Performance Appraisal

Definition Purpose Advantages Criteria Shortcomings Remedy

The overall objective of performance appraisal is to improve the efficiency of an enterprise by attempting to mobilize the best possible efforts from individuals employed in it. Such appraisals achieve four objectives including the salary reviews, the development and training of individuals, planning, job rotation and assistance promotions. CUMMINGS

It is a well-established fact that people differ in their abilities and aptitudes. These differences are natural to a great extent and cannot be eliminated completely by giving them education and training. There will always be some difference in the quality and quantity of work done by different employees. Therefore, it is necessary for the management to know these differences so that it may develop certain programme in the organization for those employees who possess better potentials so that they may be developed to accept the challenges of higher jobs or wrong placement of employees may be rectified. The individual employees may also like to know their capability in terms of their performance on the job qualitatively and quantitatively in comparison to their fellow employees so that they may improve upon it. No firm has a choice as to whether or not it should appraise its personnel and their performance but the choice lies between the systematic and the unsystematic or casual appraisal. The system of appraising the man is not new but the systematic approach of evaluating the man is by any means a new development. The technique of appraising the man by superiors or others is widely known as Merit Rating. It is also sometimes, termed as employees appraisal or personnel appraisal/rating.

Definition
Performance appraisal is one of the most important functions of personnel management. People differ in their abilities and aptitudes. The personnel management should know these differences to develop various development programmes in the organization in order to have an efficient work force. Performance appraisal technique has been evolved to know the relative worth of the employee- qualitatively and quantitatively- on the job, in comparison to other fellow workers. It is used for measuring the merit or performance of an employee and comparing it with that of others in the same group. To quote:

According to Flippo, performance appraisal is a systematic, periodic and so far as humanly possible, an impartial rating of an employees excellence in matters pertaining to his present job and to his potentialities for a job. According to Yoder, performance appraisal refers to all formal procedures used in working organizations to evaluate personalities and contributions and potential of group members. Thus, performance appraisal is a systematic evaluation by the supervisor or some qualified person of an individual workers performance. The process of performance appraisal starts at the time of recruitment and continues throughout the life of an employee in an organization.

Purpose of Performance Appraisal

The purpose of Performance Appraisal is to determine an employees worth to the organization. It is a continuous process and made at regular intervals. The purposes of performance appraisal fall in two categories: 1. Administrative; and 2. Self-improvement.

1. Administrative purpose:
(i) Promotions This is perhaps the most important administrative use of performance appraisal. It is in interest of the management to promote employees into positions where they can perform most effectively. A properly developed and administrative performance appraisal system can aid in determining whether individuals should be considered for promotions. The system must rate employee for the present job and his potentialities for the higher job. A person performing his job well does not necessarily mean that he is fit for promotion. (ii) Transfers

In an organisation, it may be necessary to consider various types of personnel actions such as transfers, lay offs, demotions, and discharges. In some cases, such actions are called for because of unsatisfactory performance while in other cases it may be called for due to economic conditions over which the organisation has no control because of changes in production process. Such actions can be justified if they are based on performance appraisal. (iii) Wage and salary administration

In some cases, the wage increases are based on the performance appraisal reports. In some cases, appraisals and seniority are used in combination. (iv) Training and development

An appropriate system of performance appraisal can be helpful in two ways. First, it can help in identifying the areas of skills or knowledge in which numerous employees are not up to par, thus pointing out general training deficiencies which presumably should be corrected by additional training, interviews, discussions,

or counseling. Secondly, these appraisals help in spotting the potentials to train and develop them to create an inventory of executive skills. It can also provide the areas where the employee/executive could be further trained and positioned to meet retirement and expansion situations. (v) Personnel research

Performance appraisal helps in research in the field of personnel management. Various theories in human relationships are the outcome of efforts to find out the cause and effect relationship between the personnel and their performance. The following diagram would help us understand the basic purpose a good performance appraisal system would do to us.

Helps to achieve organizations task through guided efforts of individuals.

Provides data for evolving development plans for individuals.

Provides one of the inputs for decisions on promotions, etc.

Performance Appraisal system.

Enables clarification of expectations between superiors and subordinates

Provides data in terms of needs, aspirations of individuals to review company policies and structure.

2. Self improvement:
The performance appraisals bring out the deficiencies and shortcomings of the ratee. A discussion between the rater and the ratee conducted in a spirit of cooperation and mutual understanding gives the chance to employee to have an insight on his performance in the general set up of the organisation. The way these discussions are conducted give chance to the employees to take suitable steps to improve upon their performance or to correct their shortcomings. Performance rating answers the questions of the employees like How am I doing? and Where do I stand? Performance appraisal helps manpower development in another way also. A promotion minded individual could ask for the target programmes of a position he seeks and uses the information given by performance appraisal to prepare him for the job and enhances his candidacy. In short, performance appraisal helps to spot out a persons ability to see an organizational problem, devise ways of solving it, translate his ideas into action, incorporate new information as it arises and carry his plans through the results. It highlights a sort of total managerial action in contrast to things we customarily factor out as conceptual entities- things such as the planning function, leadership ability, or financial knowledge. The managers selection will often be improved by this emphasis on the whole managerial job. It should be noted that best predictor of future success as a manager is past success in managerial duties. The appraisal programme asks the raters to look at the record of managerial success, not the managers personality.

