PERFORMANCE

APPRAISAL
UNIT 5
SYLLABUS
❖ Meaning, Importance, Process, Limitations
❖ Performance Evaluation to Performance Analysis and Development
❖ Methods of Performance Development
❖ System of Performance Appraisal
❖ Counseling
❖ Managerial Appraisal
MEANING

★ Performance Appraisal is a systematic evaluation of an

employee's performance in terms of their contributions to
organizational goals.
★ It involves assessing the employee’s skills, achievements, and
growth over a specified period and providing constructive
feedback to enhance future performance.
 Importance of Performance Appraisal
1. Employee Development - Identifies strengths and areas for improvement, guiding personal
and professional growth.
2. Enhanced Performance - Regular feedback motivates employees to perform better and align
with organizational objectives.
3. Goal Alignment - Ensures individual and team goals are in sync with the company’s
strategic vision.
4. Compensation and Rewards - Forms the basis for salary increments, bonuses, and
promotions.
5. Training Needs Analysis - Highlights skill gaps, helping design targeted training programs.
6. Organizational Improvement - Provides insights into workforce trends, contributing to
better workforce management.
Performance Appraisal
Process
 2. Communicating Standards 3. Measuring Actual
1. Establishing Performance
and Expectations Performance
Standards
● Share the ● Collect data on
● Define clear, specific,
performance criteria employees’ work
and measurable
with employees at the output and behavior
performance criteria.
beginning of the over the appraisal
● Ensure that the
appraisal period. period.
standards align with
● Ensure employees ● Use various tools such
the organizational
understand what is as observation, work
goals.
expected of them. samples, and reports
● Example: Sales targets,
● Provide clarity about to track performance.
customer satisfaction
how their ● Maintain objectivity
levels, or project
performance will be and consistency
deadlines.
measured. during this step.
 6. Decision-Making – Taking
5. Discussing Results
Corrective Actions
(Providing Feedback)
4. Comparing with
● Develop a plan to
Standards ● Organize a one-on-
address performance
one meeting to review
● Analyze the data to gaps, such as training,
the appraisal results.
identify gaps or areas mentoring, or role
● Discuss strengths,
where performance adjustments.
achievements, and
meets or exceeds ● Recognize and reward
areas for
expectations. employees for
improvement.
● Compare actual outstanding
● Offer constructive
performance with the performance.
feedback and provide
pre-established ● Set goals for the next
opportunities for the
standards. appraisal period and
employee to share
ensure continuous
their perspective.
improvement.
Limitations of Performance Appraisal
★ Subjectivity - Personal biases of evaluators can lead to unfair assessments.
★ Inconsistency - Lack of standardization in appraisal methods across departments may
lead to discrepancies.
★ Resistance from Employees - Employees may perceive appraisals as critical or unfair,
reducing their willingness to improve.
★ Focus on Recent Performance - Evaluators might overly emphasize recent events,
ignoring overall performance.
★ Time-Consuming- The process can be resource-intensive, particularly in large
organizations.
★ Limited Feedback - Inadequate feedback can fail to address employee concerns or
motivate improvement.
Performance Evaluation to
Performance Analysis and
Development
 The traditional approach of performance evaluation
focuses on assessing past achievements and assigning
ratings, often leading to a static, judgmental process.
In contrast, Performance Analysis and Development
emphasizes a forward-looking approach that combines
insightful analysis of employee performance with
actionable development plans.
 Aspect Performance Evaluation Performance Analysis and Development

Focus Past performance Future growth and improvement

Nature Static and judgmental Dynamic and constructive

Outcome Ratings, rewards, or penalties Development plans, skill enhancement

Employee
Limited Collaborative and participatory
Involvement

Objective Accountability Growth and alignment

System of Performance
Appraisal (Methods)
 Traditional Methods:
➔ Rating Scales: Employees are assessed on a numerical scale across various performance
dimensions (e.g., 1 to 5, where 1 is poor and 5 is excellent).

➔ Graphic Rating Scales: Similar to rating scales but uses a graph to visually represent
performance levels on different criteria.

➔ Forced Ranking: Employees are ranked against each other, typically placing a certain
percentage into performance categories (e.g., top 20%, middle 70%, bottom 10%).

➔ Checklist Method : A checklist of statements or questions is used to evaluate whether an

employee exhibits certain traits or behaviors. Example: “Completes tasks on time” (Yes/No).

➔ Essay Method : The manager writes a narrative description of the employee’s performance,
including strengths, weaknesses, and areas for improvement. Example: A one-page written
appraisal highlighting the employee’s contributions and shortcomings.
 Modern Methods:
➔ 360-Degree Feedback : Feedback is gathered from multiple sources, including peers,
subordinates, supervisors, and the employee themselves. Example: An employee receives
feedback on teamwork from coworkers and leadership skills from subordinates.

➔ Management by Objectives (MBO): Goals are set collaboratively between managers and
employees, and performance is assessed based on goal achievement. Example: An employee
sets a target to increase sales by 20% and is evaluated based on results.

