Performance Appraisal

AIMS
 What is Performance
Management

Performance management is the process of creating a

work environment or setting in which people are
enabled to perform to the best of their abilities.
Performance management is a whole work system that
begins when a job is defined as needed. It ends when an
employee leaves the organization.
 Performance Management System
(PMS)
A Performance Management System (PMS) includes the
following actions:
• Develop clear job descriptions (JDs).
• Select appropriate people with an appropriate selection process.
• Negotiate requirements and accomplishment-based performance
standards, outcomes, and measures.
• Provide effective orientation, education, and training.
• Provide on-going coaching and feedback.
• Conduct quarterly performance development discussions.
• Design effective compensation and recognition systems that
reward people for their contributions.
• Provide promotional/career development opportunities for staff.
• Assist with exit interviews to understand WHY valued employees
leave the organization.
Defining Performance Appraisal

Performance appraisal is the formal, structured

system of measuring & evaluating an employee’s
job related behaviors & outcomes to discover how
& why the employee is presently performing on
the job & how the employee can perform more
effectively in the future so that the employee as
well as the organization can mutually benefit.
Features of Performance Appraisal

 It is a systematic process, which aims to evaluate performance

of the employees on an objective & judgmental basis.
 It provides an objective description of an employee’s job’s
relevant strengths & weaknesses.
 It aims to find out how well the employee is performing the job
& tries to establish a plan for further improvement.
 The appraisal period is carried out periodically according to a
definite plan.
 It can be formal or informal. The informal evaluation is likely to
be more subjective & influenced by personal factors.
 Objectives of Performance
Appraisal
 To effect promotions based on competence & performance
 To confirm services of probationary employees upon their
completing the probationary period satisfactorily
 To assess the training & development needs of employees.
 To generate adequate feedback & guidance from the immediate
superior to an employee working under him.
 To decide upon a pay raise where regular pay scales have not
been fixed.
 To provide inputs to system of rewards (comprising salary
increments, transfers, promotions, demotions or terminations) &
salary administration.
 Objectives of Performance
Appraisal
 To let the employees know where they stand insofar as their
performance is concerned & to assist them with constructive
criticism & guidance for the purpose of their development.
 To improve communication by providing a format for dialogue
between the superior & the subordinate, and improves
understanding of personal goals & concerns.
 It can be used to determine whether HR programs such as
selection, training and transfers have been effective or not.
 To generate significant, relevant, free & valid information about
the employees.
Multiple purposes of Performance
Assessment

General Applications Specific Purpose

Developmental uses Identification of individual needs

Performance feedback
Determining transfer & job assignments
Identification of individual strengths &
developmental needs

Administrative Salary
Uses/Decisions Promotion
Retention or termination
Recognition of individual performance
Lay-offs
Identification of poor performance
Multiple purposes of Performance
Assessment

General Applications Specific Purpose

Organizational HR planning
Maintenance/Objectiv Determining organization training needs
es Evaluation of organizational goal
achievement
Information for goal identification
Evaluation of HR systems
Reinforcement of organizational
development needs

Documentation Criteria for validation Research

Documentation for HR decisions
Helping to meet legal requirements
 Planning the Appraisal
A meaningful performance appraisal is a two-way process that
benefits both the employees & the organization as a whole.
The planning appraisal strategy has to be done:
a. Before the appraisal:
 Establish key task areas & performance goals
 Set performance goals
 Get the facts
 Schedule each appraisal interview well in advance
b. During the appraisal:
 Encourage two-way communication
 Discuss & agree on performance goals for the future
 To think about how one can assist the employee to achieve
more at work.
 Record notes of the interview
 End the interview on an upbeat note
c. After the appraisal:
 Prepare a formal record of the interview
 Monitor performance
Performance Appraisal Process

Objectives of
Objectives of
Performance Appraisal
Performance Appraisal

Establish Job
Establish Job
Expectations
Expectations
Design the appraisal
Design the appraisal
program Performanc
program
e feedback
Appraise Performances
Appraise Performances

Performance Interviews
Performance Interviews

Use appraisal data for

Use appraisal data for
appropriate purposes
appropriate purposes
 Performance Appraisal Methods
Performance
Performance
appraisal methods
appraisal methods

