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PERFORMANCE APPRAISAL
Definition
Performance appraisal has been defined by different scholars in various ways.
According to
Dale S. Beach, performance
appraisal is a “systematic evaluation of the individual with respect to his or
her performance on the job and his or her potential for development”. Randall
S. Schuler defines performance appraisal as a formal, structured system
of measuring and evaluating an employee’s job, related behaviour and outcomes
to discover how and why the employee is presently performing on the job and how
the employee can perform more effectively in the future….."
Dale Yoder, on the other hand, advocates
that performance appraisal includes all formal procedures used to
evaluate personalities and contributions and potentials of group members in a
working organisation.
In
short, performance appraisal is the process of assessing employee performance by
way of comparing present performance with already established standards and providing
feedback to employees about their performance level for the purpose of
improving their performance.
Objectives
of performance appraisal
1.
Maintain
records in order to determine compensation packages, wage structure, salaries
raises, etc.
2.
Identify
the strengths and weaknesses of employees to place right men on right job.
3.
Assess
the potential of an employee for further growth and development.
4.
Provide
a feedback to employees regarding their performance and scope for development.
5.
Groom
the working habits of employees.
6.
Review
ongoing efforts for structural mobility and training opportunities
Advantages of performance appraisal
Performance appraisal is deemed to be a sound investment
for an enterprise. It has the following advantages:
1.
Promotion: Performance Appraisal helps the
supervisors to chalk out the promotion programmes for efficient employees. In
this regard, inefficient workers can be dismissed or demoted in case.
2.
Compensation: Performance Appraisal helps in applying
compensation packages for employees. Merit rating is possible through
performance appraisal. Performance Appraisal systems valorize good and bad performances.
Compensation packages which include bonus, high salary rates, extra benefits,
allowances and pre-requisites are dependent on performance appraisal. The
criteria for rewarding good performance is generally 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, effective communication can be achieved through better
understanding of the skills of employees and teambuilding.
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 may well
motivate a person for better job and helps him to improve his performance in
the future.
Traditional methods of performance appraisal
1.
Ranking
Method
The ranking system requires the assessor to
rank his subordinates on overall performance. This consists in simply ranking
an employee within a working group. The relative position of each employee is
tested in terms of his numerical rank and/or against another member of another
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.
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.
vii.
The
ranking system gives rise the possibility of snap judgments on people.
2.
Forced
Distribution method
This is a ranking technique where raters are
required to allocate a weightage 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 bias
ii.
By
forcing the distribution according to pre-determined percentages, the problem
of making use of different ratings is avoided.
Limitations of Forced Distribution
iii.
This
method is that it may lead low morale, low productivity and high absenteeism.
iv.
Employees
who feel that they are productive, but who may find themselves in lower grade
may feel frustrated and show reluctance to work.
3.
Critical
Incident method
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.
Advantages of Critical Incident Method
i.
This
method provides an objective basis for conducting a thorough discussion of an
employee’s performance.
ii.
This
method avoids recency bias (most recent incidents are too much emphasized).
Limitations of Critical Incident Method
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 Methods
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 employee’s performance.
ii.
Limitations of Checklists and Weighted
Checklists
iii.
This
method is very expensive and time consuming
iv.
Rater
may be biased in distinguishing the positive and negative questions.
v.
It
becomes difficult for the manager to assemble, analyze and weigh a number of
statements about the employee’s characteristics, contributions and behaviours.
Modern
methods of performance appraisal
1. Assessment
Centre
This method tests a candidate in
different social situations through use of a number of assessor and procedures.
The performance of an employee and
his potential for a new job are evaluated in this method by assessing his
performance on job related simulations.
Characteristics that the concerned
managers feel are important for the success of a particular job are included in
these simulations.
Techniques like business games
role playing and in basket exercises are used in this method.
The employees are evaluated
individually as well as collectively on job related characteristics.
Personal interview and projective
tests help in assessing the motivation, career orientation and dependence on
others of an employee.
To measure the intellectual
capacity written tests are used. The evaluators in this method consist of
experienced manager working at different levels who prepare a summary report
for the management as well as for the employees.
This technique usually measures
the planning ability interpersonal skills and organizational skills of an
employee.
2.
Human
Resource Accounting
Human resources are a valuable asset
for any organization and it can be valued in monetary terms. This method
evaluates the performance of an employee in terms of costs and contributions.
HR costs include expenses incurred on HR planning recruitment selection
induction and training. The difference between this costs and the contribution
by an employee reflects the performance of that employee.
3.
Behaviorally
anchored rating scale (BARS)
This method combines the graphic
rating scale and the critical incident method. It determines in advance the
critical areas of the performance and the most effective behavior to achieve
the results. Then the actual job behavior of an employee is evaluated against
the predetermined behavior.
The following steps are used for constructing BARS
(i)
Supervisor
and other persons well acquainted with a job are asked to describe specific
critical incidence of effective performance behavior
(ii)
Then
these persons categorized the incidents into sets of performance dimensions and
each set is then defined
(iii)
These
people then reallocate the original critical incidents. They are given the
cluster definition and critical incidents and are asked to re-design each
incident to the dimensions that describes it the best and a rating is given to
the incident.
(iv)
A
set of incidents is used for all performance which translate specific types of
behavior.
4 Appraisal through management by objectives
(MBO)
This concept was introduced by Peter Drucker
in 1954 who named it management by objectives and self control. It is also
known as goal setting approach. In this process the supervisor and subordinate
members jointly identify the common goals of the organization and set the areas
of the responsibility of each individual in terms of results expected from that
person.
5 The 360 degree appraisal
The 360 degree method of performance appraisal
is used to make the appraisal process more transparent, objective and participative.
