HUMAN RESOURCES MANAGEMENT - II

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 OVERVIEW OF PERFORMANCE APPRAISAL

 Introduction

 Process of performance Appraisal

 Traditional Methods of Performance Appraisal

 Modern Methods of Performance Appraisal

 Factors Affecting Performance Appraisal

 General Findings about Performance Appraisal

 How to avoid Appraisal Problem

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 Topic: 1 Organisation Performance and
Performance Appraisal System.

Performance Appraisal
  Introduction
 People differ in their abilities and their aptitudes.
 There is always some difference between the quality and
quantity of the same work on the same job being done
by two different people.
 Performance appraisals of Employees are necessary
to understand each employee’s abilities, competencies
and relative merit and worth for the organization. 
 Performance appraisal rates the employees in terms of
their performance.

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 Performance appraisal is necessary to measure the
performance of the employees and the organization to
check the progress towards the desired goals and aims.

 The latest mantra being followed by organizations across

the world being – "get paid according to what you
contribute" – the focus of the organizations is turning to
performance management and specifically to individual
performance.

 Performance appraisal helps to rate the performance of

the employees and evaluate their contribution towards
the organizational goals.

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 If the process of performance appraisals is formal and
properly structured, it helps the employees to clearly
understand their roles and responsibilities and give
direction to the individual’s performance.

 It helps to align the individual performances with the

organizational goals and also review their performance.

Performance appraisal takes into account the past

performance of the employees and focuses on the
improvement of the future performance of the
employees.

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 Performance Appraisal is being practiced in 90% of the
organisations worldwide. 

Typically, Performance Appraisal is aimed at:

 To review the performance of the employees over a

given period of time.
 To judge the gap between the actual and the desired
performance.
 To help the management in exercising organizational
control.
 To diagnose the training and development needs of the
future.
 Provide information to assist in the HR decisions like
promotions, transfers etc.
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 Provide clarity of the expectations and responsibilities of
the functions to be performed by the employees.

 To judge the effectiveness of the other human resource

functions of the organization such as recruitment,
selection, training and development.

 To reduce the grievances of the employees.

 Helps to strengthen the relationship and communication

between superior – subordinates and management –
employees
 
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Process of Performance Appraisal
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 Process of Performance Appraisal

Establishing Performance Standard

 
 The first step in the process of performance appraisal is
the setting up of the standards which will be used to as the
base to compare the actual performance of the employees.
 This step requires setting the criteria to judge the
performance of the employees as successful or
unsuccessful and the degrees of their contribution to the
organizational goals and objectives.
 The standards set should be clear, easily understandable
and in measurable terms.
 In case the performance of the employee cannot be
measured, great care should be taken to describe the
standards.
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 Communicating the Standard
 
 Once set, it is the responsibility of the management to
communicate the standards to all the employees of the
organization.
 The employees should be informed and the standards
should be clearly explained to the.
 This will help them to understand their roles and to know
what exactly is expected from them.
 The standards should also be communicated to the
appraisers or the evaluators and if required, the
standards can also be modified at this stage itself
according to the relevant feedback from the employees
or the evaluators. 

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 Measuring the actual Performance
 
 The most difficult part of the Performance
Appraisal process is measuring the actual performance
of the employees that is the work done by the employees
during the specified period of time.

 It is a continuous process which involves monitoring the

performance throughout the year.

 This stage requires the careful selection of the

appropriate techniques of measurement, taking care that
personal bias does not affect the outcome of the
process.
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 Comparing the actual with desired Performance
 
 The actual performance is compared with the desired or
the standard performance.
 The comparison tells the deviations in the performance
of the employees from the standards set.
 The result can show the actual performance being more
than the desired performance or, the actual performance
being less than the desired performance depicting a
negative deviation in the organizational performance.
 It includes recalling, evaluating and analysis of data
related to the employees’ performance.