PastOriented
OrientedMethods:
Methods: Future Oriented Methods:
Past Future Oriented Methods:
Management By Objectives
Management By Objectives
(MBO)
Checklists
Checklists (MBO)
360-dgree appraisal
360-dgree
 Ratingscales
scales appraisal
Rating Psychological appraisals
Psychological appraisals
Forced
Forcedchoice
choiceMethod
Method Assessment centers
Assessment centers
Forced
Forceddistribution
distributionMethod
Method
Critical
CriticalIncident
IncidentMethod
Method
 Behaviorallyanchored
Behaviorally anchoredScales
Scales
(BARS)
(BARS)
Field
FieldReview
Reviewmethod
method
Performance
PerformanceTestsTests&&
Observations
Observations
Annual
AnnualConfidential
Confidentialreports
reports
 EssayMethod
Essay Method
Cost
Costaccounting
accountingapproach
approach
Comparative
ComparativeEvaluation
EvaluationApproach
Approach
Past-Oriented Methods

Checklist Method: Under this method a checklist of

statements on the traits of the employee & his or her job is
prepared in two columns namely; “yes” column and a “no”
column. When points are allotted to the checklist, the
technique is known as a Weighted Checklist.

Rating Scales: This is the simplest & the most popular

technique for appraising employee performance. The typical
rating scale system consists of several numerical scales, each
representing a job-related performance criterion such as
dependability, initiative, output, attendance, attitude,
cooperation & so on. Each scale ranges from excellent to poor.
The rater checks the appropriate performance level on each
criterion, then computes the employee’s total score.
Past-Oriented Methods
Forced Choice Method: In this method, the rater is given a
series of statements about the employees. These statements
are arranged in blocks of two or more, and the rater indicates
which statement is most or least descriptive of the employee.

This approach is known as forced choice method because the

rater is forced to select statements which are readymade. The
advantage of this method is the absence of personal bias in
rating. The disadvantage is that the statements may not be
properly framed & may not also precisely be the descriptive of
the ratee’s traits.

Forced Distribution Method: One of the errors in rating is

leniency or the clustering of a large number of employees
around a high point on a rating scale. The forced distribution
method seeks to overcome the problem by compelling the
rater to distribute the ratees on all points on the rating scale.
Past-Oriented Methods
Critical Incident Method: This approach focuses on certain
critical behaviors of an employee that makes the difference
between effective and non-effective performance of a job. These
events are generally noted or recorded by the superiors. One of
the major advantages of this method is that the evaluation is
based on actual job behavior.

Field review Method: This is an appraisal by someone outside

the assessee’s own department, usually someone from the
corporate office or the HR department. The outsider reviews
employee records & holds interviews with the ratee his or her
superior.

Performance Tests & Observations: With a limited number

of jobs, employee assessment may be based upon a test of
knowledge or skills. The test may be of the paper & pencil
variety or an actual demonstration of skill.
• Annual Confidential Report: It is
mostly used in Govt. organizations. It
is a descriptive report prepared,
generally at the end of every year,
by the employee’s immediate
superior.
Behaviorally Anchored Rating Scales (BARS): Behaviorally
Anchored rating Scales are also known as Behavioral Expectations
Scale. These are rating scales whose scale points are determined by
statements of effective & ineffective behaviors. They are said to be
behaviorally anchored in that the scales represent a range of
descriptive statements of behaviors varying from the least to the
most effective.

Collect Critical Identify Reclassificatio

Incidents Performance n of Incidents
Criterions

Producing the Assigning Scale

Final Values to the
Instrument Incidents
Past-Oriented Methods
Essay Method: In this method, the rater must describer the
employee within a number of broad categories, such as a) the
rater’s overall impression of the employee performance, b) the
promotability of the employee c) the jobs that the employee is
now able or qualified to perform, d) the strengths & weaknesses
of the employee & e) the training & development assistance
required by the employee.

Cost Accounting Method: This method evaluates performance

from the monetary returns the employee yields to his or her
organization. A relationship is established between the cost
included in keeping the employee & the benefit the organization
derives from him or her.