Advantages of Performance Appraisal

The appraisal of performance is expected to provide answers to many of the questions in management of people in the organization. The people who make up a working organization are evaluated for many reasons. Individual managements may give different priorities to the purposes of performance appraisal may serve the following objectives in the organization: 1. Systematic performance appraisal provides information of great assistance in making and enforcing decisions about such subjects as promotions, pay increases, lay offs, and transfers. A research study has disclosed that performance appraisal is used for promotion in 73% cases, salary adjustments 69%, and stimulating employee improvement 61%. Performance appraisal provides information in advance of time when it may be made. Moreover, the systematic approach provides the information in a form that permits the making of comparisons. 2. A systematic performance appraisal serves to guide employee development. Most people like to know how they are doing. Appraisal programme provides this information, which can be communicated, to employees. Weaknesses of the employees reveled through the appraisal process can be removed through organizing training and development programme. Thus, this provides opportunities of assessing employees training needs in the organization. 3. Performance appraisal puts a psychological pressure on people to improve performance on the job. If the people are conscious that they are being appraised in respect of certain factors and their future largely depends on such appraisal, they tend to have positive and acceptable behaviour in this respect. Thus, the appraisal automatically works as a control device. 4. Appraisal also serves to maintain fair relationships in groups. Thus, it is necessary for tactical and strategic planning, motivation, communication and equity. 5. The existence of a regular appraisal system tends to make the supervisors and the executives more observant of their subordinates because they know that they will be expected periodically to fill out rating forms and would be called upon to justify their estimates. This improves supervision. 6. Performance appraisal serves as a means for evaluating the effectiveness of devices used for the selection and classification of workers. Knowledge of the characteristics of superior and inferior workers can be helpful in selection and placement of workers. 7. Wage increase to some people in the organisation may be justified on the basis of performance appraisal. 8. The performance appraisal pinpoints the deficiencies and shortcomings of the employees and organization doing the course of appraisal. The employer may take corrective measures to improve upon their performance. 9. The employee comes to know his performance on the job and his potential for the higher hob. It helps the employee in introspection.

In this way, performance appraisal aims at improving the administrative deficiencies and improving the performance of the personnel.

Criteria of Performance Appraisal

Our goal on performance appraisal is not to make distinctions among jobs but rather to make distinction among people, especially among people in the same job. The criteria may be subjective or objective. Subjective criteria of performance appraisal are rating of employees job proficiency by their superiors, peer and subordinates, extent of upward communication of ideas, degree of knowledge about corporate goals etc. objective measures of performance also suffers from several glaring weaknesses. Objectives indices can be easily laid down at the lower levels of an organisation where the jobs are generally specific and clearly defined. There are a number of criteria, which can be used to appraise the performance of different classes of employees in an organisation. Some of the important criteria are as follows: 1. Production Where a worker is engaged on a production job, the number of units produced in a given time would accurately represent his proficiency. The amount of output should be adjusted for variation in quality to make it directly comparable with the output of other workers. 2. Work-Sample Tests When accurate output records of workers cannot be obtained for one reason or the other, work sample tests can serve as a measure of proficiency. In a work sample test the employee performs exactly the same work as that involved in the job. 3. Length of Service In many situations the longer a worker has remained on a job, the more successful he is considered. His long stay on the job reflects his ability to adjust to the working conditions, his ability to cooperate with his fellow workers, satisfaction with the job etc. 4. Training When the training period is expensive to the organisation, training time can be used as a measure of workers proficiency. The worker who needs a longer time to learn is considered inferior to one who learn s in a relatively short time. 5. Ratings of the supervisors Ratings are qualitative statement of opinion of foremen, managers and others in supervisory authority on such characteristics of a worker as job knowledge, cooperativeness, dependability, attendance, regard for safety, ability to deal with people, etc. However, it is erroneous to think that there is always one measure job success. In actual practice, and rightly so, several measures are combined into a single one criterion. This means that a weight must be assigned to each of the component measures of efficiency. Weighting again depends upon personal judgment.

Shortcomings of Performance Appraisal Method

Performance appraisals, although very widely used, have well recognized shortcomings and limitations. Even when the process emphasizes appraisal rather than counseling, it is far from universally satisfactory. There are certain barriers, which work against the effectiveness of appraisal system. The identification of these barriers is necessary to minimize their impact on the appraisal system. The principal barriers to effective appraisal programme are: 1. Faulty assumptions: Because of the faulty assumptions of the parties concerned- superior and his subordinates- in appraisal system, it does not work properly or objectively. These assumptions work against an appraisal system in the following manner: a) The assumption that managers naturally wish to make fair and accurate appraisals of subordinates is untenable. Mc Farland feels that both superiors and subordinates show tendencies to avoid formal appraisal processes, as well as to heed them in their respective work roles. b) Another faulty assumption is that managers take a particular appraisal system as perfect and feel that once they have launched a programme that would continue forever. They expect too much from it, and relay too much on it, or blame for their faults. It should be recognized that no system could provide perfect, absolutely defensible appraisals devoid of subjectivity. c) Managers sometimes assume that personal opinion is better than formal appraisal, and they find little use of systematic appraisal and review procedures. However, this management by instinct assumption is not valid and leads to bias, subjectivity and distorted decisions based on partial or inaccurate evidence. d) Managers assumptions that employees want to know frankly where they do stand and what their superiors think about them are not valid. In fact, subordinates resist to be appraised and their reaction against appraisal has often been intense. As such they try to defeat the basic purpose of appraisal by providing camouflaged information as far as possible.

