Everything you need to know about the methods of performance appraisal. Performance appraisal is a formal system that evaluates the quality of a worker’s performance.
The appraisal measures skills and accomplishments with reasonable accuracy and uniformity. It provides a way to help identify areas for performance enhancement and to help promote professional growth.
Some of the methods of performance appraisal are:-
1. Management by Objectives (MBO) 2. Graphic Rating Scale 3. Work Standards Approach 4. Essay Appraisal 5. Critical Incident Method 6. Forced Choice Rating Method 7. Point Allocation Method 8. Ranking Methods
9. Checklist 10. Behaviourally Anchored Rating Scale (BARS) 11. 360-Degree Performance Appraisal 12. Team Appraisals 13. Balanced Scorecard 14. Multi-Source Assessment and Feedback System (MAFS) 15. Business Score Card (BSC) 16. Forced Distribution Method
17. Annual Confidential Method 18. Casual, Unsystematic and Often Haphazard Appraisal 19. Modern Methods of Performance Appraisal 20. Written Essay 21. Oriented Appraisal Method 22. Group Appraisal of Subordinates 23. Assessment Centers Method.
Methods of Performance Appraisal in HRM: MBO, BARS, Team Appraisals, MAFS, BSC, Written Essay and a Few Others
Methods of Performance Appraisal – 13 Different Appraisal Methods Used by the Organisations in India and Abroad
The different appraisal methods used by the organisations in India and abroad are discussed below.
The most commonly used methods are:
1. Management by Objectives (MBO) or goal-setting
2. Graphic Rating Scale
3. Work Standards Approach
4. Essay Appraisal
5. Critical incident method — Traditional Methods
6. Forced Choice Rating Method
7. Point Allocation Method
8. Ranking Methods
10. Behaviourally Anchored Rating Scale (BARS)
11. 360 Degree Performance Appraisal — Modern Methods
12. Team Appraisals
13. Balanced Scorecard
The main aspects of MBO are clear and well-defined goals, a definite time-span to achieve the goals, an action plan and finally, timely and constructive feedback. Also called the goal-setting approach, MBO is more commonly used for managers and professionals. The goals are set with the active participation of the employee and his supervisor. These goals have to be in alignment with the organisational goals and have to contribute to their achievement.
For successful implementation of MBO, the following are required:
i. Quantifiable and measurable goals that are neither too easy nor too difficult to achieve
ii. A well-laid out action plan providing for contingencies
iii. Employees who are suitably equipped and motivated to achieve these goals
iv. Continuous and constructive feedback and guidance
v. Objective evaluation of the performance
vi. Identification of areas for improvement and corrective action
This method of appraisal requires the rater to rate the employee on factors like quantity and quality of work, job knowledge, dependability, punctuality, attendance etc. Graphic rating scale includes numerical ranges as well as written descriptions, gives some examples of items in a graphic rating scale.
There are two disadvantages to the graphic rating scale method. One is regarding the choice of employee behaviour categories- the important ones might get missed out and the irrelevant ones may get included. The second disadvantage is that different people may interpret the written descriptions in different ways. This might lead to confusion and loss of reliability.
This method of appraisal is more suitable in a manufacturing scenario, where the goals are pre-determined work standards. These work standards can be set based on the average output of a typical employee in the organisation or by benchmarking against the work standards of a competitor in a similar business.
The advantage of this approach is that the goals to be measured are very objective and also quantifiable. The disadvantage however, is that the work standards for different job categories cannot be compared.
In the Essay Appraisal method, the appraiser prepares a document describing the performance of the employee. Questions or guidelines are provided to the appraiser, based on which he analyses and describes the employee’s performance. The advantage of this system is that the appraiser can express all his views on the employee’s performance, without any constraints imposed by the system.
For example, the rating method can miss out on some of the performance factors relevant to a job. Such errors can be eliminated in an essay-appraisal method. However, if the appraiser concentrates on a single aspect or misses out an important aspect of performance, the appraisal will be incomplete or inadequate.
Similarly, it is difficult to compare the performance of two employees, based on the descriptions of their performance provided by different supervisors. The writing skills, or the lack of it, of the appraiser can make an inadequate performance seem to be adequate or an excellent performance seem merely adequate.
In this method of performance appraisal, the appraiser makes a note of all the critical incidents that reflect the performance or behaviour of the employee during the appraisal period. These are recorded as and when they occur and can demonstrate either positive or negative traits or performance.
At the end of the appraisal period, this record forms the basis for evaluation of the performance of the employee. This method of appraisal is rarely used because of the ambiguity involved and the efforts required in recording the incidents. The employees might also not be happy with the manager ‘tracking’ and ‘recording’ their performance in this manner.
In this method, the appraiser is required to assign ranks to different attributes of the employee. These attributes are all seemingly positive, but have different weights which are unknown to the appraiser. Once the employee attributes are ranked, the human resource department applies the weights and arrives at a score which is the final appraisal score.
The element of subjectivity in this method is minimised as the appraiser has to assign a unique rank for each of the attributes. However, this might not be a very pleasant experience for the appraiser and it is not very easy to convince the employee of the rationale behind the ranking and that the ranks assigned are fair.
In this method of appraisal, the appraiser has to allocate points to different members in his team. He has at his disposal, a specific number of points which he has to distribute among his team members, based on their performance during the appraisal period. The best performer gets the highest score and the last one in the group gets the least score.
