Lecture 5

PERFORMANCE APPRAISAL

INTRODUCTION
Definitions of Performance Appraisal:
Performance Appra is al has been defined as follows :
According to
Edwin Flippo,―Performance appraisal is the systematic, periodic and an impartial
rating of an employee‘s excellence in matters pertaining to his present job and his
potential for a better job.‖

According to Cummings, ―The overall objective of performance appraisal is to

improve the efficiency of an enterprise by attempting to mobilise the best possible
efforts from individuals employed in it. Such appraisals achieve our objectives
including the salary reviews the development and training of individuals, planning job
rotation and assistance promotions.

According to Wendell French, Performance appraisal and review in the formal

,systematic assessment of how well employees are performing their jobs in
relations to establish standards and the communication of that assessment to
employees.

Characteristics of Performance Appraisal:

The following are the characteristics of Performance Appraisal

1. A Process:
Performance appraisal is not a one- act play .It is rather a process that involves
several acts or steps.

2. Systematic Assessment:
Performance appraisal is a systematic assessment of an employee‘s strengths and
weakness in the context of the given job.

3. Main Objective:
The main objective of it is to know how well an employee is going for the
organisation and what needs to be improved in him.

4. Scientific Evaluation:
It is an objective, unbiased and scientific evaluation through similar
measure and procedures for all employees in a formal manner.

5. Periodic Evaluation:

Systematic (i.e., formal) appraisal of an individual employee is likely to

occur at certain intervals throughout that person‘s history of employment
(say quarterly ,six monthly, annually, etc.)
 PURPOSE OF PERFORMANCE APPRAISAL

The following are the main purposes of performance appraisal.

1. Appraisal Procedure:
It provides a common and unified measure of performance appraisal, so that all
employee are evaluated in the same manner. It gives an in discriminatory rating of
all the employees.

2. Decision Making: Performance appraisal of the employees is extremely use

fooling the decision making process of the organization. In selection, training,
promotion,pay in crement and in transfer, performance appraisal is very useful
tool.

3. Work Performance Records: Performance appraisal gives us a complete

information in the form of records regarding very employee. In the case o find us
trial disputes even arbitrator accepts these records in the course of grievance
handling
procedure.

4. Employees Development:
Performance appraisal guides the employees in removing their effects and improving
theirworking .The weaknesses of the employee recorded in the performance appraisal
provide the basis for an individual development programme. If properly recorded and used
,the performance appraisal gives the fair opportunities to employees to correct and rectify
their mistakes.
5. Enables Supervisors to be More Alert and Competent:
Performance appraisal enables supervisor to be more alert and competent and to
improve the quality of supervision by giving him a complete record of employee's
performance. He can guide an employee, where he is prone to commit mistakes.

USES OF PERFORMANCE APPRAISAL

1. Help in Deciding Promotion:

It is in the best interest of the management to promote the employees to the positions where
they can most effectively use their abilities.
2. Help in Personnel Actions:
Personnel actions such as lay-offs, demotions, transfers and discharges etc. May be
justified only if they are based on performance appraisal. While in some cases ,actions
are taken because of unsatisfactory performance of the employee, in some other cases it
may be called for due to some economic conditions beyond control such as changes in
production process. In former case, the action can only be justified on the basis of the
result of performance appraisal.
3. Help in Wage and Salary Administration:
The wage increase given to some employees on the basis of their performance may
be justified by the performance e appraisal results. In some cases appraisal,
i.e.,merit and seniority are combined for higher salaries on better positions.

4. Help in Training and Development:

An appropriate system of performance appraisal helps the management in devising
training and development programmes and in identifying the areas of skill or
knowledge in which several employees are not at par with the job requirements.
Thus the appraisal system points out the general training deficiencies which may be
corrected by additional training, interviews, discussions or counselling. It helps in
spotting the potential to train and develop them to create an inventory of executives.

5. Aid to Personnel Research:

Performance appraisal helps in conducting research in the field of personnel
management. Theories in personnel field are the outcome of efforts to find out the
cause and effect relationship between personnel and their performance. By studying
the various problems which are faced by the performance appraiser, new areas of
research may be developed in personnel field.

