UNIT 6 PERFORMANCE APPRAISALYR3
PERFORMANCE MANAGEMENT
Performance Appraisal is the process of assessing the performance of an individual, based on
pre-determined standards.
Performance Appraisal can also be defined as an assessment of employees by the manager, in
which he/she evaluates the overall contribution made by the employee to the organization. It is a
systematic and logical review, conducted by the organization annually to judge his potential in
performing a task. It helps to analyze the skills and abilities of an employee for their future
growth that increases the productivity of employees. It helps to identify, the employee
who performs their task well and those who are not, along with the reasons for the same (Surbhi
2015).
Performance Management is a process that commences with setting goals and performance
outcomes for the individual. It includes personal development planning, periodical reviews,
talent management, ongoing performance coaching and the final performance review. As such,
there should not be any surprises during the year-end performance appraisal or review.
Difference between Performance Appraisal and Performance Management
BASIS FOR PERFORMANCE
PERFORMANCE APPRAISAL
COMPARISON MANAGEMENT
Meaning Performance Appraisal, means the analysis of an Performance Management is the
employee's performance and their caliber for management of human resources in
future growth and development. an organization.
What is it? It is a system. It is a process.
Nature Rigid Supple
Type of tool Operational Tool Strategic Tool
Owned by Human Resource Department Managers
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BASIS FOR PERFORMANCE
PERFORMANCE APPRAISAL
COMPARISON MANAGEMENT
Conducted Annually Continuously
Approach Individualistic Holistic
Focused on Quantitative Aspects Qualitative Aspects
Corrections Retrospective Prospective
Performance Appraisal Process
The steps include:
1. Defining the Performance
Performance standards should not arbitrary. These standards are necessary with each job
position, because the performance standards are used to fulfill the mission and vision of the
company. Performance standards are formed through the use of job descriptions, employee
handbooks and operational manuals. Standards are subject to adjustment/change, based on
changes in business needs.
Performance standards include everything from attendance to sale goals. Managers must set a
company culture of expectation fulfillment that is consistent for everyone. Giving some people a
pass on meeting standards creates problems with team morale and potential legal issues when
firing employees. When employees know the predetermined standards, then they are in a better
position to perform as relation to same standards.
2. Appraising and giving Feedback
In this stage, the actual performance of the employee is measured on the basis of
information available from various sources such as personal observation, statistical
reports, oral reports, and written reports. Here, the appraiser uses several methods to
assess performance. For example, in a factory, the appraiser(s) can observe how an
employee actually makes a product among other elements of assessment including:
punctuality, deportment, attendance among others.
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Performance appraisals should be reviewed with employees in order to be effective. It is
important to sit down with each employee to review the standard expectations and provide
feedback about what has been done well and what areas need improvement. That is,
communicate strengths and weaknesses identified from the appraisal process with each
employee. Ensure all feedback is written in objective terms and speak to employees in a
professional and positive manner. Use performance review meetings to not only give employees
feedback but also to gather feedback from employees about personal performance, sales goals,
professional goals and feedback on company protocol.
Importance of Performance Appraisals
Performance appraisals provide the following:
1. 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.
2. 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 appraisal.
3 Employees Development: The systematic procedure of performance appraisal helps the
supervisors to frame training policies and programmes. It helps to analyse strengths and
weaknesses of employees so that new jobs can be designed for efficient employees. It also helps
in framing future development programmes.
4 Improve Performance
Employees have an opportunity to improve areas after an honest assessment of their work. When
a supervisor or manager explains the areas the employee can improve, the worker can make an
effort to improve before the next performance review. A business may use a performance
appraisal as an opportunity to learn ways the company can improve as well. Employee
suggestions may be encouraged during a performance evaluation.
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5. Using appraisals to measure and reward performance
The first and most obvious purpose of employee appraisals is to measure employees’
performance. Your organisation might need to do this for several reasons:
● To make sure employees are working to the required standard
● To gauge which employees are performing the best and therefore eligible for bonuses,
pay rises and other rewards
● To address performance issues where necessary
6. Track strengths and weaknesses
No one person determines an organizations success. Different workers bring their experience
and strengths to the table, allowing projects to succeed with minimal delays. Identifying the
right candidates for the right teams is a crucial part of successful management. The best way to
ensure the right workers come together is to track individual strength and weaknesses.