There are two disadvantages to this method. An appraiser who wants to play it safe can allocate equal points to everyone in the group, ignoring the differences in their performance. The second disadvantage is that the difference in point allocation might not reflect the differences in performances across groups.
For example, the best performer in one group might get a score of 30, while the best performer in another group might get only 25. In such a case, how do we compare the performances of the two individuals involved?
There are three commonly used methods of ranking, namely alternation, paired comparison and forced distribution. The first two methods are used when there are only a few employees to be ranked, whereas the forced distribution method is used in large companies like GE, Microsoft and Wipro, which have thousands of employees.
In the first method, namely alternation, the appraiser ranks all his employees from the most valuable to the least valuable, based on their performance and contributions to the organisation. In the paired comparison method, which is very similar to the alternation method, the appraiser ranks the employees, based on paired comparison. Every employee in the group is compared with every other employee in the group.
The employee who is rated better in each pair the maximum number of times, is the best employee in the group and the one rated better the least number of times, the least valuable. The employees are ranked based on the number of times they emerge the winner in each paired comparison.
The last method of rating, the forced distribution method, is a very popular method of performance appraisal in many big organisations. In this method, the employees are categorized as ‘Top’, ‘Standard’ and ‘Bottom’ and placed under a forced-distribution curve. A certain percentage of employees have to be placed under each category.
For example, GE has 20% of its employees in the ‘Top Performers’ group, 70% in the ‘Standard’ group and 10% in the ‘Non-performers’ group. This system of ranking helps the organisation identify and get rid of the last group (i.e., the non-performers), which eventually improves overall productivity and performance levels in the organisation.
In this method, the rater has to respond ‘Yes’ or ‘No’ to a set of questions which assesses the employee’s performance and behaviour. Normally, weights are attached to each of these questions based on which the final appraisal score of the employee is calculated. Even though the weights are not known to the appraiser, the positive or negative connotation is evident in the question and hence, the response may be quick biased.
Another disadvantage of this method, is that different checklists may have to be designed for different jobs or job categories, which might make the whole exercise very cumbersome and complex.
BARS concentrates on the behavioural traits demonstrated by the employees instead of his actual performance. Some of the other methods like graphic rating scale and checklist also measures the behaviour, based on the assumption that desirable behaviour results in effective performance.
There are three steps in implementing a BARS system.
i. Determination of relevant job dimensions by the manager and the employee.
ii. Identification of behavioural anchors by the manager and the employee for each job dimension.
iii. Determination of the scale values to be used and grouping of anchors for each scale value, based on consensus.
An example of a BARS system is given in –
The main advantage of BARS is that both the manager and the employees are actively involved in the appraisal process. This increases the relevance of the system to each job and also improves its acceptance by the employees. However, one drawback of this system is that it is cumbersome and needs considerable time and commitment to develop.
A 360-degree appraisal system aims at a comprehensive and objective appraisal of the employee performance. In a 360-degree appraisal system, the employee’s performance is evaluated by his supervisors, his peers, his internal and external customers, his internal/external suppliers and his subordinates.
This system reduces the subjectivity of a traditional supervisor appraisal. It is also more comprehensive because the feedback is given by the peers, customers, suppliers and subordinates of the employee, who are more directly affected by his behaviour and performance, apart from the boss.
More and more organisations are trying to implement this system of appraisal in India. However, the Indian culture, which advocates a strong hierarchical divide, may find it a little hard to accept this novel concept where even the subordinates evaluate their boss. However, in spite of the cultural barriers, 360-degree appraisal system is finding more and more takers in the Indian corporate world.
In the new economy era, where teamwork is essential for any venture to succeed, team appraisals have emerged as one of the best tools for performance management. In the team appraisal method, the individual team members evaluate their colleagues in the team and provide feedback.
This helps in synergising individual efforts and taking the group performance to higher levels. Digital Equipment Corporation uses this kind of a participatory performance appraisal system.
The balanced scorecard as a method of measuring performance channelises the efforts of people to achieve organisational goals. The implementation of balanced scorecard involves formulating a strategy, and deciding what each employee needs to do-to achieve the objectives based on the strategy.
The HR scorecard is a part of the balanced scorecard. Individual responsibilities are assigned based on the strategy. This assigning of responsibilities to the individuals and tracking for achievement of objectives is called HR scorecard.
Each individual in his role will be assigned a set of initiatives and activities, which are his responsibility. These activities if done well, will contribute to the successful implementation of the company’s strategy. The HR scorecard seeks to give online feedback to the employees as to how they are faring. In some cases, their salaries could be linked to their performance.
The balanced scorecard can be used to evaluate the alignment of compensation and benefit plans with the strategic needs of the employers and the employees. Many top Indian companies like Infosys, i2 Technologies, Godrej Consumer Products, GTL, ITC Ltd. and Mahindra & Mahindra are using this method of performance management.
Performance appraisal system has undergone a sea change over the years. HR managers and other organizational stalwarts feel happy and pride to say, ‘We have a good Performance Management System (PMS) that is working well.’ It is restated that performance appraisal refers to assessment or evaluation or review of performances of individuals with the ultimate aim of managing their performances.
