You are on page 1of 9

Introduction to Performance Appraisal

Performance appraisal is “a well-established way of providing milestones, feedback, guidance


and monitoring for staff. A further development….is tying this appraisal into a larger and more
complex system of performance management” (Weightman,1999). CIPD (2008d) support the
view that whilst performance appraisal is an important part of performance management, it is
only one tool amongst a range of tools that can be used to manage performance. They also
highlight the fact that because performance appraisals are most usually carried out by the line
managers, rather than HR professionals, it is important that they understand their role in the
process and have the right skills to conduct them effectively.
Definitions of Performance Appraisal
Performance Appraisal has been defined as follows:
According to Edwin Flippo, Performance appraisal is the systematic, periodic and an impartial
rating of an employee‘s excellence in matters pertaining to his present job and his potential for a
better job.
According to Cummings, The overall objective of performance appraisal is to improve the
efficiency of an enterprise by attempting to mobilise the best possible efforts from individuals
employed in it. Such appraisals achieve our objectives including the salary reviews the
development and training of individuals, planning job rotation and assistance promotions.
According to Wendell French, Performance appraisal and review in the formal, systematic
assessment of how well employees are performing their jobs in relations to establish standards
and the communication of that assessment to employees.
Characteristics of Performance Appraisal
The following are the characteristics of Performance Appraisal
A Process
Performance appraisal is not a one- act play .It is rather a process that involves several acts or
steps.
Systematic Assessment
Performance appraisal is a systematic assessment of an employee‘s strengths and weakness in
the context of the given job.
Main Objective
The main objective of it is to know how well an employee is going for the organisation and what
needs to be improved in him.
Scientific Evaluation
It is an objective, unbiased and scientific evaluation through similar measure and procedures for
all employees in a formal manner.
Periodic Evaluation
Systematic (i.e., formal) appraisal of an individual employee is likely to occur at certain intervals
throughout that person‘s history of employment (say quarterly ,six monthly, annually, etc.)
Methods or Techniques f Performance Appraisal

The most difficult part of the performance appraisal process is measuring actual performance of
the employees i.e. the work done by the employees during a specified period of time. It is a
continuous process which involves monitoring the performance throughout the year. Numerous
methods have been devised to measure the quantity and quality of performance appraisals. Each
of the methods is effective for some purposes for some organizations only. None should be
dismissed or accepted as appropriate except as they relate to the particular needs of the
organization or an employee.

Broadly all methods of appraisals can be divided into two different categories.