It introduced the concepts of self appraisal subordinates appraisal, peer
appraisal and appraisal by customers. It is called a 360 degree method because
it involves the evaluation of an employee by persons above him, below him and
alongside him. Structured questionnaires are used to collect information from
the seniors, subordinates and peers. The employee to be evaluated thus acquires
a central position and everyone around him participates in the appraisal
process in the 360 degree method.
The main components of 360 degree appraisal are:
(i) Self- appraisal: It allows an employee complete freedom
in accessing his or her strengths objectively and identifying the areas of
development. The employees get a chance to share the development areas with
their seniors based on their self appraisal and jointly worked out a plan in
tune with the organizational realities like the availability of resources and
time. It also gives a chance to the employee to express his career plans which
is in the interest of the organization as it knows beforehand the aspirations
of its employee.
(ii) Appraisal by superiors: An appraisal by superiors involves
providing constructive, feedback about the performance of any employee as well
as his development areas during the review period. It helps in setting goals
for the employees that help in achieve the organizational goals and improve the
performance of the employee. The career aspirations of an employee are also put
in proper prospective.
(iii) Appraisal by subordinates: This is a unique feature of the 360
degree method of appraisal. As the subordinates play an important role in the
performance of the employee. The feedback by the subordinates gives firsthand
account of how they look at their superior in terms of working style. The
capability of a superior in motivating, delegating the work, building a team
and communicating with them effectively form the basis of appraisal by the
subordinates.
(iv)Peer appraisal: It also plays an important role in 360
degree appraisal as the role of peers is quite important in life of an
employee. Selecting the right peers is very important and peers from the
departments that are directly related with the department of the employee
should also be included. It mainly focuses on feedback about the style of
functioning of the employee under review and can also include his ability to
work as team leader besides his co-operation and collaboration.
Potential appraisal: It is different from performance
appraisal as it refers to the abilities of the employees that are not being
used at the time of appraisal. It searches for the latent abilities of the
employee in discharging higher responsibilities in future. The potential of the
employees is judged on the basis of his present performance, personality
traits, past experience and age and qualification. It also looks at the unused
skills and knowledge of an employee. It aims at informing the employee of their
future prospectus and helps the organization in drawing a suitable successions
plan. It also consolidates training efforts at regular intervals and enable the
employees to improve their career prospectus.
Self-awareness and self-assessment
While some view employee self-evaluations as just another tedious
step that adds more work and paper to an already onerous performance appraisal,
self-evaluations are in fact a vital activity that can help make the
performance appraisal process more effective. Done properly, employee
self-evaluations can provide the following key benefits to the organization:
(i) Engage employees in the performance appraisal
process
Including employee self-assessments as part of a performance
management process gives employees an active role to play. Rather than simply
being the "recipient" of feedback from their manager, the employee is
given a voice, and can inform or shape their performance appraisal and ratings.
This active participation helps them to be more engaged with both their
performance and the review process overall.
(ii) Give managers a broader perspective
Having the employee complete a self-assessment first can help give
their manager better insight into the employee's performance as well as their
perceptions about their performance. Even for managers who work closely with
their employees, it is not always possible to see the full picture and
understand all the factors that affect employee performance. Having the employee
complete a self-assessment allows the manager to view performance through their
eyes and get the employee's "side of the story". It can also help the
manager understand their employee's strengths and weaknesses from the
employee’s perspective, as well as training needs/desires.
(iii) Flag differences in perception before the
review meeting
It is inevitable, a manager and employee will have different
impressions of the employee's performance. While one would hope that the
manager would be aware of any differences, it is often not the case. Many
managers have been caught off guard in an employee performance review meeting
to discover that the employee has a completely different perception of their
performance and value, or that they themselves are lacking vital information
that affects employee ratings. An employee self-appraisal can help identify
differences in perception that might not surface otherwise, allowing the
manager to prepare appropriately for the review meeting and ensure a fruitful
discussion and fair performance ratings. In some cases, the information
revealed in the self-appraisal might even guide or redirect the manager's
assessment.
(iv) Promote more effective discussions about
performance
An employee self-assessment gives each employee that opportunity.
They can provide their evaluation of their performance along with relevant
background information first, which predisposes them to hear the feedback their
manager has to offer.
Effective management requires an ongoing, two-way discussion between
a manager and employee about performance, priorities and challenges. A
performance management program that includes employee self-appraisals,
formalizes this two-way dialogue, thus avoiding top down evaluations that often
serve to discourage or disengage employees.
Importance
of self-awareness and self-assessment
In
short, there are four different perspectives on performance – manager,
subordinate, customer and self – and the best all-round assessment will combine
all four.
Self-awareness
and self-assessment help break down appraisers’ inhibitions.
Those
who are appraised usually rate themselves lower than managers do. Therefore,
self-assessment promotes positive and collaborative discussion.
Self-assessment
makes the employee active and pro-active rather than passive and reactive. It further
promotes openness and communication, ownership and empowerment.
How
to instil self-awareness for better self-assessment
Enough
publicity must be given to the fact that all systems of performance appraisal are
better served by the process of self-appraisal, by what is generally referred
to as intra-personal intelligence. Self-appraisal is an introspective exercise
which requires that the individual must be objective in his own evaluation and
fearless.
One
must also know how to balance the reward mechanism with developmental
objectives of the organization.
The
organization must structure the appraisal process to require self-assessment
first, management assessment later on.
The
organization must give ownership for managing the self-assessment process to
individuals and use 360-degree appraisal to make managerial appraisal more objective.
In
a nutshell the firm must promote self-management activities in order to allow staff to have their own personal
development plans.