Methods of Performance Appraisal – MBO, MAFS, Business Score Card, BARS, Ranking Method, Forced Distribution Method and Annual Confidential Method
Various performance appraisal methods are listed below:
1. Management by objective (MBO)
2. Multi-source assessment and feedback system (MAFS)
3. Business score card (BSC)
4. Behaviourally anchored rating scale (BARS)
5. Ranking (simple ranking, alternation ranking method, and paired comparison ranking) methods
6. Forced distribution method
7. Annual confidential method
These methods are dealt with in brief in the following sections:
Method # 1. Management by Objective (MBO):
It covers a wide spectrum of thoughts. When speaking of MBO, one person may be discussing a system to manage the national government, whereas another may think of MBO as the process of managing an organization and yet someone else may apply MBO for personal development.
The variation in perception about MBO is different as it can encompass any goal-setting procedure, from a highly structured corporate profit-target system to an individual’s unstructured career plan. There may be heavy variations in MBO systems.
MBO may be designed for just one sub-unit of strategic business unit (SBU), that is, for the whole SBU or even for the whole organization. Emphasis can be laid on corporate planning, profit enhancing, individual motivation, etc. Managers may also opt for different approaches.
Method # 2. Multi-Source Assessment and Feedback System (MAFS):
This system is also known as ‘360 degree feedback’ or ‘multi-rater appraisals system’. It is a long felt need by organizations. In this system, one person is assessed by his immediate superior, internal and external customers, suppliers, colleagues, seniors of cross-functional areas, and even immediate subordinates.
All-round capability of a person can only be judged if the views of all the people who are regularly interacting with him are gathered. MAFS enables the multiple raters to measure behaviours critical to performance using questionnaires designed by the HRD department.
External consultant is generally engaged to prepare the summary to eliminate any sort of bias. MAFS is now a very popular means of appraising performance and many organizations are using MAFS.
Method # 3. Business Score Card (BSC):
Robert Kaplan and David Norton propounded the concept of BSC in 1996. It suggests that the organization is viewed from four perspectives, namely the learning and growth perspective, the business process perspective, the customer perspective, and the financial perspective.
The ‘Learning and Growth Perspective’ highlights the employee training and corporate cultural attitudes related to improvement of both individual and the corporate. In a knowledge organization, people are the only repository of knowledge. In these organizations, learning and growth contributes to essential foundation for success.
The ‘Business Process Perspective’ refers to internal business processes. Different metrics based on this perspective allows the managers to ascertain how well the business is running. These metrics must be carefully developed by those who are well acquainted with the processes and the unique business missions. External consultants cannot develop the business metrics.
The ‘Customer Perspective’ emphasizes on the increasing importance of customer focus and customer satisfaction in today’s management philosophy. Decrease in customer satisfaction is a leading indicator of future decline even if the current financial picture may look good. The prime aspect of any business is whether its products and services conform to customer requirements.
The ‘Financial Perspective’ lays emphasis on timely and accurate funding data as top priority. However, Kaplan and Norton do not disregard the traditional need for financial data. Managers must do whatever necessary to provide the funding data. Financial measures are outcomes that represent the executive’s success at achieving strategic performance goals.
Method # 4. Behaviourally Anchored Rating Scale (BARS):
BARS, sometimes called behavioural expectation scales, is a scale extensively used to record and report performances. It is a method that combines elements of the traditional rating scales and critical incidents’ methods. This appraisal method aims to combine the benefits of narratives or descriptive statements of behaviours, incidents of critical incident method, and quantified ratings by anchoring a quantified scale with specific narrative/descriptive examples of good or poor performance.
BARS has been so named as it anchors behaviours and the scale represents a range of descriptive statements of behaviour varying from the least to most effective. It is by far the best method used for performance appraisal. BARS was developed to provide results that subordinates could use to improve performance.
Superiors would feel comfortable to give feedback to the subordinates. Further, BARS helps overcome rating errors. Unfortunately, this method too suffers from distortions inherent in most rating techniques. However, use of critical incidents is of prime importance.
Method # 5. Ranking Methods:
Ranking simply involves positioning of individuals from highest to lowest on a scale based on a predetermined definition of value or contribution. In some cases, you receive several reports from multiple assessors who do not allow individuals to pinpoint their strengths or weaknesses for improvement. Simple ranking, alternation ranking, and paired comparison ranking are the three methods of ranking.
i. Simple Ranking:
Out of all the methods, simple or straight ranking method is one of the oldest and the simplest techniques of performance appraisal. In this method, the appraiser ranks the employees from the best to the poorest on the basis of their overall performance. This technique is quite useful for a comparative evaluation.
ii. Alternation Ranking Method:
This method facilitates ranking employees from best to worst based on a trait or a set of traits. Since it is easier to differentiate between the best and the worst employees, alternation ranking method emerges as a very popular and widely adopted practice.
For doing this, the steps used include:
(a) Deciding the characteristic on ranking
(b) Preparing a list subordinates to be rated
(c) Deleting the names of those subordinates who cannot be considered
(d) Identifying the best and the worst from the subordinates remaining in the list
(e) Crossing out names of the worst ones from the list
(f) Identifying the best and worst from the remaining subordinates
(g) Repeating steps 5 and 6 till all the subordinates are exhausted
iii. Paired Comparison Method:
This is a precise method of ranking employees. It is a good way of weighing up the relative importance of employees for each trait pertaining to the quantity or quality of work. Each employee is compared against the remaining employees for a particular trait.
Method # 6. Forced Distribution Method:
Forced distribution is a method of performance appraisal to group employees in order of forced distribution. The raters assign employees as ‘best performer’, ‘moderate performer’, and ‘poor performer’. For example- the distribution requested with 10 or 20 per cent in the top category, 70 or 80 per cent in the middle, and 10 per cent in the bottom.