2. Psychological Blocks: The value of any tool including performance appraisal, lies largely on the skills of the user. Therefore, the utility of performance appraisal depends upon the psychological characteristics of managers, no matter whatever the method is used. However, research tells more about the inhibiting rather than facilitating characteristics of people. There are several psychological blocks, which work against the effectiveness of an appraisal system. These are: managers feeling of insecurity, appraisal as an extra burden, their being excessively modest or skeptical to treat their subordinates, failure as their deficiency, disliking of resentment by subordinates, and so on. Because of these psychological barriers, managers do not tend to become impartial or objective in evaluating their subordinates, thereby defeating the basic purpose of appraisal.

3. Technical pitfalls: The designs of performance appraisal have received detailed attention from psychologists, but the problem of finding adequate criteria still exists there. At best, appraisal methods are subjective, and do not measure performance in any but in the most general sense. The main technical difficulties in appraisal fall into two categories: the criterion problem, and distortions that reduce the validity of results. a. Criterion problem- A criterion is standard of performance the manager desires of his subordinates and against which he compares their actual performance. This is the weakest point in appraisal procedure. Criteria are hard to define in measurable; or even, in objective terms. Ambiguity, vagueness and generality of criteria are difficult hurdles for any process to overcome. Traits too present ambiguity. A particular trait is hard to define and variations of interpretation easily occur among different managers using them. b. Distortion- Distortions occur in the form of biases and errors in making the evaluation. Evaluator may introduce such distortions consciously or unconsciously. An appraisal system has the following possible distortions: o Halo effect- this distortion exists where the rater is influenced by ratees one or two outstandingly good (or bad) performances and he evaluates the entire performance accordingly. Another type of halo effect occurs where work team or informal group with which a subordinate associates influences the raters judgment. If the group is not well liked, this attitude may work the rating of the individuals on it, apart from the actual performance. o Central tendency- this error occurs when the rater marks all or almost all his personnel as average. He fails to discriminate between superior and inferior persons. This may arise from the raters lack of knowledge of individuals he is rating, or from taste, indifference or carelessness. o Constant errors- there are easy raters and tough raters in all phase of life. Some raters habitually rate everyone high; others tend to rate low. Some rate on potential rather than on recently observed performance. In such situation, the results of two raters are hardly comparable. o Raters liking and disliking- managers, being human beings, have strong liking and disliking for people, particularly for close associates. The rating is influenced by personal factors and emotions, and rates may weigh personality traits more heavily than they realize. Raters tend to give high rating to persons whom they like and low to whom they dislike.

Remedy for Overcoming Obstacles

Systematic performance appraisal is a measurement process and as such must be reliable, which means that it must be accurate and consistent. Two main obstacles that come in the way of reliable appraisal system are: technical characteristics of the system itself and the abilities of the appraiser to exercise objective judgement and apply the tools provided. Taking appropriate actions in this direction may reduce the impact of these obstacles if not altogether eliminate them.

Following measures may be taken: 1. The reliability of a rating system can be obtained by comparing the rating of two individuals for the same person. It can also be obtained by comparing the supervisors rating given now to another rating in future. Moreover, the degree of reliability in an appraisal system cannot be as high as psychological test; it is essentially an attempt to objectivity and it deals with more intangible subjects. Thus, one should go for satisfactory level of reliability only. 2. The appraisal system can be designed to help in minimizing undesirable effects. The system should focus on objective analysis of performance in terms of specific events, accomplishment of failures. The raters may require their rates through as much continuous and close personal observation as possible. 3. The immediate superiors must make the ratings however, a staff department can assume the responsibility of monitoring the system. Though the staff department cannot change any rating, it can point out inconsistencies to the rater, such as harshness, leniency, central tendency, and so on. 4. The rating should be reviewed with the ratee. This process helps in several ways. It helps him to know where he stands, what he is expected to do, what are his strengths and weaknesses, and what future actions he should take. This not only puts subordinates in a position to improve performance, he also minimizes his resistance to appraisal if a proper atmosphere has been created. 5. The most important factor for effective appraisal system is the supportive management philosophy. Without an appropriate basic philosophy to generate the continuous support of all the managers, appraisal system cannot succeed. The philosophy must pervade the organisation with good examples from top management. The goal oriented climate, communications and the conduct of business among employees favors the development of effective performance appraisal methods.