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 Discussing the Results
 The result of the appraisal is communicated and
discussed with the employees on one-to-one basis.
 The focus of this discussion is on communication and
listening.
 The results, the problems and the possible solutions are
discussed with the aim of problem solving and reaching
consensus.
 The feedback should be given with a positive attitude as
this can have an effect on the employees’ future
performance.
 The purpose of the meeting should be to solve the
problems faced and motivate the employee to perform
better.
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 Decision method
 
 The last step of the process is to take decisions which
can be taken either to improve the performance of the
employees, take the required corrective actions, or the
related HR decisions like rewards, promotions,
demotions, transfers etc. 
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 Traditional Methods of Performance Appraisal
 
1. Easy appraisal method.
2. Straight ranking method: In this method, the appraiser
ranks the employees from the best to the poorest on the
basis of their overall performance.
3. Paired comparison: This method compares each
employee with all others in the group, one at a time.
4. Critical incidents methods: In this method
of performance appraisal, the evaluator rates the
employee on the basis of critical events and how the
employee behaved during those incidents.

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5. Field review: In this method, a senior member of the HR
department or a training officer discusses and
interviews the supervisors to evaluate and rate their
respective subordinates.

6. Check list method.

7. Graphic rating scale: In this method, an employee’s

quality and quantity of work is assessed in a graphic
scale indicating different degrees of a particular trait.

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 Modern Methods of Performance Appraisal
 
1. Assessment Centres: An assessment centre  involves the
use of methods like social / informal events, tests and
exercises, assignments being given to a group of
employees to assess their competencies to take higher
responsibilities in the future.

 Generally, employees are given an assignment similar to

the job they would be expected to perform if promoted.

2. Behaviourally anchored rating scales: Behaviourally

Anchored Rating Scale ( BARS ) is a relatively new
technique which combines the graphic rating scale and
critical incidents method.
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4. Human Resource Accounting Method: In this method the
performance appraisal of the employees is judged in
terms of cost and contribution of the employees.
5. 360 Degree Performance Appraisals: 360 degree
feedback, also known as 'multi-rater feedback', is the
most comprehensive appraisal where the feedback
about the employees’ performance comes from all the
sources that come in contact with the employee on his
job. 
6. Management By Objectives: MBO is a process
whereby the employees and the superiors come
together to identify common goals, the employees set
their goals to be achieved, the standards to be taken as
the criteria for measurement of their performance and
contribution and deciding the course of action to be
followed.
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 Factors Affecting the Performance Appraisal

 Performance appraisals are supposed to evaluate the

performance of a worker, reward good performance with
promotions and pay raises and set goals to help
employees continue to improve.

 In reality, however, performance appraisals are affected

by a wide range of psychological factors.

 Even when supervisors are working with a well-defined

guideline to evaluate workplace performance, they can
easily fall off track with results disadvantageous to both
the worker and the company.
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 The Halo and the Horns
 The Halo Effect, sometimes subdivided into the halo and
the horns arises from the human tendency to over
generalize.
 A worker who is good or outstanding in one or two areas
will receive a "halo"; his supervisor will believe he is
good in all areas because of a few noticeable strong
points.
 Similarly, a worker who is seen as weak in one or two
area can get saddled with "horns"; his supervisor will
overlook his strong points in his performance appraisal
and tend to see everything he does as lacking.

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 The Matthew Effect

 The Matthew Effect is somewhat similar to the halo effect,

but more permanent.

 Sometimes, a worker is permanently judged based on an

early performance evaluation.

 If she did well on the early evaluation, she will be more

trusted than other employees and all of her work will be
seen in a favorable light.

 If she did poorly, she will have a very hard time earning trust
or a positive evaluation from her boss, who will judge all her
future actions in light of an early impression.
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 Standards of Evaluation

 One especially tricky performance appraisal factor is

standards of evaluation.

 Many companies use subjective terms like "excellent,"

"good" and "fair" to characterize performance, but these
terms may mean very different things to different people.

 If a company has two different evaluators, this can lead

to serious bias; a more or less average worker who
performs all of his job duties correctly may receive a
"good" rating with one evaluator but only an "average" or
"fair" rating with the other.

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 General Biases

 There are many ways a supervisor can skew everyone's

evaluations.

 Some supervisors exhibit the central tendency, rating

everyone as about average and 
only deviating in extreme circumstances.

 By contrast,an evaluator exhibiting a leniency bias would

rate everyone fairly high, perhaps out of a desire to be
nice or a desire to avoid confronting unhappy employees

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 An evaluator might also only look at recent performance,
exhibiting a recency bias.

 An opportunity bias can also skew results, with

evaluators blaming or praising employees for things that
were actually out of their control.