Essentials of an Effective Performance Appraisal System :

The following are the essentials of an effective Performance Appraisal System:

1. Mutual Trust:
The existence of an atmosphere of confidence and trust so that both supervisor and
employee may discuss matters frankly and offer suggestions which may be
beneficial for the organisation and for an improvement of the employee. An
atmosphere of mutual trust and confidence should be created in the organisation
before introducing the appraisal system. Such an atmosphere is necessary for frank
discussion of appraisal. It also helps to obtain the faith of employees in the
appraisal system.

2. Clear Objectives:
The objectives and uses of performance appraisal should be made clear and
specific. The objectives should be relevant, timely and open. The supervisor must
very thoroughly evaluate the employee s performances o that he is capable of
meeting challenges about his ratings of his subordinate.

3. Standardisation:
Well defined performance factors and criteria should be developed. These factors as
well as appraisal form, procedures and techniques should be standardised. It will
help to ensure uniformity and comparison of ratings. The appraisal techniques
should measure what they are supposed to measure. These should also be easy to
administer and economical to use. The appraisal system should be performance
based and uniform. Employees should be made fully aware of performance
standards and should be involved in setting the standards.

4. Training:
Evaluators should be given training in philosophy and techniques of appraisal. They
 should be provided with knowledge and skills in documenting appraisals,
conducting post appraisal interviews, rating errors, etc.

5. Job Relatedness:
The evaluators should focus attention on job-related behaviour and performance of
employees .The results of performance rather than personality traits should be given
due weight. Suggestions for improvement should be directed towards the objective
facts of the job (such as work schedules, output, reports completed, sales made,
losses incurred, profits earned,

6. Strength and Weaknesses:

The ratters should be required to justify their ratings. The supervisor should try to
analyse the strength and weaknesses of an employee and advise him on correcting
die weakness.

7. Feed back and Participation:

Arrangements should be made to communicate the ratings to both the employees
and the ratters. The employees should actively participate in managing performance
and in the ongoing process of evaluation. The superior should play the role of coach
and counsellor. The overall purpose of appraisals should be developmental rather
than judgmental.

8. Individual Differences:
While designing the appraisal system, individual differences in organisations
should be recognised. Organisations differ in terms of size, nature, needs and
environment. Therefore, the appraisal system should be tailor-made for the
particular organisation .The needs of rates in terms of feedback ,mobility
,confidence and openness should also be considered.
 Steps in Appraising Performance:

Various steps in appraising performance of employees are as follows:

1. Establishing Performance Standard:

The process of evaluation begins with the establishment of Performance Standards.
While designing a job and formulating a job description, performance standards are
usually developed for the position. These standards should be very clear and not
vague, and objective enough to be understood and measured. They should also be
discussed with the supervisors to find out which different factors are to be
incorporated. Weights and points to be given to each factor and these then should
be indicated on the Appraisal Form, and later on used for appraising the
performance of the employees.

2. Communicating Performance Expectations to Employees:

The next important step is to communicate the fore said standards to the concerned
employees. Their jobs and jobs-related behaviour should be clearly explained to
them. It should be noted that job related behaviours are those critical behaviour that
constitute job success. The employee should not be presumed to guess what is
expected of him. It should be noted that here communication means that the
standards have been transmitted to the employee and he has received and
understood them a two-way communication ,i.e., transference of information from
the manager to the subordinate regarding expectations, and feedback from the
subordinate to the manager that this information has been received and understood
in same context and contents.

3. Measuring Actual Performance:

The third step is the measurement of actual performance. To determine what actual
performance is, it is necessary to acquire information about it we should be
concerned with how we measure and what we measure. Four sources of information
are frequently used to measure actual performance: personal observation, statistical
reports, or al reports and written reports.

4. Comparing Actual Performance with Standards:

The next step is comparison of actual performance with the standards. By doing so,
the potentiality for growth and advancement of an employee can be appraised and
judged. Efforts are made to find out deviations between standard performance and
actual performance.

