Assignment

On

“Performance
Appraisal”
 Assignment

Course Title: Performance Appraisal Management

Course code: HRM 4358

Submitted To
Dr. Mohd Hasanur Raihan Joarder
Associate Professor & Director, BBA program
School of Business & Economics

Submitted By
Group
Sec: C
 Date of Submission:
28th December,2016

List of Group Members

Sl. Name ID

1 Mahfuza Akter 111 131 177

2 Noor Mohammad 111 131 235

3 Eshrat Jahan 111 132186

4 Kh. Afrina Akram 111 131 495

 Letter of Transmittal

28th November, 2016

Dr. Mohd Hasanur Raihan Joarder
Associate Professor & Director, BBA program
School of Business and Economics
United International University
Subject: Request to accept the Assignment on- “1. Performance Appraisal & Rewards.
2. Appraisal methods & effectiveness”

Dear Sir,
We are very pleased to submit the report on “1. Performance Appraisal & Rewards.
2. Appraisal methods & effectiveness”
We were assigned to prepare and submit this assignment as the partial fulfillment of the
course entitled “Performance Appraisal Management”. We have tried our level best to
prepare this plan perfectly. Nevertheless, this paper has been suffered by time and cost
limitation.
We will be obliged, if you kindly accept this assignment.

Sincerely yours,
Group
Section: c

Performance Appraisal
&
Reward System
 Rewards
The reward system is a group of neural structures responsible for incentive salience,
pleasure, and positive reinforcement.
Reward is the attractive and motivational property of a stimulus that induces appetitive
behavior – also known as approach behavior – and consummatorbehavior.

"Any stimulus, object, event, activity, or situation that has the potential to make us
approach and consume it is by definition a reward."
According to Reward Neuroscience
 Types of Reward System

Tangibl
e
Returns

Reward

Intangi
ble
Returns

Tangible Returns:
There are several types of tangible returns by which an employee is rewarded.

Cost of living
Base pay
Adjustments

Short Term Incentives Long term incentives

Merit pay
 Base-pay:

Base pay is given to employees in exchange for work performed. The base pay
which usually includes a range of values, focuses on the position & duties
performed rather than an individual’s contribution.

Thus, the base pay is usually the same for all employees performing similar duties
ignores differences among employees, However, differences within the base pay
range may exist based on such variables as experience & differential performance.

 Cost of living adjustments:

Cost of living adjustments imply the same percentage increase for all employees
regardless of their individual performance. Cost of living adjustments aregiven to
combat the effects of inflation in an attempt to preserve the employees buying
power.
 Short-term incentives:

Similar to Contingent pay but here it is based on past performance. Sometimes

referred as variable pay.

A second difference between incentives & contingent pay is that incentives are
known in advance.

 Long-term incentives:

Long-term incentives attempt to influence future performance over a longer

period of time. Typically, they involve stock ownership or options to buy stocks at
a pre-established and profitable price.

 Merit Pay:

It is given as an addition to the base pay based on past performance. In a nutshell,

contingent pay means that the amount of additional compensation depends on an
employee’s level of performance.
 Benefits of tangible returns:
• Income Protection:
Income protection programs serve as a backup to employees’ salaries in the event
that an employee is sick, disabled or no longer able to work.

 Work/life focus:

This includes programs that help employees achieve a better balance

between work & nonwork activities. These include time away from work such as
vacation time, special financial services like counselling & flexible work schedule.

 Allowances:

Benefits in some of the organizations includes allowances covering housing

and transportation. These kinds of allowances are typical for expatriate personnel
& are popular for high level managers.

Intangible returns:
Several types of intangible rewards are also available for increasing the performance of
an employee or to appraise an employee.

Relational returns
(Recognition, Status, Employment security)
  Relational Returns:

Relational returns are intangible in nature. Such returns might fulfill the need
of -
 social recognition,
 social status and
 Employment security.

The Importance of Reward Management:

The elements of reward management within a business organization are all the things that
they use to attract potential employees into their business which includes salary, bonuses,
incentive pay, benefits and employee growth opportunities such as professional
development and training opportunities.
Having a reward management system in place provides the business with many
advantages, especially in small to medium size organizations where the managers must
have a good relationship with the employees. Reward programs have proved to be very
successful in motivating employees and in turn increase the performance of the
organization as a whole.