Consistent performance appraisals make that information easily accessible when it is time to
hand out new assignments.
Uses of Performance Appraisals
Perform
Assess
Review
plan
develop
Performance Appraisal Methods
✔ 360-Degree Feedback
360-degree feedback in the performance appraisal process refers to feedback on an employee's
performance being provided by the manager, different people or departments an employee
interacts with (peer evaluation), external customers, and the employee himself. This type of
feedback includes employee-generated feedback on management performance (also known as
upward appraisals). As a company grows in size, a small business owner should consider using
360-degree feedback to appraise employees. Communication in a business of ten people varies
wildly from that of a company of 100 persons and 360-degree feedback ensures that an
employee's performance is observed by those who work most closely with him. Small business
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owners or managers can either include the feedback in the performance review or choose to
provide it informally for development purposes.
✔ Checklist:
With this method, checklist of statements of traits of employee in the form of Yes or No based
questions is prepared. If the rater is of the opinion that the employee possesses a specific listed
trait, he checks the item; otherwise, he leaves the item blank. Here the rater only does the
reporting or checking and the HR department does the actual evaluation. Although it does not
allow detailed analysis of the performance.
Yes No
Gives complete attention to detail
Has complete knowledge of the product
Works well with the team
Takes initiative
Has creative approach to solving problems
✔ Ranking Appraisal:
With this method, the manager compares an employee to other similar employees, rather than to
a standard measurement for the purpose of assessing their worth. The employees are ranked from
the highest to the lowest or from the best to the worst. The problem here is that it does not tell
that how much better or worse one is than another. Also it cannot be used for large number of
employees.
Attention to detail
1 2 3 4 5 6 7 8 9 10
Poor Average Excellent
Initiative
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1 2 3 4 5 6 7 8 9 10
Poor Average Excellent
Knowledge
1 2 3 4 5 6 7 8 9 10
Poor Average Excellent
✔ Critical Incidents:
In this method, the manager prepares a list of statements of very effective and/or effective
behaviour of an employee. These critical incidents/events represent the outstanding or poor
behaviour of workers on the job. The manager maintains logs on each employee, whereby he/she
periodically records critical incidents of the workers behaviour. For example:
July 20 – The sales clerk patiently attended to the customers complaint. He is polite, prompt,
enthusiastic in solving the customers’ problem.
On the other hand the bad critical incident may appear as under:
July 20 – The sales assistant stayed 45 minutes over on his break during the busiest part of the
day. He failed to answer the store manager’s call thrice. He is lazy, negligent, stubborn and
uninterested in work.
At the end of the rating period, these recorded critical incidents are used in the evaluation of the
workers’ performance. It provides an objective basis for conducting a thorough discussion of an
employee’s performance.
Although this method avoids recency bias, there is a tendency for managers to focus more on the
negative incidents than otherwise.
✔ Management By Objectives - MBOs
This method of performance appraisal is results-oriented/based. That is, they seek to measure
employee performance by examining the extent to which predetermined work objectives have
been met. Usually the objectives are established jointly by the supervisor and subordinate. Once
an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills
needed to achieve the objective. Typically they do not rely on others to locate and specify their
strengths and weaknesses. They are expected to monitor their own development and progress.
The MBO method concentrates on actual outcomes
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What makes MBOs efficient is the ability to set SMART Goals i.e. set goals that are Specific,
Measurable, Actionable, Relevant and Time-bound.
✔ Rating Scales Method
This is a commonly used method for assessing the performance of the employees and a
well-known traditional method of performance appraisal of employees. Several organizations in
India and the US IT companies like Dell Corporation are using this method for evaluating the
employees and subsequently take decisions on concerned employee.
Depending upon the job of employee under this method of appraisal traits like attitude,
performance, regularity, accountability and sincerity etc, are rated with scale from 1 to 10. 1
indicates negative feedback and 10 indicates positive feedback as shown below.