The distribution is done by the organization based on the policy in their company. The distribution might be 20:70:10 or 10:70:20 or 15:75:10. The underperformers categorized in the lowest group get time and opportunity to improve. Given the increased focus of linking pay with performance, the forced distribution method is gaining an increasing popularity.
Prestigious firms like General Electric, Microsoft, and JPMorgan are using this method today. However, the system, being unpopular among many managers, is criticized. Some believe this method fosters cutthroat competition, damages morale, and generates mistrust of leadership.
One reason of opposing this method is suspicion of employees towards the raters. Employees also suspect that these rankings are a way for companies to rationalize firings more easily.
Method # 7. Annual Confidential Method:
Many organizations, mainly government organizations, use this annual confidential method while appraising the employees. In this system, a subordinate does not know what the superior has endorsed in the report. However, a subordinate only comes to know when the adverse points, if any, are communicated to him.
Blind faith is obviously placed in the subjective evaluation of the superior. As the name indicates, juniors are never discussed while appraising. This method is criticized as seniors can use this report as a tool to control. Moreover, seniors can always offer biased opinion as the report is ‘confidential.’
Methods of Performance Appraisal
When it comes to appraising the performance, there are two basic issues –
(a) What to measure—usually speaking, it is the quantity, quality and timeliness of work. But all the same, it is also desirable to measure performance with respect to developing one’s competence or accomplishing the targets and
(b) How to measure—there are several ways to evaluate employees’ performance/methodologies.
Method # 1. Casual, Unsystematic and Often Haphazard Appraisal:
It is an old and very common approach but, of late, it is being replaced by the ‘systematic’ and ‘MBO’ approaches. Casual appraisal is more common among small organisations. Casual appraisal does not evaluate all performances in the same manner using the same approach.
As a result, ratings obtained of separate personnel are not comparable. This approach lays more emphasis on the evaluation of the employee’s worth as a person. In this approach, there is always a scope for human bias and prejudice. Besides, in this system appraisal is not made regularly after a fixed period.
Some of the modern methods of performance appraisal are as follows:
The process of 360 degree feedback was originally developed by NASA to evaluate their space programmes. Now most ‘Fortune 500’ companies use 360 degree feedback with considerable success. Consultant Peter Ward introduced this technique into Tesco (UK).
Some other major companies using this process in the UK include W.H.Smith, Forward Trust and so on, while in the USA, companies such as General Motors, Mobil and Motorola fall in this category. In India, we can mention the names of some companies such as Reliance Industries Ltd, Godrej Soaps, Infosys and Wipro.
All this goes to illustrate that with its origins in the 1960s and 1970s, this approach has a growing number of exponents and fans.
‘Multirater feedback’, ‘all-round feedback’, ‘peer appraisal’, ‘upward appraisal’, ‘180 degree appraisal’, ‘360 degree appraisal’, ‘400 degree appraisal’, ‘540 degree appraisal’ and so on are the names by which 360 degree feedback has been labelled, the reason being that all these terms represent different ways of describing the same thing.
The variation in the numbers indicates the variation in the rater groups used. For example, while 180 degree feedback describes top-down and bottom-up feedback, the 360 degree feedback includes feedback not only from the boss and the subordinates but also from peers and so on.
The 540 degree feedback comprises feedback from almost all stakeholders even if they are from outside the organisation. Thus, it is a process of systematic collection and feedback of performance data on an individual or a group, derived from a number of stakeholders, in their performance.
While the traditional performance appraisal involves bosses only assessing their staff, the 360 degree feedback is based on the concept that people other than bosses also, who actually work with us, for example, subordinates, peers, customers and suppliers, may also provide for more vital, accurate and useful insights into our strengths, weaknesses and scope for development.
It involves collecting responses through structured questionnaires about a manager from his/her bosses, peers and subordinates. The techniques span over several parameters – performance as well as behaviour, how effectively a manager handles his/her boss and juniors, how clearly he/she communicates, how deftly he/she delegates and how abrasively he/she administers.
Values, ethics, fairness, balance and courtesy—nothing is excluded from the ambit of appraisal and neither crucially is the question of how inspired a manager’s leadership is.
The questions are formulated so as to elicit one of the five responses to the subject’s rating on a parameter – significant strength, strength, meets requirements, developments required and cannot rate. Normally, questions relating to behaviour are more effective than performance-related queries. The latter requires judgement which can be not only difficult but also biased. By contrast, the former elicits reportage which is simpler and more reliable.
Each manager is assessed by a minimum of 15 colleagues – at least 2 of them being his/her bosses, 4 of them peers and 6 of them subordinates. While immediate supervisors are best placed to evaluate performance parameters, peer judgement provides comparative and even competitive perspectives.
And including juniors is crucial – many an apple of the boss eye metamorphoses into a brutal bully with subordinates, often hoarding responsibility rather than delegating it. The best 360 degree system polls customers too.
Crunched and graphed by a computer, the responses are presented collectively to the subject of the appraisal, with specific comments. A bar chart for each parameter indicates what percentage of respondents in each category—boss, peer or subordinate—rated the subject.
Then interpretations of what the findings are actually telling their subject follow. And finally, counselling sessions tackle ways to solve the specific problems and weaknesses identified by the 360 degree assessment.