Below are some of the reasons why a reward system is important:

 Mutually beneficial-
A reward system is beneficial not only to the employee but also to the organization. The
employee will feel more motivated to work harder.by having a reward system in place the
employee will feel more committed to their work and their productivity will increase. An
increase in productivity will then benefit the organization. Therefore, a reward system is
mutually beneficial to the employee and the organization.
 Motivation-
A reward system will motivate employees by reaching targets and organizational goals in
exchange for rewards. A reward system is great at motivating employees but they will
also be motivated to prove themselves to the organization.

 Absenteeism-
A reward system will reduce absenteeism in the organization. Employees like being
rewarded for a job well done and if there is a reward system in place, employees will be
less likely to be ringing in sick and not showing up for work. Also by having a reward
system in place the employees will be clearer about the targets and goals of the
organization as they will be rewarded when reach certain targets. So, by having a reward
system as an incentive they will be less likely to be absent from work.

 Loyalty-
A reward system will increase the employee's loyalty to the organization. By a reward
system being in place the employee feels valued by the organization and knows that their
opinion matters. If an employee is happy with the reward system, they are more likely to
appreciate work place and remain loyal to the organization.

 Moral-
Having a reward system in place providing employees with incentives and recognition
will boost their morale. By encouraging employees to meet goals and targets it gives
them clear focus and purpose which will their morale. By the employees’ morale being
boosted this will increase the morale of the entire organization. This is all down to a
reward system in the organization.
 Teamwork-
The reward system will increase the teamwork spirit in the organization. The reward
system will promote teamwork to the employees. The employees will work together as
part of a team to achieve their targets in return for rewards. Teamwork within the
organization will help increase efficiency and create a happier workplace. This is another
reason why reward systems are important in business organizations.

This is all the various types of reward system and their benefits which indicates that
rewards are very much important for creating or increase the motivation of employees.

----------------------------

Appraisal Method
 &
Effectiveness

Methods of Performance Appraisal

Each method of performance appraisal has its strengths and weaknesses may be
suitable for one organization and non-suitable for another one. As such, there is no single
appraisal method accepted and used by all organizations to measure their employees’
performance.

A more widely used classification of appraisal methods into two categories

 traditional methods and
 modem methods

“While traditional methods lay emphasis on the rating of the individual’s personality
traits, such as initiative, dependability, drive creativity, integrity, intelligence, leadership
potential, etc.; the modem methods, on the other hand, place more emphasis on the
evaluation of work results, job achievements than the personal traits!”
According toStrauss and Sayles

Types of Methods of Performance Appraisal

In the discussion that follows, each method under both categories will be described
briefly.

Traditional Methods:
  Ranking Method:
It is the oldest and simplest formal systematic method of performance appraisal in
which employee is compared with all others for the purpose of placing order of worth.
The employees are ranked from the highest to the lowest or from the best to the worst.
In doing this the employee who is the highest on the characteristic being measured and
also the one who is L lowest, are indicated. Then, the next highest and the next lowest
between next highest and lowest until all the employees to be rated have been ranked.
Thus, if there are ten employees to be appraised, there will be ten ranks from 1 to 10.
Limitations:
However, the greatest limitations of this appraisal method are that:
(i) It does not tell that how much better or worse one is than another,
(ii) The task of ranking individuals is difficult when a large number of employees
are rated, and
(iii) It is very difficult to compare one individual with others having varying
behavioral traits. To remedy these defects, the paired comparison method of performance
appraisal has been evolved.

 Paired Comparison:
In this method, each employee is compared with other employees on one- on one basis,
usually based on one trait only. The rater is provided with a bunch of slips each coining
pair of names, the rater puts a tick mark against the employee whom he insiders the better
of the two. The number of times this employee is compared as better with others
determines his or her final ranking.
The number of possible pairs for a given number of employees is ascertained by the
following formula:
N (N-1)/2
Where,
N = the total number of employees to be evaluated.
Thus, the pairs so ascertained give the maximum possible permutations and
combinations. The number of times a worker is considered better makes his/her score.
Such scores are determined for each worker and he/she is ranked according to his/her
score. One obvious disadvantage of this method is that the method can become unwieldy
when large numbers of employees are being compared.