➔ Behaviorally Anchored Rating Scales (BARS) : Combines quantitative and qualitative

approaches by linking specific behaviors to performance levels. Example: A "5" rating in
customer service corresponds to "Resolves issues within 10 minutes consistently."

➔ Self-Assessment : Employees evaluate their performance and reflect on their achievements and
areas for improvement. Example: An employee completes a self-review form detailing their
contributions to a project.
 CONTD….
➔ Continuous Feedback: Ongoing communication between employees and
managers to provide real-time feedback and address performance concerns
proactively. Example: Weekly one-on-one meetings to discuss progress and
challenges.
➔ Competency-Based Evaluations: Performance is assessed based on specific
competencies or skills required for the role. Example: Evaluating a
programmer’s coding efficiency or problem-solving skills.
➔ Project or Task-Based Evaluations: Performance is judged based on the
outcomes of specific projects or tasks. Example: Reviewing the success of a
marketing campaign led by the employee.
PERFORMANCE COUNSELLING
CONCEPT :

★ Performance Counseling refers to the help provided by a

manager to his/ her subordinates in objectively analyzing their
performance.
★ It involves providing constructive feedback, guidance, and
support to improve their effectiveness and align their
performance with organizational goals.
 Objectives of Performance Counseling
● Improve Performance: Address specific performance gaps and provide solutions
for improvement.
● Boost Morale: Motivate employees by focusing on strengths and opportunities for
growth.
● Resolve Issues: Identify and address personal or professional barriers impacting
performance.
● Promote Development: Help employees develop skills and competencies for their
roles.
● Strengthen Relationships: Foster trust and communication between employees
and managers.
 Steps in Performance Counseling

1. Preparation : Collect performance data, feedback, and examples of achievements or

areas needing improvement. (Example: Reviewing missed deadlines or quality
concerns before the session.)

2. Establish Rapport : Create a comfortable and supportive environment for open

dialogue. (Example: Starting the session with positive feedback to build trust.)
 CONTD….

3. Diagnose Issues ; Identify specific performance problems and their root causes.
(Example: Analyzing whether poor performance stems from skill gaps, lack of
motivation, or external factors.)

4. Provide Feedback : Share clear, specific, and actionable feedback.

(Example: “You have great technical skills, but improving communication with
teammates will help project success.”)
 CONTD….

5. Set Goals and Plan Actions : Collaborate with the employee to set SMART (Specific,
Measurable, Achievable, Relevant, Time-bound) goals and develop an improvement
plan. (Example: Completing a time management workshop within a month.)

6. Monitor Progress : Regularly review performance improvements and offer ongoing

support. (Example: Weekly check-ins to assess progress on set goals.)
Managerial Appraisal
Managerial appraisal refers to the evaluation
of a manager’s performance in leading teams,
achieving organizational objectives, and
fulfilling managerial responsibilities.
It assesses not just technical skills but also
leadership, decision-making, and strategic
abilities.
Objectives of Managerial Appraisal
1. Evaluate Leadership Skills: Assess the manager's ability to lead, inspire, and
guide teams effectively.
2. Assess Decision-Making: Measure the quality and impact of decisions made
by the manager.
3. Identify Development Needs: Highlight areas for improvement and
opportunities for professional growth.
4. Align Goals: Ensure managerial performance supports organizational
strategies.
5. Succession Planning: Identify high-potential managers for leadership roles.
 Methods of Managerial Appraisal
Self-Appraisal
● Managers assess their own performance, identifying strengths and areas for improvement. (Example: Reflecting on a
successful project and identifying missed opportunities.)
360-Degree Feedback
● Collects feedback from subordinates, peers, and superiors to provide a holistic view of performance. (Example:
Subordinates rating the manager’s approachability and leadership style.)
Management by Objectives (MBO)
● Evaluates performance based on the achievement of pre-set goals. (Example: Meeting a target of reducing
operational costs by 15%.)
Behaviorally Anchored Rating Scales (BARS)
● Uses specific behaviors as benchmarks to rate performance. (Example: “Delegates tasks effectively” rated on a scale
of 1 to 5.)
Peer Reviews
● Peers provide feedback on the manager’s collaboration and decision-making skills. (Example: Evaluating a
manager’s contribution to cross-departmental projects.)
 Key Areas of Focus in Managerial Appraisal
Focus Area Description Example

Leadership and Team Ability to motivate, manage, and develop Fostering collaboration and resolving
Management team members effectively. conflicts within the team.

Decision-Making and Evaluates analytical and decision-making Developing innovative solutions to address
Problem-Solving skills in addressing challenges. operational inefficiencies.

Strategic Planning and Ability to set goals and drive the team to Designing and implementing a successful
Execution achieve them. marketing strategy to boost sales.

Communication and Measures clarity and effectiveness in Conducting clear, motivating team
Interpersonal Skills communication with stakeholders. briefings and resolving misunderstandings.

Performance Ability to set realistic goals, provide Conducting constructive performance

Management feedback, and evaluate performance. reviews for team members.

Financial Acumen Skill in managing budgets and utilizing Keeping project costs within budget while
resources efficiently. maintaining quality standards.
END OF UNIT 5