Attitude of employee towards his superiors, colleagues and customers
1 2 3 4 5 6 7 8 9 10
Extremely Excellent
poor
Regularity in the job
1 2 3 4 5 6 7 8 9 10
Extremely outstanding
poor
Under this method of performance appraisal, employee may be assessed by his superiors,
colleagues, subordinates or sometimes by his customers which all depends on nature of the
company or job which is added where the employee. Appraiser is a person who appraises
employee will give rating for every trait given by marking or choosing number basing on his
observation and satisfaction. ultimately all numbers chosen or marked will be added to determine
highest score gained by employee. Employee who scored more points will be treated as top
performer following descending scored employees will be treated as low performer and the least
scored employee will be treated as non-performers
Performance Appraisal Challenges and Solutions
1. Appraiser Bias
Even though you're the boss, you are still human and subject to personal biases. You can also be
swayed by an employee's recent performance while overlooking actions that may have taken
place earlier in the appraisal period. You can overcome bias by making notes of employee
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actions throughout the appraisal period so that you can refer to them when preparing your
evaluation.
Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait influencing
the evaluator’s rating for all other traits) etc. may creep in the appraisal process. Therefore the
rater should exercise objectivity and fairness in evaluating and rating the performance of the
employees.
. Halo Effect
The Problem: A manager or supervisor allows a general favorable impression of an employee to
influence his or her judgment on each separate factor in the performance appraisal process.
The Solution: The rater should consider each factor independently of all other factors, rather than
rating the employee at the same level on all (or most) factors in an appraisal. No employee’s
behavior can be the same on the variety of skills that the rating scales measure
2. 2. Recency Effect
The Problem: A staff member’s recent outstanding contribution or untimely mistake just
prior to a performance review colors the manager’s perception of the employee’s
performance for the entire appraisal period. (A similar pitfall, the Unforgettable Effect,
occurs when an employee does something so extraordinary, either positively or
negatively, that its impressions last for a long time, to the advantage or disadvantage of
the employee.)
The Solution: An alert manager compensates for lack of perspective by careful
documentation.
3. Infrequent feedback – if the primary goal of the process is to identify and resolve
performance issues, executing the process annually is silly. A quality assessment/control
program anywhere else in the business would operate in real time. At the very minimum,
formal feedback needs to be given quarterly, like the General Electric GE process.
4. Don’t assess actual performance — most of the assessment that managers complete
focuses on “the person,” including characterizations of their personal “traits” (i.e.
commitment), knowledge (i.e. technical knowledge) or behaviors (i.e. attendance). While
these factors may contribute to performance, they are not measures of actual output. If
you want to assess the person, call it “person appraisal.” Performance is output quality,
volume, dollar value, and responsiveness.
5. Disconnected from rewards — in too many organizations, getting a merit raise, bonus,
or promotion is completely disconnected from an employee’s performance appraisal
scores. When there is a weak link, employees and managers are not likely to take the
process seriously.
6. Managers are not trained — in most organizations, managers are not trained on how to
assess and give honest feedback. If the process includes a career development
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component, it is even more likely that managers will not know how to enhance the career
path of their employees.
Outcome of performance appraisals
✔ Training
An employee’s competency gaps/weaknesses can be identified and areas of improvement in the
performance can be suggested. Managers can take the necessary steps to help the employees
improve on those areas by providing the necessary training requirements. This can be a very
valuable input to the training department, who can plan their training calendar based on that.
✔ Leadership Development and Succession Planning
Performance appraisal can provide an indication of employees with leadership potential or
leadership development needs. In both cases, the manager and HR department then can develop
programs and interventions to either offer employees an opportunity to exercise their leadership
competencies or build skills. Performance appraisal can serve as an input to succession planning
by identifying employees with specific competencies that the organization knows it will need in
the future due to turnover and retirement; it can highlight external factors affecting the need for
new skills.
To maximize the use of performance appraisals in this manner, it is important that the appraisals
be standardized and that appraisal results be reviewed, assessed and analyzed to identify
competencies and development needs across all departments.
✔ Provides Legal, Ethical Evidence
Employee performance evaluation provides legal, ethical, and visible evidence that employees
were actively involved in understanding the requirements of their jobs and their performance.
The accompanying goal setting, performance feedback, and documentation ensure that
employees understand their required outputs. The goal of employee performance evaluation is to
create accurate appraisal documentation to protect both the employee and the employer.
✔ Career Development
The goals of the best employee performance evaluations also include employee development and
organizational improvement. The employee performance evaluation helps employees accomplish
both personal development and organizational goals. The act of writing down the goals takes the
employee one step closer to accomplishing them.
Since goals, deliverables, and measurements are negotiated in an effective employee
performance evaluation, the employee and the supervisor are committed to achieving them. The
written personal development goals are a commitment from the organization to assist the
employee to grow in his or her career.
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