Performance Appraisal and Job Evaluation

 Nature

A performance appraisal is a systematic and objective method of judging the quality of an

employee in performing his job and a part of guiding and managing career development. It is
the process to obtain, analyze, and record the information about the relative worth of an
employee to the organization. Performance appraisal is an analysis of an employee's recent
successes and failures, personal strengths and weaknesses, and his/her suitability for
promotion or further training.

It is also the judgment of an employee's performance in a job based on considerations other

than productivity alone.

Performance appraisal is done periodically, but on a continuous basis. It is a part of a larger

performance management system and includes both managerial and non- managerial
employees in its scope.

 Objectives of Performance Appraisal

(i) To provide employees feedback on their performance.

(ii) Identify employee training needs.

(iii) Document criteria used to allocate organizational rewards.

(iv) A basis for decisions relating to salary increases, promotions, disciplinary actions,
bonuses, etc.

(v) Provide the opportunity for organisational diagnosis and development.

(vi) Facilitate communication between employee and employer.

(vii) Validate selection techniques and human resource policies to meet regulatory
requirements.

(viii) To improve performance through counseling, coaching and development.

(ix) To motivate employees through recognition and support.

  Forced Distribution Method

Forced distribution method is one of the most widely used and also the most criticized
method of performance appraisal. This is a rating system that is used all over the world by
companies to evaluate their workforce. It requires the supervisor to assess each employee
based on certain pre-determined parameters, and thereafter rank them into 3 or more
categories. Most commonly, the employees fall into excellent, good or poor categories,
which can be expanded by the organization to a 5-point scale as well. It was introduced by
General Electric in 1980s, during the era of Jack Welch who was infamous for cutting down
GE’s workforce regularly by firing low performers.

 Importance and Issues with Forced Distribution Method

The forced distribution method is also called bell-curve rating or stacked ranking. This
method is preferred by many employers as it creates a visible differentiation between
performances of each employee in the organization. This method of performance
management typically chooses the normal distribution curve to represent the performance
distribution. This ensures that a small fraction of the entire workforce is to be placed at the
extremes, which is the outstanding performers and poor performers. A relatively large
section of the workforce fall in the middle of the distribution. This is illustrated in the image
below.

There are several issues associated with this method of performance appraisal. Firstly, the
manager must clearly understand the parameters on which employees have to be evaluated.
These parameters must be defined as objectively as possible to avoid unambiguity. Though
this method is known for cultivating a culture of high performance in the organization and is
also simple and cost-effective to implement, it is criticized because of various reasons.
Often, the employees feel that the evaluation is not fair and hence it can lead to unhealthy
competition, rivalry amongst employees and loss of morale of the workforce.

Example of Forced Distribution Method

For example, a manager of XYZ corporation evaluating 30 employees can be instructed to

put 5 employees each in the ‘outstanding’ and the ‘poor’ category, whereas 20 will fall in
the range of average performers. In this manner, the ratee (manager) has forced the
distribution of level of performance of each of the 30 employees into one of the three
categories.

 Human Resource Accounting(HRA)

Human Resource Accounting (HRA) is a branch of accounting that involves the identification,
measurement, and reporting of the value of human resources as an organizational asset. It is
based on the premise that human resources are valuable assets of an organization that
contribute to its growth and success. It is a method used by organizations to measure the
value of their human resources in financial terms. It involves quantifying the cost and value
of the employees, their skills, knowledge, experience, and abilities, and presenting it in the
organization’s financial statements. HRA considers human resources as an investment that
can generate future benefits for the organization. It uses various techniques to measure the
value of human resources, such as the cost of recruitment and training, the value of
experience and expertise, and the potential for future growth.

 Investment analysis: HRA can be used to analyze the return on investment of human
resource management practices, such as training and development programs. This
can help organizations to determine the effectiveness of these practices and to make
decisions about where to allocate resources.

 Decision-making: HRA can provide valuable information to support decision-

making about human resource management practices, such as determining the
optimal level of staffing, identifying areas for improvement in employee
performance, and assessing the impact of changes in compensation and benefits.

 Reporting: HRA involves creating reports that summarize the value of human
resources and the costs associated with managing them. These reports can be used
to inform decision-making by managers and executives.

 Performance evaluation: HRA can be used to evaluate the performance of

employees and to determine the impact of human resource management practices
on employee productivity and performance. This can help organizations to identify
areas where they can improve employee performance and develop strategies to
enhance productivity.
  Strategic planning: HRA can be used to support strategic planning by providing
information about the organization’s human resource capabilities and constraints.
This can help organizations to identify potential gaps in their human resource
capacity and to develop strategies to address these gaps.