In 360 degree feedback, the role of evaluation is shared, shifting the responsibilities from one individual to many, reducing the severity of any one person’s shortcomings as an evaluator, including errors of leniency, personal bias, subjectivity and so on.
360 degree feedback reflects many directions from which information is provided on a set of predefined competencies. Feedback comes from many sources, and it provides a more balanced evaluation that is usually more acceptable as fair and objective.
Peers and subordinates are regarded as credible feedback sources because they have greater opportunity to observe the manager’s behaviour than supervisors do. This hot new form of assessment, known as 360 degree feedback, involves having a manager rated by everyone above, alongside and below him/her.
Every organisation wants to know everything about a person. That is why 360 degree method should be on top of CEOs’ wish list and that is why the companies referred to earlier and some other are using this technique to find out home truths about their managers.
Although deployed mostly as a fact-finding and self-correction technique, 360 degree feedback is also beginning to be used to design promotion and reward. It involves collecting responses through structured questionnaires about a manager from his/her bosses, peers and subordinates.
How does 360 degree feedback score over other forms of appraisals? Normal performance appraisal systems judge the outcome of a manager’s efforts but ignore the road taken. They focus on achievements rather than the intrinsic qualities that a manager must have in order to lead.
But these qualities are what the appraisal reveals. Remember, it will not tell your managers whether they have met their hard targets, but it will praise or warn them about their styles. ‘It is like having a close look at yourself in the mirror’. How will your managers benefit?
They will learn which of their techniques hurt more than help, learn that their subordinates thought they were insecure and, therefore, did not delegate. For example, Godrej Groups CEO Adi Godrej was amazed to realise that his managers wanted him to curb his authoritarianism.
Communicated to your managers, their ratings will push the onus for changing directly onto each of them. Says Adi Godrej, managing director, Godrej Soaps, the first manager in the company to take a 360 degree appraisal – ‘It is a powerful tool for self-development, especially at the senior level, which is where one tends to get insulated’.
Naturally, your organisation will gain from the improvements that heightened self-awareness generated among your employees, among the other benefits that will flow.
Now the question arises that whom should you subject to a 360 degree assessment? Although applicable across functions and anywhere in the hierarchy, the tool is most effective when used from the top- down for the fact that the CEO and the top managers have been administered the test convinces everyone else to go through it too.
Of course, do not be surprised if the results are uneven, for individual reactions can vary, and not every manager in your company will accept and benefit from the findings. According to R. R. Likhite, group senior vice president (HRD), Mafatlal Industries, ‘Such assessment may be applicable to some managers, but not all’.
Then the next question is that should your manager’s pay cheques reflect their appraisals? Used to complement performance assessments, the feedback can be a useful compass for pointing out directions to compensation. But do not deploy it as the soul arbiter of reward.
After all, performance in terms of meeting targets must be fundamental to evaluation. Manab Bose, director (Human Resource and Corporate Affairs, India Region), GE remarks, ‘You can’t deduct five per cent of someone’s increment because he trampled over two people to achieve his goals’.
Alright, but how can you ignore, when determining increments, the leadership ratings the 360 degree test gives your managers? To resolve the contradiction, American Express uses a target-based performance appraisal to award a performance bonus at the year end. And the leadership rating of the 360 degree assessment is linked to promotions and increments.
Thus, managers have to make the numbers for a one-off reward and earn high grades on the 360 degree test for permanent gains. Approves GE’s Bose – ‘The high performer who shoots past targets but is low on leadership skill will be forced to change. Don’t replace your current system with 360 degree assessment, therefore, but do add it to your appraisal arsenal’.
360 degree method is preferred because:
i. It unfolds strengths and weaknesses in the managing style of the assesse.
ii. It forces inflexible managers to initiate self-change.
iii. It helps in creating team spirit.
iv. It reveals truths about organisational culture and ambience.
v. It promotes democratic climate in the organisation and, thus, makes it more open and transparent.
vi. It focuses on customers and suppliers also.
vii. It suits flatter structures.
viii. It is useful because direct line managers may not know all the aspects of an individual’s work.
ix. The predictive ability to 360 degree feedback approach highlights long-term success.
i. Colleagues’ responses may be biased.
ii. It ignores performance in the terms of reaching goals.
iii. Assessees usually deny the truth of negative feedback and, at times, feel threatened.
iv. Linking findings to rewards may be unfair.
v. It is time consuming.
vi. It can be used to humiliate assessee(s).
vii. It is a costly proposition.
In order to make the whole exercise meaningful, individual employees and functional groups should be encouraged to take charge of getting feedback from their constituents on a regular basis. This ensures an organisation-wide performance management system that is ongoing and decentralised.
Besides, traditional appraisal systems are organisational requirements. They establish role clarity, enable one to plan performance, establish abilities and facilitate performance monitoring, assessment and rewards. 360 degree feedback, on the other hand, is an awareness-building, impact-assessing, reflective and developmental tool. Interest and enthusiasm are very critical for success.
360 degree feedback offers promise for the development of managers. The essential prerequisite is how the individuals react to the feedback and a desire to profit by it. One has to look at oneself critically with a desire to accept shortcomings and try to overcome them. It is like having a close look at yourself in the mirror.
The second approach, namely MBO, has emerged as a reaction to the traditional management practices. In the famous phrase of McGregor, traditional measurement asks the supervisor ‘play God’ and sit in judgement upon his/her fellows.