Traditional Methods or Past Oriented Methods

Modern Methods or Future Oriented Methods

Performance Appraisal Methods

Traditional Methods Modern Methods

1. Ranking Method 1. Management by Objective (MBO)


2. Grading Method 2. Assessment Centre Method
3. Man-to-Man Comparison Method 3. Human Asset Accounting Method
4. Graphic Rating Scale Method 4. Behaviourally Anchored Rating Scales
Traditional/Past Oriented Methods
Rating Scales
Rating scales consists of several numerical scales representing job related performance criterions
such as dependability, initiative, output, attendance, attitude etc. Each scales ranges from
excellent to poor. The total numerical scores are computed and final conclusions are derived.
Advantages – Adaptability, easy to use, low cost, every type of job can be evaluated, large
number of employees covered, no formal training required.
Disadvantages – Rater’s biases
Checklist Method
Under this method, checklist of statements of traits of employee in the form of Yes or No based
questions is prepared. Here the rater only does the reporting or checking and HR department
does the actual evaluation.
Advantages – economy, ease of administration, limited training required, standardization.
Disadvantages – Raters biases, use of improper weighs by HR, does not allow rater to give
relative ratings
Forced Choice Method
The series of statements arranged in the blocks of two or more are given and the rater indicates
which statement is true or false. The rater is forced to make a choice. HR department does actual
assessment.
Advantages – Absence of personal biases because of forced choice.
Disadvantages – Statements may be wrongly framed.
Forced Distribution Method
Here employees are clustered around a high point on a rating scale. Rater is compelled to
distribute the employees on all points on the scale. It is assumed that the performance is
conformed to normal distribution.
Advantages; they force reluctant managers to make difficult decisions and identify the most and
least talented members of the work group.
They create and sustain a high performance culture in which the workforce continuously
improves.
Disadvantages; Assumption of normal distribution, unrealistic, errors of central tendency.
Critical Incidents Method
The approach is focused on certain critical behaviors of employee that makes all the difference in
the performance. Supervisors as and when they occur record such incidents.
Advantages – Evaluations are based on actual job behaviors, ratings are supported by
descriptions, feedback is easy, reduces recency biases, chances of subordinate improvement are
high.
Disadvantages – Negative incidents can be prioritized, forgetting incidents, overly close
supervision; feedback may be too much and may appear to be punishment.
Behaviorally Anchored Rating Scales
Statements of effective and ineffective behaviors determine the points. They are said to be
behaviorally anchored. The rater is supposed to say, which behavior describes the employee
performance.
Advantages – helps overcome rating errors.
Disadvantages – Suffers from distortions inherent in most rating techniques.
Field Review Method
This is an appraisal done by someone outside employees’ own department usually from
corporate or HR department.
Advantages – Useful for managerial level promotions, when comparable information is needed,
Disadvantages – Outsider is generally not familiar with employees work environment,
Observation of actual behaviors not possible.
Performance Tests & Observations: This is based on the test of knowledge or skills. The tests
may be written or an actual presentation of skills. Tests must be reliable and validated to be
useful.
Advantage – Tests may be apt to measure potential more than actual performance. Disadvantages
– Tests may suffer if costs of test development or administration are high.
Confidential Records
Mostly used by government departments, however its application in industry is not ruled out.
Here the report is given in the form of Annual Confidentiality Report (ACR) and may record
ratings with respect to following items; attendance, self expression, team work, leadership,
initiative, technical ability, reasoning ability, originality and resourcefulness etc. The system is
highly secretive and confidential. Feedback to the assessee is given only in case of an adverse
entry.
Disadvantage is that it is highly subjective and ratings can be manipulated because the
evaluations are linked to HR actions like promotions etc.
Essay Method: In this method the rater writes down the employee description in detail within a
number of broad categories like, overall impression of performance, promoteability of employee,
existing capabilities and qualifications of performing jobs, strengths and weaknesses and training
needs of the employee.
Advantage – It is extremely useful in filing information gaps about the employees that often
occur in a better-structured checklist.
Disadvantages – It its highly dependent upon the writing skills of rater and most of them are not
good writers. They may get confused success depends on the memory power of raters.
Cost Accounting Method: Here performance is evaluated from the monetary returns yields to
his or her organization. Cost to keep employee, and benefit the organization derives is
ascertained. Hence it is more dependent upon cost and benefit analysis.
Comparative Evaluation Method (Ranking & Paired Comparisons): These are collection of
different methods that compare performance with that of other co-workers. The usual techniques
used may be ranking methods and paired comparison method.
Ranking Methods: Superior ranks his worker based on merit, from best to worst. However how
best and why best are not elaborated in this method. It is easy to administer and explanation.
Modern/Future Oriented Methods
Management By Objectives
It means management by objectives and the performance is rated against the achievement of
objectives stated by the management. MBO process goes as under.
Step 1: Establish goals and desired outcomes for each subordinate
Step 2: Setting performance standards
Step 3: Comparison of actual goals with goals attained by the employee
Step 4: Establish new goals and new strategies for goals not achieved in previous year.
Advantage – It is more useful for managerial positions.
Disadvantages – Not applicable to all jobs, allocation of merit pay may result in setting short-
term goals rather than important and long-term goals etc.
Psychological Appraisals: These appraisals are more directed to assess employees potential for
future performance rather than the past one. It is done in the form of in-depth interviews,
psychological tests, and discussion with supervisors and review of other evaluations. It is more
focused on employees emotional, intellectual, and motivational and other personal characteristics