 Grading Method:
In this method, certain categories of worth are established in advance and carefully
defined. There can be three categories established for employees:
 outstanding,
 satisfactory and
 unsatisfactory.
There can be more than three grades. Employee performance is compared with grade
definitions. The employee is, then, allocated to the grade that best describes his or her
performance.
Such type of grading is done is Semester pattern of examinations and in the selection of a
candidate in the public service sector. One of the major drawbacks of this method is that
the rater may rate most of the employees on the higher side of their performance.

 Forced Distribution Method:

This method was evolved by Tiffen to eliminate the central tendency of rating most of the
employees at a higher end of the scale. The method assumes that employees’
performance level confirms to a normal statistical distribution i.e., 10,20,40,20 and 10 per
cent. This is useful for rating a large number of employees’ job performance and promo
ability. It tends to eliminate or reduce bias.
It is also highly simple to understand and easy to apply in appraising the performance of
employees in organizations. It suffers from the drawback that improve similarly, no
single grade would rise in a rating.
Each statement carries a score or weight, which is not made known to the rater. The
human resource section does rating for all sets of statements— both positive and
negative. The final rating is done on the basis of all sets of statements. Thus, employee
rating in this manner makes the method more objective. The only problem associated
with this method is that the actual constructing of several evaluative statements also
called ‘forced-choice scales’, takes a lot of time and effort.

 Check-List Method:
The basic purpose of utilizing check-list method is to ease the evaluation burden upon the
rater. In this method, a series of statements, i.e., questions with their answers in ‘yes’ or
‘no’ are prepared by the HR department. The check-list is, then, presented to the rater to
tick appropriate answers relevant to the appraisee. Each question carries a weight-age in
relationship to their importance.

Sample Check-list for Appraising University Teachers

When the check-list is completed, it is sent to the HR department to prepare the final
scores for all appraises based on all questions. While preparing questions, an attempt is
made to determine the degree of consistency of the rater by asking the same question
twice but in a different manner.

Limitation:
  However, one of the disadvantages of the check-list method is that it is difficult to
assemble, analyze and weigh a number of statements about employee
characteristics and contributions.
 From a cost stand point, also, this method may be inefficient particularly if there
are a number of job categories in the organization, because a check-list of
questions must be prepared for each category of job. It will involve a lot of money,
time and efforts.

 Critical Incidents Method:

In this method, the rater focuses his or her attention on those key or critical behaviors that
make the difference between performing a job in a noteworthy manner (effectively or
ineffectively). There are three steps involved in appraising employees using this method.
First, a list of noteworthy (good or bad) on-the-job behavior of specific incidents is
prepared.
Second, a group of experts then assigns weightage or score to these incidents, depending
upon their degree of desirability to perform a job.
Third, finally a check-list indicating incidents that describe workers as “good” or “bad” is
constructed. Then, the check-list is given to the rater for evaluating the workers.

Limitations:
Its drawbacks are to regularly write down the critical incidents which become
 time-consuming and
 burdensome for evaluators

 Graphic Rating Scale Method:

The graphic rating scale is one of the most popular and simplest techniques for appraising
performance. It is also known as linear rating scale. In this method, the printed appraisal
form is used to appraise each employee.
The form lists traits (such as quality and reliability) and a range of job performance
characteristics (from unsatisfactory to outstanding) for each trait. The rating is done on
the basis of points on the continuum. The common practice is to follow five points scale.
  Essay Method:
Essay method is the simplest one among various appraisal methods available. In this
method, the rater writes a narrative description on an employee’s strengths, weaknesses,
past performance, potential and suggestions for improvement. Its positive point is that it
is simple in use. It does not require complex formats and extensive/specific training to
complete it.
Limitations:
However, essay method, like other methods, is not free from drawbacks in
 The absence of any prescribed structure,
 The essays are likely to vary widely in terms of length and content.
 And, of course, the quality of appraisal depends more upon rater’s writing skill
than the appraiser’s actual level of performance.

 Field Review Method:

When there is a reason to suspect rater’s biasedness or his or her rating appears to be
quite higher than others, these are neutralized with the help of a review process. The
review process is usually conducted by the personnel officer in the HR department.