5. Discussing the Appraisal with the Employee:

After comparing actual performance with standards, the next step is to discuss
periodically the appraisal with the employee. Under these discussion good points,
weak points, and difficulties are indicated and discussed so that performance is
improved. The information that the subordinate receives about this performance
assessment has a great impact to his self-esteem and on his subsequent
performance. Conveying good news is considerably less difficult for both the
manager and the subordinate than when performance has been below expectations
 METHODS OR TECHNIQUES OF PERFORMANCE APPRAISAL

Performance
Appraisal

Traditional Methods Modern Methods

Traditional Methods of Performance Appraisal:

There are different techniques /methods which are used for performance appraisal
of employees. Some of the methods of performance appraisal are:

Ranking Method:
Ranking method is the oldest and simplest method of rating. Here, each employee
is compared with all other forming the same job and then he is given a particular
rank i.e. .First Rank, Second Rank etc.

The ranking method is highly subjective. Similarly, here the employees are
compared as a whole. Comparison of the various parts of an employee's
performance is not done.

1. Grading Method: Under this method of performance appraisal ,different grades are
developed for evaluating the ability of different employees and then the employees
are placed in these grades .These grades may be as follows:
i. Excellent.
ii. Very good.
iii. Good.
iv. Average.
v. Bad.
vi. Worst.

2. Man-to-Man Comparison Method : This method was first used in USA army
during the 1st World War. Under this method, a few factors including leadership,
dependability and initiative are used for analysis . After that a scale is designed by
the rate for each factor. A scale of person is also developed for each selected factor
. Each person to be rated is compared with the person in the scale, and certain
scores for each factor area warded to him/her. In other words, instead of
comparing a whole man to a whole man personnel are compared to the key man in
respect of one factor at a time.

We can use this method in job evaluation. This method is also known as the Factor
Comparison Method. In performance appraisal, it is not of much use because the
designing of scale is a very difficult task.

3. Graphic Rating Scale Method of Performance Appraisal: This is the very popular,
traditional method of performance appraisal. Under this method, scales are
established for a number of fairly specific factors. A printed form is supplied to the
rater. The form contains a number of factors to be rated. Employee characteristics
and contributions include equalities like quality of work, dependability, creative
 ability and soon. These traits are then evaluated on a continuous scale, where the
rater places a mark somewhere along the scale. The scores are tabulated and a
comparison of scores among the different individuals is made. These scores
indicate the work of every individual.

Average Poor

This method is popular because it is simple and does not require any
writing ability. The method is easy to understand and use. Comparison
among pairs is possible. This is necessary for decision on salary increases,
promotion, etc.

MODERN METHOD OF APPRAISAL AND CAREER

DEVELOPMENT

Most of the traditional methods emphasise either on the task or the

worker‘s personality, while making an appraisal. For bringing about a
balance between these two, modern methods have been developed. The
details of these methods are as follows:

1. Management by Objective (MBO): Management by objective can

be described as, a process whereby the superior and subordinate managers
of an organisation jointly identify its common goals, define each
individual‘s major areas of responsibility in terms of results expected of
him and use these measures as guides for operating the unit and assessing
the contribution of each of its members.

Essential Characteristics of MBO: The important features of MBO

are as follows:

A Philosophy: Management by objective is a philosophy or a system, and

not merely a technique.

1. Participative Goal Setting: It emphasises participative goal

setting.

2. Clearly Define Individual Responsibilities: Management by

objective (MBO) clearly defines each individual‘s responsibilities in terms
of results.

3. Accomplishment of Goal: It focuses a tension on what goal must

be accomplished rather than on how it is to be accomplished (method).
4. Objective Need into Personal Goal: MBO converts objective
need in to personal goals at every level in the organisation.

5. It Establishes Goals Yardsticks: It establishes standards or goals yardsticks as

operating guides and also as basis of performance evaluation.