As against this, in the MBO programme, there is a special provision for mutual goal setting and appraisal of progress by both the appraiser and appraise(s). The philosophy of ‘MBO’ is based on the behavioural value of fundamental trust in the goodness, capability and responsibility of human beings.
iii. Behaviourally Anchored Rating Scales (BARS):
This method combines elements of the traditional rating scales and critical incidents methods. Using BARS, job behaviours from critical incidents—effective and ineffective behaviours—are described more objectively. In this method, services and expertise of those individuals are used who are familiar with a particular job to identify its major components so that they may rank and validate specific behaviours for each of the components.
Process for Constructing BARS:
The following are the main steps involved in constructing BARS:
(1) Collecting critical incidents
(2) Identifying performance dimensions
(3) Reclassifying incidents
(4) Assigning scale values to the incidents
(5) Producing the final instrument.
It was the German Army that applied this method for the first time in 1930. It is a system where assessment of several employees is done by various experts using various techniques and also other techniques such as transactional analysis (TA), role-playing, case studies, in-basket and simulation exercises.
In this approach, employees from different departments are brought together to spend two-three days and assigned the task which they would be expected to handle if promoted. The observers then rank the performances of every participant in order of merit.
In it, we work out the cost and contribution of an employee. Cost of the employee is worked out on the basis of money spent on him/her in terms of manpower planning, recruitment, selection, induction, placement, training and development, wages, benefits and so on.
The employee’s contribution is the money value of his/her services. If the percentage of surplus of contribution to cost of the employee is more, then it is considered positive.
As the test ‘Optimism Index Oi 1.1’, recently developed by Padmakali Banerjee, is a measure of present performance also, it can be used as a tool in the process of performance appraisal.
Performance appraisal by the superiors has been the basis for promotion, training and development since long. But subordinates are critical of the assessment done by their supervisors when they feel that the superiors –
(1) Judge them in terms of their own self-images and appraise low-level role performance by comparing it with their own high-level role performance.
(2) Adopt different criteria of assessment in different cases.
(3) Do not give them opportunity to explain the causes of their failures or unsatisfactory performance.
(4) Keep their assessment confidential so that it may not be challenged.
(5) Evaluate them on the basis of certain incidents or happenings which may not be a regular feature of their behaviour or work situation.
(6) Rely too much on past records and remarks by their predecessors.
Self-assessment by employees may be complementary to evaluation by the superiors. McGregor’s theory is based on three important postulates – self-direction, self-control and self-appraisal. The average human being, according to him, learns under proper conditions not only to accept but also to seek responsibility.
The capacity to exercise a relatively high degree of imagination, ingenuity and creativity in the solutions of organisational problems is widely, not narrowly, distributed in the population. People should be given a degree of freedom to direct their own activities to achieve the goals which are set in consultation with them.
This would satisfy their egoistic and self-fulfilment needs, and will make them less dependent on their superiors and assume more responsibility. Thus, the philosophy of self-assessment is based on the theory of human behaviour. Self-assessment is successful when it ensures that the subordinates rate themselves in an objective manner without fear of being victimised.
The pro forma for self-assessment should be designed in such a manner that the employee may have an opportunity to tell about his/her performance on the job both in qualitative and quantitative terms, his/her interest and aptitude, his/her relations with the superiors, colleagues and subordinates, and so on.
If the assessment is done in a free atmosphere, then he/she will not hesitate in pointing out his/her weak points as well as his/her expectations from the bosses to guide him/her in improving his/her performance and potentialities.
Self-assessment may result in subordinates:
1. Accepting the organisation goals and working activity for the same.
2. Cooperating with superiors in implementing plans and policies.
3. Maintaining discipline, giving due respect to superiors and working in harmony with colleagues.
4. Improving productive efficiency and reducing waste.
5. Improving employee morale.
Methods of Performance Appraisal – Written Essay, Critical Incidents, Checklist, Forced Choice, Graphic Rating Scale, BARS, Oriented Appraisal Method and a Few Others
Performance of employees can be evaluated with the help of both traditional and modern methods of appraisal. Appraisal can also be either informal or formal. Informal appraisal is carried out in order to communicate to the subordinates about their performance on a day to day basis.
For instance, if an employee is performing consistently and meeting the performance standards, an informal appraisal may help in just recognizing his/her effort. It can also be used to discourage poor performance. It is next to impossible for all managers to make such informal appraisals regularly and effectively.
Hence, this will result in either a subjective appraisal or no appraisal. Therefore, it is vital to have formal appraisal.
Formal appraisal is most often required by the organizations for the purpose of employee evaluation. Formal appraisal methods are those that are prescribed through instructions.
Traditionally, these are behaviour-oriented which focused on employee behaviour or result-oriented that focused on achievement of given tasks. Modern methods such as appraisal by – (a) group, (b) colleagues, (c) subordinates, (d) 360 degree feedback, (e) assessment centres are also being used.
Behaviour-oriented methods can be classified into (a) absolute rating methods, and (b) relative rating methods. In absolute rating methods, each employee’s performance is rated independently without comparing it with that of any other employee. While in relative rating methods, the relative standing among employees’ performance is determined.
Absolute Rating Methods:
1. Written Essay
2. Critical Incidents
4. Forced Choice
5. Graphic Rating Scale
6. Behaviourally Anchored Rating Scale (BARS).
7. Oriented Appraisal Method
8. Group Appraisal of Subordinates
9. 360 Degree Feedback Method
10. Assessment Centers Method
Method # 1. Written Essay:
This is a method in which the rater is asked to describe in writing the strengths and weaknesses of an employee’s behaviour, the potential for development, and also gives suggestions for improvement.