The review process involves the following activities:

(a) Identify areas of inter-rater disagreement.
(b) Help the group arrive at a consensus.
(c) Ensure that each rater conceives of the standard similarity.

Modern Methods
 Management by Objectives (MBO):
Most of the traditional methods of performance appraisal are subject to the antagonistic
judgments of the raters. It was to overcome this problem;
Peter F. Drucker propounded a new concept, namely, management by objectives (MBO)
way back in 1954 in his book.
“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 and use these measures as guides for operating the unit and
assessing the contribution of each its members”.
According to Drucker
In other words, stripped to its essentials, MBO requires the manager to goals with each
employee and then periodically discuss his or her progress toward these goals.

Steps of MBO:

Goal Performanc
Setting e standard

Compariso Periodic
n review
Goal-setting:
Goals are set which each individual, s to attain. The superior and subordinate jointly
establish these goals. The goals refer to the desired outcome to be achieved by each
individual employee.
Performance standards:
The standards are set for the employees as per the previously arranged time period.
When the employees start performing their jobs, they come to know what is to be done,
what has been done, and what remains to be done.
Comparison:
In the third step the actual level of goals attained are compared with the goals agreed
upon. This enables the evaluator to find out the reasons variation between the actual and
standard performance of the employees. Such a comparison helps devise training needs
for increasing employees’ performance it can also explore the conditions having their
bearings on employees’ performance but over which the employees have no control.
Periodic review:
Corrective measure is initiated when actual performance deviates from the slandered
established in the first step-goal-setting stage. Consistent with the MBO philosophy
periodic progress reviews are conducted in a constructive rather than punitive manner.

Limitation of MBO:
(i) Setting Un-Measurable Objectives:
(ii) Time-consuming:
(iii) Tug of War:
(iv) Lack of Trust:
MBO is likely to be ineffective in an environment where management has little trust in its
employees. Or say, management makes decisions autocratically and relies heavily on
external controls.
  Behaviorally Anchored Rating Scales (BARS):
It combines the benefits of narratives, critical incidents, and quantified ratings by
anchoring a quantified scale with specific behavioral examples of good or poor
performance. The proponents of BARS claim that it offers better and more equitable
appraisals than do the other techniques of performance appraisal we discussed so far.
 Developing BARS typically involves five steps:

1. Generating Critical Incidents:

Critical incidentsare those which are essential for the performance of the job effectively
Persons who are knowledgeable of the job in question are asked to describe specific
critical incidents of effective and ineffective performance. These critical incidents may be
described in a few short sentences or phrases using the terminology.

2. Developing Performance Dimensions:

The critical incidents are then clustered into a smaller set of performance dimensions,
usually five to ten. Each cluster, or say, dimension is then defined.

3. Reallocating Incidents:
Various critical incidents are reallocated dimensions by another group of people who also
know the job in question. Various critical incidents so reallocated to original dimensions
are clustered into various categories, with each cluster showing similar critical incidents.

4. Scaling Incidents:
The same second group as in step 3 rates the behavior described in each incident in terms
of effectiveness or ineffectiveness on the appropriate dimension by using seven to nine
points scale. Then, average effectiveness ratings for each incident are determined to
decide which incidents will be included in the final anchored scales.

5. Developing Final BARS Instrument:

A subset of the incidents (usually six or seven per cluster) is used as a behavioral anchor
for the final performance dimensions.
Now, a BAR for one of these performance dimensions, namely, “knowledge and
judgment” can be developed.
  Assessment Centers:
In business field, assessment centers are mainly used for evaluating executive or
supervisory potential. By definition, an assessment center is a central location where
managers come together to participate in well-designed simulated exercises. They are
assessed by senior managers supplemented by the psychologists and the HR specialists
for 2-3 days.

Assesse is asked to participate in in-

 Basket exercises,
 Work groups,
 Simulations, and
 Role playing
which are essential for successful performance of actual job. Having recorded the
assessesbehavior the raters meet to discuss their pooled information and observations
and, based on it, they give their assessment about the assesee. At the end of the process,
feedback in terms of strengths and weaknesses is also provided to the assesees.

