Performance Appraisal

Performance Appraisal is the systematic evaluation of the performance of employees and to

understand the abilities of a person for further growth and development. Performance appraisal is
generally done in systematic ways which are as follows:

1. The supervisors measure the pay of employees and compare it with targets and plans.

2. The supervisor analyses the factors behind work performances of employees.

3. The employers are in position to guide the employees for a better performance.

Objectives of Performance Appraisal

1. To maintain records in order to determine compensation packages, wage structure, salaries

raises, etc.

2. To identify the strengths and weaknesses of employees to place right men on right job.

3. To maintain and assess the potential present in a person for further growth and development.

4. To provide a feedback to employees regarding their performance and related status.

5. To provide a feedback to employees regarding their performance and related status.

6. It serves as a basis for influencing working habits of the employees.

7. To review and retain the promotional and other training programmes.

Advantages of Performance Appraisal
It is said that performance appraisal is an investment for the company which can be justified by
following advantages:

1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion
programmes for efficient employees. In this regards, inefficient workers can be dismissed or
demoted in case.

2. Compensation: Performance Appraisal helps in chalking out compensation packages for

employees. Merit rating is possible through performance appraisal. Performance Appraisal
tries to give worth to a performance. Compensation packages which includes bonus, high
salary rates, extra benefits, allowances and pre-requisites are dependent on performance
appraisal. The criteria should be merit rather than seniority.

3. Employees Development: The systematic procedure of performance appraisal helps the

supervisors to frame training policies and programmes. It helps to analyse strengths and
weaknesses of employees so that new jobs can be designed for efficient employees. It also
helps in framing future development programmes.

4. Selection Validation: Performance Appraisal helps the supervisors to understand the validity
and importance of the selection procedure. The supervisors come to know the validity and
thereby the strengths and weaknesses of selection procedure. Future changes in selection
methods can be made in this regard.

5. Communication: For an organization, effective communication between employees and

employers is very important. Through performance appraisal, communication can be sought
for in the following ways:

a. Through performance appraisal, the employers can understand and accept skills of
subordinates.

b. The subordinates can also understand and create a trust and confidence in superiors.

c. It also helps in maintaining cordial and congenial labour management relationship.

d. It develops the spirit of work and boosts the morale of employees.

All the above factors ensure effective communication.

6. Motivation: Performance appraisal serves as a motivation tool. Through evaluating

performance of employees, a person’s efficiency can be determined if the targets are
achieved. This very well motivates a person for better job and helps him to improve his
performance in the future.
Performance Appraisal Tools and Techniques and Methods
Following are the tools used by the organizations for Performance Appraisals of their employees.

1. Ranking Method

The ranking system requires the rater to rank his subordinates on overall performance. This
consists in simply putting a man in a rank order. Under this method, the ranking of an
employee in a work group is done against that of another employee. The relative position of
each employee is tested in terms of his numerical rank. It may also be done by ranking a
person on his job performance against another member of the competitive group.

Advantages of Ranking Method

i. Employees are ranked according to their performance levels.

ii. It is easier to rank the best and the worst employee.

Limitations of Ranking Method

iii. The “whole man” is compared with another “whole man” in this method. In practice, it
is very difficult to compare individuals possessing various individual traits.

iv. This method speaks only of the position where an employee stands in his group. It does not
test anything about how much better or how much worse an employee is when compared
to another employee.
 v. When a large number of employees are working, ranking of individuals become a
difficult issue.

vi. There is no systematic procedure for ranking individuals in the organization. The
ranking system does not eliminate the possibility of snap judgements.

2. Forced Distribution method

This is a ranking technique where raters are required to allocate a certain percentage of rates
to certain categories (eg: superior, above average, average) or percentiles (eg: top 10
percent, bottom 20 percent etc). Both the number of categories and percentage of employees
to be allotted to each category are a function of performance appraisal design and format.
The workers of outstanding merit may be placed at top 10 percent of the scale, the rest may
be placed as 20 % good, 40 % outstanding, 20 % fair and 10 % fair.

Advantages of Forced Distribution

i. This method tends to eliminate raters bias

ii. By forcing the distribution according to pre-determined percentages, the problem of

making use of different raters with different scales is avoided.

Limitations of Forced Distribution

iii. The limitation of using this method in salary administration, however, is that it may lead
low morale, low productivity and high absenteeism.