While preparing the essay, the rater generally keeps in mind the following few factors – (a) job knowledge and potential of the employee; (b) employee’s understanding of the company’s policies, programmes, goals, objectives, etc.; (c) the relationship of employee with his co-workers and superiors; (d) the employee’s general planning, organizing and controlling ability; (e) the attitudes and perceptions of the employee in general. If the essay is unstructured and the rater is free to improvise its format.
It is a simple method that facilitates quick feedback to employees. Moreover, through this method a great deal of information about the employee can be gathered. But the length and content of the essay may vary from employee to employee and rater to rater, and it may not be easy to make a comparison between employees’ performance.
Method # 2. Critical Incident Technique:
In this method, a rater focuses attention on the critical elements of a job or key behaviours that determine whether the job has been done effectively or ineffectively. These elements or behaviours are expressed in the form of statements which are developed by staff specialists or line managers.
A rater prepares a record of performance in the form of incidents describing what the employee did or did not do, and whether the performance was effective or ineffective. At the end of the rating period, these recorded critical incidents are used to evaluate the employee’s performance.
An example of a good critical incident of a customer care executive as on 1st July, 2011 is as follows:
1st July, 2011 – The customer care executive patiently listens and tackles the problems of the customers. She is polite, enthusiastic and very prompt in solving customer’s problems.
An example of a bad critical incident of a customer care executive as on 1st July, 2011 may appear as follows:
1st July, 2011 – The customer care executive is impatient, rude, negligent and disinterested in work. He came 25 minutes late to office.
This method is more objective than a trait-based appraisal because it consists of incidents about an employee’s performance. It is helpful in counselling the employee about the aspects of performance that need to be improved. But a rater may find it burdensome to note down regularly critical incidents for all the employees.
It is also likely that the rater may not be around when the employee does something ‘critically good’ or ‘critically bad’ and, therefore, this performance goes unnoticed. Comparison of performance of employees also becomes difficult because the narrative is unstructured.
Method # 3. Checklist:
In this method, a rater uses a list of statements that describe job-related behaviours. The rater goes through the list and ticks those statements that best describe the employee’s behaviours or he strongly believes that the employee possesses the particular list of traits. Else, the rater leaves it blank.
After completion, the rater sends the checklist to the HRM department, where scores are allotted to the statements ticked, and an overall numerical rating for each employee is worked out. In this method, bias is reduced because the rater and the scorer are different persons. Also, appraisals can be completed quickly.
But separate checklists have to be prepared for each job category and, therefore, this method may not be found cost – effective.
Method # 4. Forced Choice:
In this method, a special type of checklist is used in which some statements under each heading are given. A rater has to tick the statement that best describes an employee’s performance. After completion, the list is sent to the HRM department where scores are allotted to the statements ticked, and final evaluation of the employee is prepared.
This method permits quick evaluation of employees’ performance. The degree of bias in the assessment is also reduced because raters do not know the scores allotted to the statements. But it is likely that some of the given statements do not accurately describe the employee’s performance, and, therefore, the evaluation may not be accurate.
Method # 5. Graphic Rating Scale:
This is one of the oldest, the simplest and the most popular method of appraising performance. In this method, an attempt is made to seek objectivity by focusing on factors of an employee’s job, and indicating employee’s performance in respect of those factors. Generally, these factors are – quality and volume of work, loyalty, job knowledge, co-operative spirit, dependability, attitudes etc.
Each of these factors is clearly defined and, against it , a scale or continuum of five or ten points, along with a descriptive phrase indicating the level of performance ranging from ‘excellent’ to ‘poor’ for the point noted on the scale, is given. A rater ticks or notes the point that best describes the performance.
This method is less time-consuming to develop and administer. It also permits quantitative analysis and comparison of performance of employees. Performance factors are standardized and, therefore, comparison with other individuals in the diverse job categories can be made.
But raters should clearly understand the performance factors and the scale points so that errors in appraisal could be minimized.
Method # 6. Behaviourally Anchored Rating Scale (BARS):
This method combines main elements of the critical incidents method and the graphic rating scale method. In this case, an employee’s performance is evaluated against specific job-related behavioural dimensions of performance spread along a continuum ranging from “excellent” to “poor” work.
The points on the continuum, which are like critical incidents, are carefully developed in consultation with managers, employees and a group of experts, using specific examples of effective and ineffective behaviours regarding each performance dimension. These are tested and retested to ensure that there is agreement on the levels of performance indicated by these examples.
The final performance statements thus developed are assigned numerical value representing the level of performance. The statement that is rated higher on the scale is used as an anchor on the performance dimension.
The process of generating behavioural dimensions enables managers and employees to specify types of behaviours which represent ‘good’ and ‘bad’ performance. The subjectivity in evaluation is minimized, and errors in appraisal are reduced. A good gauge of job performance can be prepared through this method.
It is also easy to counsel employees because behaviours or work activities where improvement is required can be explained with specific examples of performance. But development of BARS is a painstaking, expensive, and time consuming process.
Relative rating methods are:
I. Group Order Ranking or Forced Distribution
II. Individual or Straight Ranking
III. Paired Comparison.
I. Group Order Ranking or Forced Distribution:
In this method, a rater distributes employees into a normal or bell-shaped curve. The assumption is that a relatively small number of employees are “outstanding” and a relatively small number are “unsatisfactory”, and all others fall in between. For example, the distribution of employees can be – 10% ‘outstanding’; 20% very good’; 40% ‘good’; 20% ‘average’; and 10% ‘unsatisfactory’.
