The personnel department prepares a detailed report on the basis of this collected information. A copy of this report is placed in the personnel file of the concerned employee after getting approval from the supervisor.
The success of this type of appraisal method is based on the competence of the interviewer.
Performance Appraisal– 7 Major Problems: Leniency, Central Tendency, Rater Effect, Halo Effect, Faulty Assumptions and a Few Others
Performance appraisal is subject to a wide variety of inaccuracies and biases referred to as rating errors. These errors occur in the rater’s observation, judgement and information processing and can seriously affect assessment results.
Problem # 1. Leniency or Severity:
Leniency or severity on the part of the rater makes the assessment subjective. Subjective assessment defeats the very purpose of performance appraisal.
Ratings are lenient for the following reasons:
(i) The rater may feel that anyone under his or her jurisdiction who is rated unfavourably will reflect poorly on his or her own worthiness.
(ii) He may feel that a derogatory rating revealed to the ratee would be detrimental for the relations between the rater and the ratee.
(iii) He may be projecting.
(iv) He may feel it necessary to always approve of others in order to get approval for himself.
Problem # 2. Central Tendency:
This occurs when employees are incorrectly rated near the average or middle of the scale. The attitude of the rater is to play safe. This safe playing attitude stems from certain doubts and anxieties which the raters have while assessing the ratees.
Such doubts are:
(i) Do I know the man well to give him fair assessment of him?
(ii) If I rate him the way I think I should, what will be its influence on his relations with me and on his performance in the future?
(iii) If I rate him the way I think I should, what will be its influence on my relations with other subordinates?
(iv) If I rate him the way I think I should, what will be its influence on his relationship within the group or subordinates?
(v) If I rate him the way I think I should, will I be accused of being partial?
Problem # 3. Rater Effect:
This includes favouritism, stereotyping and hostility. Excessively high or low scores are given only to certain individuals or groups based on the rater’s attitude towards the ratee, not an actual outcome or behaviour. Sex, age, race and friendship biases are examples of this type of errors.
Problem # 4. Halo Effect:
The halo error or effect is a tendency to rate high or low on all factors due to the impression of the high or low rating on specific factors.
Problem # 5. Faulty Assumptions:
Sometimes the immediate superiors adhere to the faulty assumptions while performing the performance appraisal, which affects the rating of the employees.
Problem # 6. Lack of Knowledge of the Appraisers:
Sometimes an employee who appraises his subordinates does not have the full knowledge about the performance appraisal process, which again affects the rating of the employees.
Problem # 7. Employees Losing Trust in their Immediate Superiors:
Employees losing trust in their immediate superiors regarding the performance appraisal because of lack of feedback about the assessment reports leaves the employees in the confusion. It raises misunderstandings between the immediate superiors and the subordinates.
Performance Appraisal – Pre-Requisites for Effective Performance Appraisal
There are certain pre-requisites for making performance appraisal effective.
Important among these are explained below:
Prerequisite # 1. Uniformity in Norms:
In order to ensure effectiveness of a performance appraisal system, it is essential to adopt the same norm or standard in respect of all employees belonging to the same category and working under the same supervision. The periodicity of appraisals should also be uniform for all these employees. The specific yardsticks used for measuring the efficiency and also the categories of ranks in the rating should be uniform and identical.
Prerequisite # 2. Clarity and Objectivity:
An effective performance appraisal should not only adopt uniform standards in measuring the level of traits and specifying the various degrees in the scale, but also ensure that these standards are objectively worked out and are clear and easily understandable. Absence of clarity may inject subjectivity in evaluation. A particular attention has to be paid on defining personal traits and behavioural standards.
Prerequisite # 3. Trained and Competent Appraisers:
In order to make performance appraisal effective, it is also necessary that appraisers are adequately trained and competent for the task. Trained appraisers are in a better position in assessing employees’ competence in an objective and impartial way, and can also gain the confidence of the employees. The training programmes for the appraisers must also be periodic and organised in a planned way.
Prerequisite # 4. Appropriate Method and Tool:
Effectiveness of performance appraisal programme also depends on the appropriateness of the methods and tools used in the appraisal. A particular method may be appropriate for rating one trait, but it may be inappropriate for measuring another.
For example, behavioural anchored rating scale may be appropriate for assessing behavioural traits, but may not be effective in measuring productive efficiency. If needed, a combination of suitable methods may be used to ensure an effective appraisal.
Prerequisite # 5. Useful Communication:
In order to ensure transparency in evaluation and confidence of the appraisee towards the method adopted, it is desirable to have a system of continuing feedback. Periodic feedbacks can provide opportunities to employees to improve. Effective communication, both upwards and downwards, can make the task easier.
Prerequisite # 6. Documentation:
Maintenance of records and documents related to employees’ performance is desirable for keeping each successive appraisal on track. In the absence of such records, the appraisals may become inconsistent, especially when the appraisers change. The use of computers and software can be of considerable help in maintaining relevant records and documents in a systematic manner and for a long period of time.
Performance appraisals generally result in rewarding the high performing employees, providing opportunities for improvement to average performers, and punishing those who do not improve in spite of opportunities made available to them for improvement. Rewards may be in various forms such as enhancement in emoluments, allowances and facilities, promotion, performance-based bonus and similar other benefits.
Poor performances may invite punishments in the forms of stagnation, transfer to a more disagreeable job, demotion and even termination of service in the event of repeated and extremely unsatisfactory performance. There are, however, opportunities before the aggrieved employees to invoke the provisions of labour laws for redressing their grievances resulting from action taken by the employers on the basis of appraisals of employees’ performances.
Performance Appraisal – New Trends and Recent Development
Performance appraisal to performance development and then to performance management- The approach of performance appraisal is changed significantly in recent times. The approach is shifted from controlling to development. Consequently, it is termed as performance analysis and development.
Under this approach, performance of the employee on the job is analysed, weak areas are identified, and developmental activities are taken up to convert weak areas into strong areas. Further, the approach is changed from performance development to performance management.
Under performance management, performance of the employee is continuously monitored and developed in tune with the organizational requirements. Performance management is a process that consolidates goal setting, performance appraisal and performance development into a single common system, the aim of which is to ensure that the employee’s performance is supporting the company’s strategic performance.
Organizations started adopting customized performance management system where separate performance appraisal techniques are designed for each employees, separately based on employee skills, behaviour and his job needs. Nowadays, computer based performance management software is used for implementing the entire performance management process. However, some of the problems of performance appraisal (like personal bias) can be removed by appraising performance through computers.
Performance appraisal has been an important area for HR specialists since ages. It has been argued by many HR specialists that traditional performance appraisal practices that are given in theory are far from the practical implementation. The gamut of HR activities is changing altogether, and so are the performance appraisal methods. These methods now focus on feasibility and practicality applicable in the current business scenario, instead of implementing standard practices that were followed earlier.
The following are the new trends in performance appraisal:
i. 720-Degree Appraisal – Refers to a more advanced version of multi-appraiser appraisal, and is often defined as 360-degree appraisal process repeated. The difference between 360-degree and 720-degree appraisal is that 720-degree feedback adds customers and supplies to the list; whereas 360-degree does not call for the feedback from customers and supplies.
ii. Behavioral Observational Scale – Refers to a qualitative method of measuring performance. It includes an employee’s behaviour on-the-job and evaluates the same using critical incident methods. A manager needs to be hired for the specific job of evaluating the behavior of employees.