affecting his performance. This approach is slow and costly and may be useful for bright young
members who may have considerable potential. However quality of these appraisals largely
depend upon the skills of psychologists who perform the evaluation.
Assessment Centers
This technique was first developed in USA and UK in 1943. An assessment center is a central
location where managers may come together to have their participation in job related exercises
evaluated by trained observers. It is more focused on observation of behaviors across a series of
select exercises or work samples. Assessees are requested to participate in in-basket exercises,
work groups, computer simulations, role playing and other similar activities which require same
attributes for successful performance in actual job. The characteristics assessed in assessment
center can be assertiveness, persuasive ability, communicating ability, planning and
organizational ability, self confidence, resistance to stress, energy level, decision making,
sensitivity to feelings, administrative ability, creativity and mental alertness etc.
Disadvantages – Costs of employees traveling and lodging, psychologists, ratings strongly
influenced by assessee’s inter-personal skills. Solid performers may feel suffocated in simulated
situations. Those who are not selected for this also may get affected.
Advantages – well-conducted assessment center can achieve better forecasts of future
performance and progress than other methods of appraisals. Also reliability, content validity and
predictive ability are said to be high in assessment centers. The tests also make sure that the
wrong people are not hired or promoted. Finally it clearly defines the criteria for selection and
promotion.
360-Degree Feedback
It is a technique which is systematic collection of performance data on an individual group,
derived from a number of stakeholders like immediate supervisors, team members, customers,
peers and self. In fact anyone who has useful information on how an employee does a job may be
one of the appraisers. This technique is highly useful in terms of broader perspective, greater
self-development and multi-source feedback is useful. 360-degree appraisals are useful to
measure inter-personal skills, customer satisfaction and team building skills. However on the
negative side, receiving feedback from multiple sources can be intimidating, threatening etc.
Multiple raters may be less adept at providing balanced and objective feedback.
Merits of 360-Degree Approach
 The organization gains from the self-awareness of the top managers. It reveals strengths
and weaknesses in their managing styles.
 The gap between self assessment and the views of one’s colleagues is reduced.
 Teamwork thrives once peer group assessment is included in the methodology.
 Empowerment is facilitated.
 Facts about the organizational culture are brought to light.
 Inflexible managers are forced to initiate change in their style:
Demerit of 360-Degree Approach
 360-degree approach can be utilised to humiliate people.
 Response from colleagues tends to be biased.
 Linking rewards to findings can prove to be unfair.
 The results could be uneven.
This technique identifies most suitable and acceptable person for the consideration of promotion.
360-degree approach supports the company’s progress and rewarding the excellent performance
of an individual.
Human Resource Accounting Method
Human resources are valuable assets for every organization. Human resource accounting method
tries to find the relative worth of these assets in the terms of money. In this method the
performance appraisal of the employees is judged in terms of cost and contribution of the
employees. The cost of employees include all the expenses incurred on them like their
compensation, recruitment and selection costs, induction and training costs etc whereas their
contribution includes the total value added (in monetary terms). The difference between the cost
and the contribution will be the performance of the employees. Ideally, the contribution of the
employees should be greater than the cost incurred on them.
Advantages
 Ascertain the cost of labor turnover.
 Development of human resources
 Planning and execution of personnel policies.
 Return on investment on human resources.
 Improve the efficiencies of employees.
Disadvantages
 There are no specific & clear-cut guidelines for finding cost and value of human
resources of an organization.
 The method measures only the cost to the organization but ignores completely any
measure of the value of the employee to the organization.
 The life of human resources is uncertain and therefore, valuing then under uncertainty
seems unrealistic.
Conclusion
The success of any performance management system is influenced by the effectiveness of its
appraisal system. From this we conclude that there are many techniques that used for
performance appraisal. It is very difficult to say that which technique is better than other
technique because it depends upon the type and size of organization. Each technique has its own
pros and cons. The various issues like performance appraisal process, methods, characteristic of
an effective performance appraisal system etc. have been covered in detail. It also covers the
concept of Key Performance Indicators and explains various financial performance indicators
which can be useful for measuring organisational performance.
References
Anupama and D. M.B.T. and Dulababu T., (2011). “The Need of 720 Degree Performance
Appraisal in the New Economy Companies”, International Journal of Multidisciplinary
Research, vol.1 (4),
Blstakova I.J. (2010) “Employees‟ Appraisal is an indicator of the quality of human resource
management in organizations in slovakia”,Mega Trend Review: The International
Review of Applied Economics,vol.7(2),
Bracken D.W. and Timmreck C.W. and Church (2001) A.H., Handbook of Multisource
Feedback, First Edition, Jossey Bass Inc,.
Byham W.C., (2006) The Assessment Center Method and Methodology: New Applications and
Methodologies, Development Dimensions International,
Elverfeldt A.V., (2005) Performance Appraisal-how to improve its effectiveness, University of
Twenty,Enschede,.
Jafari M. & Bourouni A. & Amiri H. A.,A New Framework for selection of the best performance
appraisal method, European Journal of Social Sciences,vol.7(3),2009.
Johanson U. & Eklov G. & Holempren M. & Martensson M., (1998) Human Resource Costing
and Accounting versus the Balanced Score Card: A Literature Survey of Experience with
the concepts, OECD, Paris,
Kohli A.S. & Deb T., Performance Management, First Edition, Oxford University Press, 2008.
Mondy & Wayne, (2008) Human Resource Management, Tenth Edition, Pearson
Education,Prentice Hall
Weihrich H.,A (2000) New approach to MBO Updating a time honored technique Troy State
University,

You might also like