Comparative Evaluation Approaches: These are a collection

of different methods that compare one worker’s performance
with that of his/her coworkers. Comparative appraisals are
usually conducted by supervisors. The usual comparative forms
used in this kind of evaluation are the Ranking Method & the
Paired Comparison Method.
Comparative Evaluation Approaches

Ranking Method: In this method the superior ranks his or her

subordinates in the order of their merit, starting from the best
to the worst. This method is subject to the halo & recency
effects, although rankings by two or more raters can be
averaged to help reduce bias.

 Paired-Comparison Method: Here the appraiser compares

each employee with every other employee, one at a time. For
example, there are five employees namely, A, B, C, D, E. the
performance of A is 1st compared with that of B & a decision is
made about whose performance is better. Then A is compared
with C, D & E in that order. The same procedure is repeated for
other employees. The number of comparisons can be calculated
with the help of a formula, namely:
N(N-1)/2, where N stands for the number of employees to be
compared.
If there are 10 employees, the comparisons will be
10(10-1)/2=45.
Future-Oriented Appraisal
Methods

• Management By Objectives (MBO)

• 360 Degree Feedback Appraisal Systems
• Psychological appraisals
• Assessment Centers
Management By Objectives
(MBO)

What is MBO:

Management by Objectives is a process whereby the

superior and subordinate managers of an organization
jointly identify its common goals, define each
individual’s major areas of responsibility in terms of
results expected of him & use these measures as guides
for operating the unit and assessing the contributions of
each of its members.
360 Degree Feedback Appraisal
Systems
The 360 degree Feedback Appraisal process is the systematic
collection of performance data on an individual or group,
derived from a number of stakeholders-the stakeholder being
the immediate supervisors, team members, customers, peers
& the self (self appraisal).
Grand Parent Appraisal /
Grand Parent Appraisal /
Super Boss Appraisal
Super Boss Appraisal
Client Appraisal / Appraisal by Uncle-Aunt Appraisal /
Client Appraisal / Appraisal by Uncle-Aunt Appraisal /
Suppliers, Distributors, and Appraisal by other
Suppliers, Distributors, and Appraisal by other
Direct Customers Departmental heads
Direct Customers Departmental heads
Parent Appraisal /
Parent Appraisal /
Boss Appraisal
Boss Appraisal

Peer Peer
Peer Self Peer
Appraisal
Appraisal
Self Appraisal
Appraisal
Appraisal
Appraisal

Son / Daughter Appraisal

Son / Daughter Appraisal
(Subordinate Appraisal)
(Subordinate Appraisal)
 Future-Oriented Appraisal
Methods
Psychological Appraisals:

The appraisal normally consists of in-depth interviews,

psychological tests, discussions with supervisors & a review of
other evaluations. The psychologist then writes an evaluation of
the employee’s intellectual, emotional, motivational & other-
related characteristics that suggest individual potential & may
predict future performance.

Assessment Centers:
Assessment center is a mechanism used to identify the potential
for growth of individuals. It is a procedure specifically used,
designed to evaluate an employee’s managerial potential. Its
objective is to reinforce strengths, overcome weaknesses &
exploit potential of the employees through training &
development efforts. The assessors observe the behavior & make
independent evaluation of what they have observed, which
results in identifying strengths & weaknesses of the attributes
being studied.
Errors in Performance Appraisal:
Error Type Hallmarks/Features

Halo effect This is a tendency to allow one positive

trait of the employee to color the entire
appraisal. This results in an overall higher
rating than may be warranted.

Horn Effect This is a tendency to allow one negative

trait of the employee to color the entire
appraisal. This results in an overall lower
rating than may be warranted.
Errors in Performance Appraisal:
Error Type Hallmarks/Features

Leniency or Strict Some appraisers consistently assign high values

Error to all employees, regardless of merit. This is a
leniency error.

The strictness tendency is a reverse situation,

where all individuals are rated too severely and
performance is understated.

Central Tendency This is the most common error that occurs when a
rater assigns mainly middle range scores or
values to all individuals under appraisal.
Extremely high or extremely low evaluations are
avoided by assigning “average ratings” to all.

Spill-over Effect This refers to allowing past performance to

influence the evaluation of present performance.
Errors in Performance Appraisal:
Error Type Hallmarks/Features

Personal Bias Perhaps the most important error of all rises from
the fact that very few people are capable of
objective judgments entirely independent of their
values & prejudices.

