Q. Distinguish between ‘Performance Appraisal’ and ‘Potential Appraisal’.

Also discuss, in brief, the methods of performance appraisal.

Answer :

Difference between Performance Appraisal and Potential Appraisal.

1. Performance Appraisal is the systematic , periodic rating of an employee’s performance

pertaining to his present job.
Appraisal is the appraisal of the hidden qualities of an employee which might be not
known to employee also. Measurement of potential is a highly challenging one because
people are like iceberg.
2. What we see above the surface ( i,e performance ) is only a small part. A large of the
attributes (i,e potential) needed to perform excellently in a future job.
3. Potential Appraisal is done on the basis of future job employee can perform, whereas
performance appraisal is related to work already done by the employee.
4. Performance appraisal is the assessment of a person for a given job , whereas potential
appraisal is an appraisal of his capabilities to perform higher responsibility and higher
level job .
5. Performance appraisal is done by his supervisor as well as self but potential appraisal is
don confidentially , not even shown to the appraise to avoid expectation.
6. Past data are used for appraisal of performance, whereas no such data are available to
potential appraiser.

Methods of performance appraisal

Basically there are three methods of performance appraisal which are sub divided and
explained in brief.

1. Casual approach
2. Traditional and highly systematic Appraisal
3. Modern method
Casual approach : This is an old approach . This approach emphasizes on the evaluation of
employee’s worth as a person. Hence human bias will be more in this method.
Traditional and highly systematic Appraisal : It is a systematic approach where performance
of all the employees of a particular category is evaluated in the same manner using same
approach so that the rating found of separate personnel are comparable. In this method
evaluation done on ‘what the person does’ rather than ‘what he is’. Various traditional system
used by different organization. The important ones are tabulated as below.
Sl. Method Key Idea Merit Demerit
No.
A. Ranking Employees are 1. Transparent. 1. Less objective.
method ranked from best to 2. Fastest 2. Applicable for
worst on a particular process.. small workforce.
trait, choosing 3. Cost effective. 3. Morale Problems
highest , then lowest, 4. Simple & easy to may arise due to
until all ranked. use. not appearing in
the top.
4. Strength and
weakness of
employees can
 not be determined
easily.

B. Graphic A list of traits and a 1. Simple. 1. Rating may be

Rating range of performance 2. Easily subjective.
Scales for each trait is put constructed. 2. Each
on scale, then the 3. Standardized characteristic is
employees are rated results what equally important
by identifying the allows in evaluation of
score that best comparison to the employee’s
describe his or her be made performance.
performance for each between
trait. employee.
4. Reduce
personal bias.
C. Critical Supervisor keeps on 1. Basis is direct 1. Time consuming
Incident recording of certain observation. and laborious
key acts of behavior 2. Can develop process..
and then review it and administer 2. Difficult to
with the employee at easily and convince
predetermined time. economically. The people to
3. It is time tested share their critical
and more face incidents through
time. survey.
3. Provide a personal
perspective of
organizational
issue.
D. Narrative Evaluators prepares 1. Report actually 1. It is time consuming.
Essays a detailed report shows employee’s 2. Biased reported can be
about employee’s performance. reported by supervisor.
strength, weakness 2. All factors can 3. Effective writers are
points, previous covered. difficult to find.
performance, 3. Feedback and
positional and example are noted.
suggestion for his or
her improvement at
the end of evaluation.

Modern method of performance appraisal

Modern methods are improved method of traditional one. It attempted to reduce the bias and
subjectivity of traditional approach. Following are the some important methods tabulated below.

A. 360-degree It relies upon the 1. Excellent 1. Costly and time

rating or input of an development tool for consuming
employees, employee. 2. Sensitive to
supervisor, 2. System is accurate, organization and
colleagues, credible, and reliable. national culture.
 subordinates, 3. Legally more 3. If feedbacks are
customers, defensible. wrong then the self-
suppliers . 4. More objective esteem of the
being a multi rate employees may be
system damaged.
4. Prone to political and
social games played by
the people.
5. Implementation is
difficult for cross
functional team

B. Assessment Employees from 1. Simple and highly 1. Expensive and

Centers different departments flexible managing is difficult.
are brought together 2. Possible to 2. More staffs and times
to spend 2-3days diagonising are required.
and assigned the employees 3. Limited no. of people
task and then development needs are processed at one
observer then ranked and helps in time
the performance. promotion decision. 4. Much cognitive loads
3.Multiple attribute on assessors.
measurement is
possible.
4. Exercise is hard to
fake.

C. MBO Goal setting is done 1. Motivational 1. Difficulty may observe

by jointly by both the method as employees for agreeing in goal
appraiser and are involved in setting.
appraise. appraisal process. 2. Misses intangibles like
MBO is based on 2. Easy to implement honesty, integrity, quality
behavioral value of and measure. etc.
fundamental trust in 3. Performance 3. Goals setting may
the goodness, oriented diagnostic vary manager to
capability and method. manager and employee
responsibility of 4. Facilitate employee to employee
human being. counseling and 4. It is lengthy and time
guidance. consuming process and
also expensive process.
D. Behaviorally BARS combines 1. Effective and 1. Activity oriented
Anchored elements of the ineffective behaviors behaviors are
Rating traditional rating and are described more considered rather than
Scale critical incidents objectively. result oriented.
(BARS) method. 2.More acceptance as 2. Scale independence
the active may not be valid
participation of /reliable.
manager and 3.It is very time
employees. consuming to decide a
BARS.
4. Each job is required to
 scale a separate BARS.
E. HR In this method cost 1. Ascertain cost and 1. Specific and clear cut
Accounting and contribution of labor turnover. guide line is not there to
an employee is 2. Development of HR find out the cost and
worked out. Cost is 3. Calculates the value of human
worked out on the return on investment resources.
basis of money spent on HR 2. The method measures
in terms of 4. Efficiency the cost to the
manpower planning, of employee can be organization but value of
recruitment, improved by HR employee to the
selection, induction, accounting organization is ignored.
placement, training, 3. The life of human
and development, resources is uncertain
wages, benefits etc. and therefore, valuing
Contribution is then under uncertainty is
money value of unrealistic.
services. If
contribution is more
than cost then it is
considered as
positing