Chapter 9: Performance Management and Appraisal

Question 1: Define performance management and discuss how it

differs from performance appraisal.
 Define performance management
Performance management is a corporate management tool that helps managers
monitor and evaluate employees' work. Performance management's goal is to
create an environment where people can perform to the best of their abilities to
produce the highest-quality work most efficiently and effectively.
A formal performance-management program helps managers and employees see
eye-to-eye about expectations, goals, and career progress, including how
individuals' work aligns with the company's overall vision. Generally speaking,
performance management views individuals in the context of the broader
workplace system. In theory, you seek the absolute performance standard,
though that is considered unattainable.
 Discuss how it differs from performance appraisal
- Performance management: Performance Management is a continuous
process that aims at planning, monitoring and evaluating the objectives of
an employee and his total contribution to the organization. The basic
purpose of performance management is to encourage and improve
employee’s efficiency and effectiveness.
- In this process, both the employees and the managers participate in
setting the objectives, assessing the performance or progress, providing
training and feedback to the employees at regular intervals for
improvement, implementing development programs for employees and
rewarding them for their achievements.
Performance appraisal: 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.
 The following are the major differences between performance
appraisal and performance management:
1. An organized way of evaluating the performance and potential of employees
for their future growth and development is known as Performance 
Appraisal. The complete process of managing the human resources of the
organization is known as Performance Management.
2. Performance Appraisal is a system while Performance Management is a
process.
3. Performance appraisal is inflexible, but performance management is flexible.
4. Performance Appraisal is an operational tool to improve the efficiency of
employees. However, performance management is a strategic tool.
5. Performance Appraisal is conducted by a human resource department of the
organization, whereas managers are held responsible for
performance management.
6. In performance appraisal, corrections are made retrospectively. In contrast to
performance management is forward looking.
7. Performance Appraisal has an individualistic approach which is just opposite
in the case of Performance Management.
8. Performance Appraisal is carried on eventually, but Performance
Management is an ongoing process.

Question 2: Define Performance appraisal process

Step 1: Establishing performance standards

The first step in the process of performance appraisal is the setting up of the
standards which will be used to as the base to compare the actual performance
of the employees. This step requires setting the criteria to judge the performance
of the employees as successful or unsuccessful and the degrees of their
contribution to the organizational goals and objectives. The standards set should
be clear, easily understandable and in measurable terms. In case the
performance of the employee cannot be measured, great care should be taken to
describe the standards.

Step 2: Communicating the standards

Once set, it is the responsibility of the management to communicate the
standards to all the employees of the organization. The employees should be
informed and the standards should be clearly explained to the employees. This
will help them to understand their roles and to know what exactly is expected
from them. The standards should also be communicated to the appraisers or the
evaluators and if required, the standards can also be modified at this stage itself
according to the relevant feedback from the employees or the evaluators.

Step 3: Measuring the actual performance

The most difficult part of the Performance appraisal process is measuring the
actual performance of the employees that is the work done by the employees
during the specified period of time. It is a continuous process which involves
monitoring the performance throughout the year. This stage requires the careful
selection of the appropriate techniques of measurement, taking care that
personal bias does not affect the outcome of the process and providing
assistance rather than interfering in an employees work.

Step 4: Comparing the actual performance with desired performance

The actual performance is compared with the desired or the standard
performance. The comparison tells the deviations in the performance of the
employees from the standards set. The result
can show the actual performance being more than the desired performance or,
the actual performance being less than the desired performance depicting a
negative deviation in the organizational performance. It includes recalling,
evaluating and analysis of data related to the employees’ performance.

Step 5: Discussing results ( Feedbacks)

The result of the appraisal is communicated and discussed with the employees
on e-to-one basis. The focus of this discussion is on communication and
listening. The results, the problems and the possible solutions are discussed with
the aim of problem solving and reaching consensus. The feedback should be
given with a positive attitude as this can have an effect on the employees’ future
performance. Performance appraisal feedback by managers should be in such
way helpful to correct mistakes done by the employees and help them to
motivate for better performance but not to demotivate. Performance feedback
task should be handled very carefully as it may leads to emotional outburst if it
is not handing properly. Sometimes employees should be prepared before
giving them feedback as it may be received positively or negatively depending
upon the nature and attitude of employees.

A research conducted by TJinsite, underlined that in an effective organisation,

assignments and projects are monitored continually. According to 46% of
surveyed organisations, ongoing monitoring - periodic reviews and managerial
feedback - provides the opportunity to check how well employees are meeting
pre-determined standards and to make changes in unrealistic or problematic
standards.