Employees who feel that they are productive, but find themselves in lower grade(than
expected) feel frustrated and exhibit over a period of time reluctance to work.

3. Critical Incident techniques

Under this method, the manager prepares lists of statements of very effective and ineffective
behaviour of an employee. These critical incidents or events represent the outstanding or
poor behaviour of employees or the job. The manager maintains logs of each employee,
whereby he periodically records critical incidents of the workers behaviour. At the end of the
rating period, these recorded critical incidents are used in the evaluation of the worker’s
performance. Example of a good critical incident of a Customer Relations Officer is : March
12 - The Officer patiently attended to a customers complaint. He was very polite and prompt
in attending the customers problem.

Advantages of Critical Incident techniques

i. This method provides an objective basis for conducting a thorough discussion of

an employees performance.

ii. This method avoids recency bias (most recent incidents are too much emphasized)
 Limitations of Critical Incident techniques

iii. Negative incidents may be more noticeable than positive incidents.

iv. The supervisors have a tendency to unload a series of complaints about

the incidents during an annual performance review sessions.

v. It results in very close supervision which may not be liked by an

employee.

vi. The recording of incidents may be a chore for the manager concerned,
who may be too busy or may forget to do it.

4. Checklists and Weighted Checklists

In this system, a large number of statements that describe a specific job are
given. Each statement has a weight or scale value attached to it. While rating an
employee the supervisor checks all those statements that most closely describe
the behaviour of the individual under assessment. The rating sheet is then
scored by averaging the weights of all the statements checked by the rater. A
checklist is constructed for each job by having persons who are quite familiar
with the jobs. These statements are then categorized by the judges and weights
are assigned to the statements in accordance with the value attached by the
judges.

Advantages of Checklists and Weighted Checklists

i. Most frequently used method in evaluation of the employees

performance.

Limitations of Checklists and Weighted Checklists

ii. This method is very expensive and time consuming

iii. Rater may be biased in distinguishing the positive and negative questions.

iv. It becomes difficult for the manager to assemble, analyze and weigh
a number of statements about the employees characteristics,
contributions and behaviours.

5. Management by Objectives (MBO)

Management by Objectives (MBO) is a strategic performance appraisal method that has

been around for decades. It focuses on aligning individual goals with organizational
objectives. In this approach, managers and employees collaborate to set clear, measurable
goals that contribute to the company’s overall success. MBO emphasizes transparency, with
company goals set by top management and made visible to all employees. This top-down
approach ensures that everyone understands the organization’s objectives and has a defined
role in achieving them.

MBO Implementation

To implement MBO effectively, organizations typically follow a structured process:

1. Define organizational objectives

2. Share objectives with employees
3. Encourage employee participation in goal-setting
4. Monitor progress regularly
5. Evaluate performance and reward achievements

6. 360-Degree Feedback

The 360-degree feedback method is a comprehensive performance appraisal approach that

gathers input from multiple sources in an employee’s professional circle. This includes
feedback from managers, peers, subordinates, and sometimes even customers or vendors.
Unlike traditional reviews that rely solely on a manager’s assessment, this method provides a
more holistic view of an employee’s competencies and job performance.

360-Degree Feedback Process

The process typically involves the following steps:

1. Selection of reviewers who have worked with the employee for at least six months
2. Distribution of anonymous online feedback forms
3. Collection and aggregation of data
4. Generation of a summary report
5. Review of feedback with the employee

It’s crucial to note that 360-degree feedback should be used as a development tool, not for
performance evaluation or determining pay and promotions.

360-Degree Feedback Advantages

This method offers several benefits:

 Increased self-awareness among employees

 A balanced view of organizational expectations
 Identification of strengths and weaknesses in employee skill sets
 Promotion of a feedback culture with open communication
 Support for succession planning
 Identification of training opportunities
 7. Self-Assessment Method

Self-Assessment Benefits
The self-assessment method is a crucial component of the performance management process,
offering employees an opportunity for self-reflection on their job performance. This approach
allows individuals to evaluate their strengths, areas for improvement, and contributions to the
organization.