 360 – Degree Appraisal:

Under 360 – degree appraisal, performance information such as employee’s skills,
abilities and behaviors, is collected “all around” an employee, i.e., from his/her
supervisors, subordinates, peers and even customers and clients.
In other worlds, in 360-degree feedback appraisal system, an employee is appraised by
his supervisor, subordinates, peers, and customers with whom he interacts in the course
of his job performance. All these appraisers provide information or feedback on an
employee by completing survey questionnaires designed for this purpose.

All information so gathered is then compiled through the computerized system to prepare
individualized reports. These reports are presented to me employees being rated. They
then meet me appraiser—be it one’s superior, subordinates or peers—and share the
information they feel as pertinent and useful for developing a self-improvement plan.

In 360 – degree feedback, performance appraisal being based on feedback “all around”,
an employee is likely to be more correct and realistic. Nonetheless, like other traditional
methods, this method is also subject to suffer from the subjectivity on the part of the
appraiser. For example, while supervisor may penalize the employee by providing
negative feedback, a peer, being influenced by ‘give and take feeling’ may give a rave
review on his/her colleague.

 Cost Accounting Method:

This method evaluates an employee’s performance from the monetary benefits the
employee yields to his/her organization
While evaluating an employee’s performance under this method, the following factors are
also taken into consideration:

1. Unit wise average value of production or service.

2. Quality of product produced or service rendered.

3. Overhead cost incurred.

4. Accidents, damages, errors, spoilage, wastage caused through unusual wear and tear.

5. Human relationship with others.

6. Cost of the time supervisor spent in appraising the employee.

 Effectiveness of Performance Appraisal Method

Importance of Providing Effective Feedback:

Giving feedback to subordinates is not always an easy thing to do. Negative feedback
may not be well received and can create difficult relations in the future. These realities
are counterbalanced by the necessity of honesty. Without accurate feedback employees,
will not know what they need to improve and the workplace suffers. How then, can we
give accurate, candid feedback without damaging work relationships, or hurting those we
are trying to help? Here are several insights into this topic:

Ensure the employee understands the process of the appraisal and criteria under
evaluation:
One way to improve employee acceptance of an appraisal process is to involve them in
the appraisal process. Explaining clearly and completely what will be done, the behaviors
that are expected of them, as well as the criteria on which they will be evaluated can
increase employee buy in.
If employees have limited understanding of the purpose, or the process, they will have
more difficulty accepting the outcomes- clear, open communication can aid in
eliminating this barrier. Having employees complete a self-appraisal can also be a helpful
tool.
Continuous feedback ensures open communication and awareness:
Another important precursor to acceptance of appraisal feedback is the frequency of
feedback outside the appraisal process. An employee may feel "blindsided" by
information that could have been shared with them previously, but was held back. By
sharing tips or suggestions throughout the year, not just at appraisal time can reduce
surprises, and increase acceptance of appraisal ratings.

Fair procedures and communication can make up for negative outcomes:

Explaining thoroughly the process and giving examples of the reasons for the appraisal
rating can create less friction for the employee, letting them know that the appraisal
process was approached the same for everyone. They are not being singled out, or
persecuted. Interpersonal communication makes a huge difference in accepting a negative
rating. You're not just softening the blow; you're helping them gain insight into how you
can help them improve for the future.

Giving the employee a voice, even when it will not change the rating it will help with
acceptance:
Allow the employee to express their views. Always remember that they have a right to
their opinion, even when it differs from yours. Let them know that you understand their
feelings and that you want to be helpful to them. The rating cannot be changed until their
performance changes. The purpose of the appraisal is to give them information for
improvement and listen to them, not to punish. Another important outcome of giving
employees a voice is the likelihood of uncovering misunderstandings. If an employee
believes they are doing well and are unaware anything is wrong, they will not know a
change in performance is needed.

Ensure consistent standards are used to evaluate job relevant behaviors:

This may seem obvious, but is important for employees to understand what is being
evaluated. It is their job performance and job relevant factors that affect the workplace.
This feature is one of the most important for employees. If something other than job
related performance is being evaluated, they will feel mistreated and rightly so! Be sure
to communicate this when giving feedback and outline the connections between their
behavior and workplace effectiveness.
-----------------------