 For example, a salesman could have declining sales

numbers do to a sharp economic downturn, poor product
quality or poor inventory management, none of which
would be his fault

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 General findings about Performance Appraisal
1. It has been observed that there is a considerable difference
in the stated and practiced objectives of performance
appraisal.
2. In the whole the of appraisal, often the supervisors assume
that the role of judges. In contrast, when the aim is to
develop employees , managers need to be counsellers,
helpers and teachers.
3. Companies that go for personal trait evaluation observe too
much of subjectivity, biases, hallo effect, in their decision, .
Moreover , the connections between, performance and
possession of specific trait is doubtful.
4. MBO is used in a narrow , mechanical target-setting sense
only.
5. Most evaluators claim they consider the uncontrollable or
unexpected factors in assessing the performance , but it is
extremely difficult to practice.
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 How to avoid Appraisal Problem

 Know problems.

 Use right tool.

 Train supervisor.

 Control outside influence.

 Keep diary.

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 Performance Management
 
Performance Appraisal And Performance Management.
 
 It is sometimes assumed that performance appraisal is the
same thing as performance management.
 But there are significant differences.
 Performance appraisal can be defined as the formal
assessment and rating of individuals by their managers at
usually , an annual review meeting.
 In contrast performance management is continuous and much
wider , more comprehensive and more natural process of
management that clarifies mutual expectations , emphasizes
the support role of managers who are expected to act as
coaches rather than judges and focuses on the future.
 
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 Performance appraisal has been discredited because
too often it has been operated as a top-down and largely
bureaucratic system owned by the HR department
rather than by line managers .
 It has been perceived that performance appraisal
means of exercising managerial control.
 Performance appraisal tended to be backward looking,
on what had gone wrong, rather than looking forward to
future development needs.
 Performance appraisal schemes existed in isolation.
 There was little or no link between them and the needs
of the business.
 Line managers have frequently rejected performance
appraisal schemes as being time consuming and
irrelevant .
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 Employees have resented the superficial nature with
which appraisals have been conducted by the managers
who lack the skills required , tend to be biased and are
simply going through motions.

 Employees assert that performance appraisal too often

degenerated into a dishonest annual ritual.
 
 Appraisal can help to improve employees job
performance by identifying strengths and weakness and
determining how their strengths may be best, be utilized
within the organization and weakness overcome.

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 But there are many things wrong with the most of the
performance appraisal system in use. The drawbacks
are:
 Judgement on performance are usually subjective and
arbitrary.
 Ratings by different managers are not comparable.
 Delays in feedback occur that create frustration when
good performance is not quickly recognized and anger
when judgement is rendered for inadequacies long past.
 Managers generally have a sense of inadequacy about
appraising subordinates .

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 What is performance management?
 
 Performance management is an important organizational
tool to clarify performance objectives ,standards ,critical
dimensions, and competencies to enhance individual
performance.

 Performance management works best when an

employee’s work is planned and goals for achievements
are communicated , so that every employee is aware of
the work and performance expected of him.

 Performance management is a multidimensional concept

and includes inputs, process, outputs, and outcomes.
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 What is performance management? (contd)
 
 Performance management is a process which
contributes to the effective management of individuals
and teams in order to achieve high levels of
organisational performance.
 It establishes shared understanding about what is to be
achieved and an approach to leading and developing
people which will ensure that it is achieved.
 It is 'a strategy which relates to every activity of the
organisation set in the context of its human resource
policies, culture, style and communications systems.
 The nature of the strategy depends on the organisational
context and can vary from organisation to organisation.'
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• In other words performance management should be:
 Strategic - it is about broader issues and longer-term
goals
 Integrated - it should link various aspects of the business,
people management, and individuals and teams.
• It should incorporate:
 Performance improvement - throughout the
organisation, for individual, team and organisational
effectiveness
 Development - unless there is continuous development
of individuals and teams, performance will not improve
 Managing behaviour - ensuring that individuals are
encouraged to behave in a way that allows and fosters
better working relationships.
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• Performance management is a tool to ensure that
managers manage effectively; that they ensure the
people or teams they manage:
 know and understand what is expected of them
 have the skills and ability to deliver on these
expectations
 are supported by the organisation to develop the
capacity to meet these expectations are given feedback
on their performance
 have the opportunity to discuss and contribute to
individual and team aims and objectives.
• It is also about ensuring that managers themselves are
aware of the impact of their own behaviour on the people
they manage and are encouraged to identify and exhibit
positive behaviours.
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 Performance management is therefore about
establishing a culture in which individuals and groups
take responsibility for the continuous improvement of
business processes and of their own skills, behaviour
and contributions.
 It is about sharing expectations.
 Managers can clarify what they expect individual and
teams to do; likewise individuals and teams can
communicate their expectations of how they should be
managed and what they need to do their jobs.
 It follows that performance management is
about interrelationships and about improving the
quality of relationships - between managers and
individuals, between managers and teams, between
members of teams and so on, and is therefore
a joint process.
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 It is also about planning - defining expectations
expressed as objectives and in business plans - and
about measurement; the old dictum is 'If you can't
measure it, you can't manage it'.