6. Efforts to Blend and Balance Goals: It is a system intentionally directed toward

effective and efficient attainment of organisational and personal goals.
7. Objectives of MBO: The objective of MBO is to change behaviour and attitudes
towards getting the job done. In other words, it is results-oriented. It is
performance that counts. It is a management system and philosophy that stress
goals rather than methods. It provides responsibility and accountability and
recognises that workers or employees have needs for achievement and self-
fulfilment. It meets these needs by providing opportunities for participation in
goal setting process. Subordinates become involved in planning their own
careers.

The Process of MBO: It is as follows:

 Establishment of Goal,
 Setting the Performance Standard.
 Comparison of Actual Goals with the Standard Goals.
 Establishing New Goals, New Strategies
Benefits or Advantages of MBO: The benefits of MBO are as follows: :

 Balanced Focus on
 Better Managing Things
 Better Organising
 MBO Reduces Role Conflict and Ambiguity
 It Provide more Objective Appraisal Criteria
 More Motivation
 Managers Complete with Themselves
 Develop Personal Leadership
 MBO Identifies Problem Early :
 Identifies Performance Deficiency

DISADVANTAGES OF MBO

 Unfavourable Attitude of Managers

 Difficult to Apply MBO Concepts
 Heavy Paper Work
 Tug of War: There is sometimes tug of war in which the subordinates try to
set the lowest targets possible and the supervisors the highest.
 Time Consuming: MBO is time consuming especially in the early phases
of its introduction when employees are unfamiliar with its process.

Limitations of Performance Appraisal

The limitations of Performance Appraisal are explained below:

Time Consuming: Performance appraisal is a time taking affair. It is a very

lengthy process under which different forms are to be filled in and various
observations are required to be noted in a careful manner.

Lack of Reliability: Reliability implies stability and consistency in the

measurement. Lack of consistency over time and among different raters may reduce
the reliability of performance appraisal.

Incompetence: Raters may fail to evaluate performance accurately due to lack of

knowledge and experience. Post appraisal interview is often handled ineffectively.

No Uniform Standards: The standards used for appraisal purpose are not uniform
within the same organisation. This makes the rating unscientific. Similarly ,the
rating is done on the basis of an overall impression, which is not proper.

Absence of Effective Participation of Employees: In performance appraisal

effective participation of concerned employee is essential. In many methods of
appraisal he is given a passive role. He is evaluated but his participation or self
evaluation is rather absent.
Resistance of Employees to Appraisal: Employees oppose the system as they feel
that the system is only for showing their defects and for punishing them. The
managers resist the system as they are not willing to criticise their subordinates or
have no capacity to guide them for self improvement or self development.

1. Paper work: Some supervisors feel that performance appraisal is

paper work. They make such complaints because many At times,
performance appraisal reports are found only in the files rather than
rendering any practical use.

2. Fear of Spoiling Relations: Performance appraisals may also

affect superior –subordinate relations. As appraisal makes the superior
more of a judge rather than a coach, the subordinate may look upon the
superior with a feeling of a suspicion and mistrust.

3. Stereo typing: This implies for being a mental picture of a person

on the basis of his age, sex ,caste or religion. It results in an over-
simplified view and blurts he assessment of job performance.

4. Negative Approach: Performance appraisal loses most of its

value when the focus of management is on punishment rather than on
development of employees.

5. Multiple Objectives: Ratters may get confused due to two many

objectives or unclear objective of performance appraisal.

6. Resistance:Tradeunionsmayresistperformanceappraisalonthegro
undthatitinvolvesdiscriminationamongitsmembers.Negativeratingsmayaffe
ctinterpersonalrelationsandindustrialrelationsparticularlywhenemployees/u
nionsdonothavefaith in the system of performance appraisal.

7. HaloEffect:Generally,thereisthepresenceof‗ahalo‘effectwhichlea
dstoatendencytoratethesameindividualfirst,which once have stood first.

8. IndividualDifferences:Somepeoplearemoredistinctwhilesomeare
veryliberalinassigningthefactors,pointsornumbertotheemployees.Theyareu
nabletomaintainafairdistinctionbetweentwoindividuals.Italsonullifiestheutil
ityofthissystem.