Self-assessments offer several advantages:

1. Improved data insights: Employees gain a management perspective on their

performance by analyzing project data.
2. Enhanced communication: It helps managers understand the day-to-day
responsibilities of their team members.
3. Employee empowerment: Self-assessments give employees a voice in their
performance evaluation.
4. Goal setting: It aids in setting clearer objectives and identifying areas for professional
development.

8.Peer Review Method

The peer review method is a collaborative approach to performance appraisal where

employees evaluate their colleagues’ work performance, skills, and competencies. This
method provides a multidimensional view of an employee’s contributions, offering insights
that managerial assessments might miss. Organizations typically implement peer reviews as
part of a formal evaluation process, allowing managers to gain a more comprehensive
understanding of each team member’s strengths and weaknesses.

Peer Review Process

In a typical peer review process, employees anonymously fill out standardized forms about
their colleagues’ performance. The anonymity encourages honest feedback, allowing
reviewers to express their opinions without fear of repercussions. Reviewers are usually
selected from those who regularly interact with the employee being evaluated, ensuring they
have a working knowledge of the reviewee’s job duties and required skills.

Peer Review Benefits

Peer reviews offer several advantages to organizations:

1. Enhanced communication between team members

2. Identification of hidden talent and quiet performers
3. Improved data insights for management
4. Employee empowerment through participation in the evaluation process
 5. More objective assessment of performance

9. Psychological Appraisal

Psychological appraisal is a performance evaluation method that focuses on assessing an

employee’s future potential rather than past performance. This approach analyzes seven key
components: interpersonal skills, cognitive abilities, intellectual traits, leadership skills,
personality traits, emotional quotient, and other related skills. Qualified psychologists
conduct various tests, including in-depth interviews, psychological assessments, and
discussions, to evaluate employees effectively.

Psychological Appraisal Approach

The psychological appraisal method involves analyzing specific scenarios to gage an

employee’s capabilities. For instance, observing how an employee handles an aggressive
customer can provide insights into their persuasion skills, behavioral responses, and
emotional intelligence. This approach helps determine hidden potential and future
performance

Ethics in Performance appraisal.

Performance appraisal has now become the most important part of any organisation which in
general used to measure and improves the performance of employees and ultimately the
performance of the organization. But, if not used or carried out in appropriate manner it can
be harmful instead of being useful. Thus, the organisation should follow a set of rules from
starting known as ethical system. Therefore, this research paper shows the integration of
ethics with the performance appraisal and the issues arises during the evaluation of
performance of employees. This paper also provides the view on the reason behind the
unethical practices.

Managerial ethics in performance appraisal While doing the evaluation of employee’s

integration of ethics in it, is quite important. As these appraisals can be highly subjective to
show its impact on the relationships between both the parties appraiser and appraise. There
are several action which turns ethical action in to unethical one. Thus, the general characters
of such act are as given below:

1. Rewards, punishments and threats All these must be used in appositive way to improve the
performance of the employees. If used in improper way, it definitely affects he performance
of employees and demotivate them for future performance. Reward and punishment should
not rely on the matter of favoritism and hatred.

2. Reliability and validity The most important task of manager is to provide reliable as well
as proper valid information. This information can be documented and used for legal aspects if
any problem arises in future. The appraisal practice perform by supervisors must be valid as
this shows their ability that how well they are performing during the appraisal process.

3. Job relatedness The information provided in the appraisal should be related to the job
performance only. It should not include personal conflict and grudges between the appraisers
and appraise.

4. Standardization It characterize the standard format of appraisal system. This

standardization provides equal opportunity to all the employees to perform in same system of
measurement and rating.

5. Rater errors This shows it is again quite unethical to fulfill the needs of appraisal process
personally without involving the employee as it may destroy the right information that is
required during the appraisal process.

In organizations, many managers talk about ethics but do not recognize or act upon ethical
issues in their day-to-day managerial responsibilities and most ethical questions arise from
people relationships within the organizational settings. There are recent survey results in
which one large organization indicate that only 26% of managers believe they are recognized
and reinforced for their ethical decisions and behaviours.

Performance management is essentially a commitment-based system of the organization. This

seeks to align employee action and behaviour towards the desired organizational goals. As
employees are the key to the organization, their beliefs, values, behaviours, and actions have
a profound impact on the organization’s outcomes and most organizations understand that
employees tend to engage in behaviour that is recognized and rewarded, and avoid behaviour
that is penalized.