 It should apply to all employees, not just managers, and

to teams as much as individuals.

 It is a continuous process, not a one-off event.

 Last but not least, it is holistic and should pervade every

aspect of running an organisation.

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• Performance Management Process
1. Performance Planning: Refers to setting performance
criteria in line with strategic objectives of the organisation,
identifying required level of competencies needed and
developmental plan to perform effectively.
2. Performance Managing: Managing resources availability
and optimal utilisation of all the resources.
3. Performance Appraisal: Refers to systematic evaluation
of the employees performance on the job.
4. Performance Monitoring: Refers to continuous overseeing
of employees performance, giving feedback, and making
correction to achieve desired performance criteria.
5. Performance Management Implementation: Device
appropriate strategies for effective implementation
performance management for very survival of
organisation in competition.
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 Needs for successful implementation of performance
management

 Well-designed jobs.

 Written job description.

 Comprehensive orientation.

 Effective training.

 Effective supervision.

 A positive work environment.

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 Strategies for effective implementation of
performance management

 Top management agreement , commitment and

leadership
 Building a performance oriented work culture.
 Manager’s participation and accountability.
 Training and feedback.
 Benchmarking best practices.
 Communication and feedback.
 Information infrastructure.
 Organisational behaviour improvement.
 De-linking reward administrative system.

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 Performance standards

 Performance standards are used when it is not possible

to set time-based targets, or when there is a continuing
objective which does not change significantly from one
review period to the next and is a standing feature of the
job.

 These should be spelled out in quantitative terms if

possible, for example, speed of response to requests or
meeting defined standards of accuracy.

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 Measurement
 
 To manage performance effectively, individuals should
know on what basis their performance will be measured.

 Measures should be transparent and applied fairly

across the organisation.

 Ideally there should be a mix of individual and team

measures, and measures relevant to both the inputs and
the outputs of performance.

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 Individual output measures:

 Achievement of objectives.

 Achievement against agreed standards of performance,

which might be descriptions of excellent, good,
satisfactory or poor performance.

 Behaviour, measuring the extent to which individuals

exhibit behaviours associated with performance such as
respect for others, trust etc.

 Specific instances of performance for example

commendations for specific pieces of work.
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 Individual input measures:

 Competence.
 Skills and experience and the extent to which news skills
are applied in the job.
 Potential to develop and/or acquire new skills and
progress to next career level.
 Behaviours associated with developing and knowledge
sharing.
 Communication skills and other traits which enhance
team roles.

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 Team measures:

 Individual contribution to the team through involvement

in cross team projects.

 Support for other individuals to achieve their objectives

and participation in cross organisation initiatives by
providing timely input.

 Understanding of team role.

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 Organisational Measures
 Jack Welch, Ex. CEO of General Electric Company ,
believes that the three most important things you need to
measure in a business are customer satisfaction ,
employee satisfaction, and cash flow.
 More specifically , the different approaches to
measuring organisational performance are :
1. Balanced scorecard.
2. The European Foundation for Quality Management
(EFQM) model.
3. Economic value added.
4. Other traditional Financial measure.

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 Balance Score Card
 Kaplan and Norton emphasise that building a score card
enables a company to link its financial budget with its
strategic goals.
 They emphasise that the balanced scorecard can help to
align employees individual performance with the overall
strategy.
 Scorecard users generally engage in three activities
:communicating and educating , goals setting and linking
rewards, to performance measure.
 Shell oil company has developed a technique to enable and
encourage individuals to set goals for themselves that are
consistent with the organisation’s.
 These personal scorecards contain three levels of information
(1) corporate objectives, measures and targets, (2) business
unit targets, (3) team / individual objectives and initiatives . 46
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