Risk management: HRA can be used to identify potential risks associated with human
resource management practices, such as high turnover rates or a lack of skilled workers.
This can help organizations to develop strategies to mitigate these risks and ensure the
availability of the necessary human resources to achieve organizational goals.

Objectives of Human Resource Accounting (HRA)

The main objectives of human resource accounting (HRA) are as follows:

 To assign a monetary value to an organization’s human resources: It helps

organizations estimate the value of their human resources by quantifying the cost
of recruiting, training and retaining employees, as well as the economic value of
their skills, knowledge, and experience. This information can help organizations to
better allocate resources and to make informed decisions about HR investments.

 To track the costs associated with managing human resources: It can help
organizations track the costs associated with managing their human resources, such
as recruitment costs, training expenses, and salaries and benefits. By analyzing this
information, organizations can identify areas where they can reduce costs and
increase efficiency.

 To evaluate the effectiveness of human resource management practices: HRA

provides a framework for evaluating the effectiveness of HR practices such as
training and development programs, employee retention strategies, and
compensation and benefits policies. By analyzing HR data, organizations can
identify areas where they can improve their HR practices and better support
employee productivity and performance.

 To support decision-making: HRA provides valuable information to support

decision-making about HR management practices, such as determining the optimal
 level of staffing, identifying areas for improvement in employee performance, and
assessing the impact of changes in compensation and benefits.

 To comply with legal and regulatory requirements: HRA can help organizations to
comply with legal and regulatory requirements related to HR management, such as
equal employment opportunity regulations, minimum wage laws, and workplace
safety regulations. By tracking and reporting on compliance-related data, HRA can
help organizations to avoid penalties and legal disputes.

In conclusion, human resource accounting (HRA) is a technique that assigns a monetary

value to an organization’s human resources and tracks the costs associated with managing
them.

360 Degree Feedback

360 degree feedback is a system where an employee receives feedback from all the people
around him related to business including the managers and the subordinates. In 360 degree
feedback, a feedback about the employee is received from everyone with whom he has
interacted with in the course of executing his job responsibilities. 360 degree feedback is
obtained from peers, teammates, subordinates, direct reports and even external parties like
suppliers, partners and vendors. It is also known as 360 Degree Assessment.

360 Degree Feedback is a type of feedback which is done by managers to understand the
performance of an employee, and used in the appraisal process. This feedback is a part of
the organizational feedback which is intended to improve the quality of employees in the
workforce.

Importance of 360 degree feedback

It is essential for an organization to evaluate the performance of its employees. If an

employee is under performing, they must be warned and if they are doing well, they must be
rewarded. This can be done by understanding their performances based on a feedback. This
is why 360 degree feedback is important to an organization.
This feedback may be used as an input to the performance appraisal process. It may also be
used to identify competency gaps to administer relevant training to the employee. Such
feedback can help in training & development programs of employees, and help in their
career development. Important employee skills like leadership, time management, team
management, communication management etc. can be developed. Similarly, a feedback
from vendors & suppliers, known as 540 degree feedback is also used by companies.

This 360 degree feedback/assessment is also known as a multi-rater or multi source

feedback as feedback about the employee is gathered from multiple sources and not just the
reporting manager as in the case of a traditional performance appraisal system. A good and
constructive feedback helps in employee motivation as well as helping in hearing out the
employee voice.

The above image shows the 360 degree feedback of an employee based on reviews from
peers, subordinates, suppliers, customers, managers & other team members.

 Advantages of 360 degree feedback

There are several advantages of 360 degree feedback. Some of the benefits of such a
feedback system are as below

1. It helps in evaluating the overall performance of an employee

2. 360 degree feedback gives a complete view of the work the employee has done, and just
based on some supervisors review

3. This feedback shows all the competencies of an employee across various domains and
verticals of business

4. Based on 360 degree feedback, new training programs can help develop the employee
even more

5. The employee can work on his or her shortcomings based on the feedback given by
everyone

 Disadvantages of 360 degree feedback

There are certain drawbacks of this type of a feedback system. Some disadvantages of 360
degree feedback are:

1. Favoritism can affect the feedback of certain employees who otherwise must be working
well

2. 360 degree feedback mostly gives qualitative feedback and might overlook the
quantitative performance of an employee

3. Unfair feedback from some people may lead to an ambiguous ratings of the employee's
performance.

 Example of 360 degree Feedback

Let us imagine an organization hierarchy and sales department. Sales department hierarchy
would be made up of Sales president, sales regional heads, sales managers and sales
representatives. In 360 degree assessment of Sales managers, not only the regional heads
would be giving feedback during appraisal but feedback would also be sought from the sales
representatives who report to the sales manager. Similarly for assessment of regional heads,
sales president as well as sales managers would provide feedback.