Recency Effect In this case the rater gives greater weightage to

recent occurrences than earlier performances.

Stereotyping It is a mental picture that an individual holds

about a person because of the person’s age,
religion, state, caste etc.
 Challenges of Performance
Appraisal

 To create a culture of excellence that inspires every

employee to improve and lend himself or herself to be
assessed.
 Align organizational objectives to individual
aspirations
 Clear growth paths for talented individuals
 Provide newer challenges to rejuvenate careers that
have reached the plateau stage
 Forge a partnership with people for managing their
careers
 Empower employees to make decisions without the
fear of failing
 Embed teamwork in all operational processes.
 Debureaucratise the organization structure for ease of
flow of information.
Performance Appraisals: Legal Issues
Legal Issues Associated with Performance Appraisal:

Performance appraisal data are used to make vital HR

decisions as those of pay, promotion, training, transfer &
termination etc. the appraisal system is a common target of
legal disputes by employees involving charges of unfairness &
bias.

Legally defensible appraisal procedures:

 All personal decisions should be based on a formal
standardized performance appraisal system.
 Any performance appraisal process should be uniform for all
employees within a job group, and decisions based on that,
the performance appraisal should be monitored for differences
according to race, sex, national origin, religion etc criteria of
the employees.
 All specific performance standards should be formally
communicated to the employees.
 Legally defensible appraisal
procedures
Legally defensible appraisal procedures (Contd):

 All employees should be able to review their appraisal results.

 There should be a formal appeal process for the ratee to rebut
rater judgments.
 All raters should be provided with written instructions & training
on how to conduct appraisals properly to facilitate systematic,
unbiased appraisals.
 All personnel decision-makers should be well-informed of anti-
discrimination laws.
 Legally defensible appraisal
contents

 Any performance appraisal content should be

based on a Job Analysis
 Constraints on an employee’s performance that
are beyond the employee’s control should be
prevented from influencing the appraisal so as to
ensure that the employee has an equal opportunity
to achieve any given performance level.
 Specific job-related performance dimensions
should be used
 The performance dimensions should be assigned
weights so as to reflect their relative importance in
calculating the composite performance scores.
Legally defensible documentation
of appraisal results

 A thoroughly written record of evidence leading to

termination decisions should be maintained
 Written documentation for extreme ratings should be
required & they must be consistent with the numerical
ratings.
 Documentation requirements should be consistent
among the raters
 Legally defensible raters

 The Raters should be trained in “how to use an appraisal

system.”
 The raters must have the opportunity to observe the
ratee first-hand or to review important ratee performance
products.

Use of more than one rater is desirable in order to lessen

the amount of influence of any one rater & to reduce the
effects of biases. Peers, subordinates, customers & clients
are possible such sources.
 Essential Characteristics of an
effective Performance Appraisal
system
Reliability & validity: Appraisal system should provide
consistent, reliable & valid information & data, which can be
used to defend the organization to appraise the employees
even in case of legal challenges.
 Job Relatedness: The appraisal technique should measure
the performance and provide information in job related areas.
 Standardization: appraisal forms, procedures,
administration of techniques, ratings etc should be
standardized as appraisal decisions affect all employees of the
group.
 Practical Applicability: The techniques should be
practically viable to administer, possible to implement &
economical to undertake continuously.
 Legal Sanction: Appraisals must meet the legal statutory
norms & regulations.
 Training to appraisers: As appraisal is important &
sometimes difficult, it would be useful to provide training to
appraisers viz some insights & ideas on the rating,
documenting appraisals & conducting appraisal interviews.
 Essential Characteristics of an
effective Performance Appraisal
system
 Open communication: Most employees want to know how
well they are performing the job. The appraisal interviews should
permit both parties to learn about the gaps & prepare themselves
for the future.
 Employee access to results: Employees should receive
adequate feedback on their performances. If performance
appraisals are meant for improving employee performance, then
withholding appraisal results would not serve any fruitful purpose.
Due Process: It follows then that formal procedures should be
developed to enable employees who disagree with appraisal
results. They must have the means for pursuing their grievances &
having them addressed objectively.