The relative standing of employees determines the categories in which they are placed. Since rater has necessarily to put employees in a certain category, this method is also known as – ‘forced distribution’.
This method eliminates clustering of all employees at the top, middle or bottom of the distribution. Raters are not able to inflate their evaluations nor can they rate everyone ‘excellent’, ‘very good’, ‘good’, or ‘average’. Also, a large number of employees among whom it is not possible to make an accurate distinction can easily be evaluated.
But this method is unfair to employees who may have excellent record and yet cannot be given excellent rating because only a limited number of employees can be so graded. Similarly, employees who may be mediocre may be ranked high if they happen to be better than the rest of the group.
II. Individual or Straight Ranking:
This is a simple method in which a rater lists appraises in order of the level of their performance from the highest to the lowest. For example, if a rater is appraising 20 employees, only one among them can be graded as the “best”. Thus, in this method, it is not possible to rate more than one person as – “excellent” or “above average”. Therefore, employees who can be rated among the best are relegated to lower positions.
III. Paired Comparison:
In this method, each employee is rated in relation to every other employee, and the rating indicates whether the employee is a better member of the pair. When making paired comparisons, names of all the employees in the group are listed on the left hand side of the sheet. Then each employee is compared, one by one, with other members of the group.
The total number of comparisons to be made are worked out by the formula – [N (N-1)]/2 where N is the total number of employees to be rated. After comparisons on all performance dimensions have been made, a score is obtained for each employee by counting the number of times the employee was found better.
The employee who secures the highest number of “better” ratings is considered to be the best among the group. The relative position of employees is similarly determined.
While this method permits comparison among employees, it becomes unwieldy if the number of employees to be compared is large. Also, the comparisons are made on overall basis and not in terms of specific job behaviours or results achieved, and may, therefore, be open to challenge.
Method # 7. Oriented Appraisal Method:
This method is also called ‘Management by Objectives’. It is used to evaluate employee performance on the basis of achievement of tasks that are critical for successful performance of a job. These tasks are determined before-hand with the knowledge, understanding and acceptance of the superior and the subordinate.
The tasks should be tangible, verifiable, and measurable, be described in qualitative and quantitative terms, and to be achieved within a prescribed time – frame. Work planning and periodical reviews are essential parts of the MBO process.
In this method, appraisal becomes objective because it is based on success in achieving the mutually agreed tasks. The appraisal interview also provides an opportunity to look forward, and set and agree to the tasks for the next review period. But this method requires that work environment should be conducive of trust, and permit individual initiative and risk-taking.
Also, the method is time-consuming to implement and maintain. Sometimes resentment may be generated if the tasks set for some employees are more difficult to achieve than those set for others, and the latter group is better rewarded than the former.
Method # 8. Group Appraisal of Subordinates:
In this method, appraisal is made by a group or a managerial committee who have functional relationship with appraisees. The group members fill out separate forms, which are then collated and analyzed in the HRM department, and final evaluation is made.
This method makes available a large amount of data and employees can be rated from different perspectives. Extreme or out-of-line ratings can be identified and corrected. But if group members are not fully familiar with employees’ performance, appraisal may not be accurate.
Employees’ feelings of loyalty to immediate superiors may also be eroded. Sometimes reconciliation of extreme ratings may pose problems. This method is time-consuming also.
Peers Appraising the Colleague- In this appraisal, which is also known as sociometric appraisal, a group of co-workers rate an employee. It brings out in a comprehensive manner personality traits, behaviours and actual results achieved, because co-workers are likely to have a clear idea of how effective the individual is at working with them, and the views of several people can provide a balanced perspective of the performance.
But if co-workers do not know all aspects of the individual’s job or are reluctant to express an honest opinion about their colleague, the evaluation may be inaccurate. Inter-personal aspects of job performance may also get over -emphasized and the evaluation may turn out to be almost a “popularity contest”.
Subordinates Appraising the Boss:
In this method, subordinates appraise their bosses. The underlying assumption is that subordinates who have day-to-day inter-action with their bosses and observe them closely can more accurately evaluate their performance.
This method provides a means to gauge the nature of superior-subordinate relationships and a feedback on subordinates’ perception of their superior’s personality, behaviours and activities. But subordinates may not make adverse comments if they feel that their boss might hold this against them at some future date.
The boss may also be reluctant to accept the subordinates’ views. Besides, such an appraisal tends to dilute the superior’s authority and encourages subordinates to take advantage of their boss’s vulnerability.
Method # 9. 360 Degree Feedback Method:
In this method, the emphasis is on assessing how managers lead their teams. Managers are rated simultaneously by their bosses, colleagues, subordinates, and customers. For the purpose of evaluation, detailed questionnaires are given to evaluators who are guaranteed anonymity.
On the basis of information so collected, those managers who need to improve their communication skills and team-working are identified and helped to remove their weaknesses. But it is a time-consuming and expensive method.
Method # 10. Assessment Centers Method:
Assessment centers are used to assess potential of employees for higher level management positions. The employees are required to participate in a series of tests and activities which simulate situations they may have to face in their job. These tests and activities provide an all-round comprehensive view of the individual’s talents and abilities. But these are expensive and time-consuming.