What is Performance Appraisal?


Performance appraisal means the systematic evaluation of the performance of an employee by an expert or his immediate superior.

Performance appraisal is concerned with determining the differences among the employees working in the organisation. Generally, the evaluation is done by the individual’s immediate superior in the organisation and who is reviewed in turn by his superior.

Performance appraisal is the process of assessing quantitative and qualitative aspects of an employee’s job performance.


It basically involves evaluating the performance of an employee against predetermined targets together with evaluation of personal traits and preparing a development action for the employee.

Learn about:-

1. Introduction to Performance Appraisal 2. Meaning and Definitions of Performance Appraisal 3. Concept 4. Objectives 5. Characteristics 6. Importance 7. Pre-Requisites

8. Performance Criteria. 9. Purposes 10. Types 11. Approaches 12. Uses 13. Steps 14. Challenges of Appraisal Interview 15. Essentials of an Effective Performance Appraisal System


16. Employee Potential. 17. Difference between Performance Appraisal and Job Evaluation 18. Benefits 19. Problems 20. Remedies for Pitfalls 21. Guidelines 22. Performance Appraisal in Indian Industries.

What is Performance Appraisal: Meaning, Definitions, Concept, Nature, Characteristics and Benefits

What is Performance Appraisal – Introduction

After selection, training and development of employees and they being on job for some time, it is essential to appraise their performance which will give a fairly good idea about the effectiveness of the processes of selection, training and development undertaken by the organisation. The outcome of performance appraisal also indicates whether the organisation is going in the right direction or not.

It is perhaps for this reason that Edwin B. Flippo has rightly remarked – No firm has a choice as to whether or not it should appraise its personnel and their performance. Just as training must and does take place after hiring, it is inevitable that the performance of the hired personnel will be evaluated by someone at some time. The choice is one of method.

Although the candidate’s appraisal at the time of selection is a must and it serves many useful purposes, still performance appraisal on a continuing basis during the working life of such an employee is also desirable and useful. Although the appraisal of vari­ous employees is continuously done at an unconscious level, for example, employees evaluate their supervisors, fellow colleagues and subordinates also, here we are concerned with the periodic and sys­tematic evaluation of an employees’ performance which is done by the management in case of its employees at all levels.


Performance appraisal means the systematic evaluation of the performance of an employee by an expert or his immediate superior.

Appraisal results in the comparison of more than one person in several directions with others. The very purpose of appraising an employee is for the promotion of the employee. Performance appraisal is used to cover some other activities also. The appraisal is done by the management periodically. The time and venue of the appraisal should be known to both the employer and the employee. The appraisal avoids personal biases and prejudices which tend to lead to an incorrect appraisal of an employee.

The performance of an employee is compared with the job standards. The job standards are already fixed by the management for an effective appraisal.

Scott, Clothier and Spriegel have defined merit rating or performance appraisal as the process of evaluating the employee’s performance on the job in terms of requirements of the job. According to Yoder, “Performance appraisal refers to all formal procedures used in working organisations to evaluate personalities and contributions and potential of group members.” This definition reveals that performance appraisal is a formal programme in an organisation which is concerned with not only the contributions of the members of the organisation but also aims at spotting their potential.


Performance appraisal is concerned with determining the differences among the employees working in the organisation. Generally, the evaluation is done by the individual’s immediate superior in the organisation and who is reviewed in turn by his superior.

Thus, everyone in the organisation who rates other is also rated by his superior. Performance appraisal employs rating techniques for comparing individual employees in the work-group, in terms of personal qualities or deficiencies and the requirements of their respective jobs. It should be differentiated from job evaluation which is concerned with the determination of worth of different jobs.

What is Performance Appraisal – Meaning and Definitions

Growth and development of an organisation depends upon efficient use of human resources. Most of the employees are interested to know as to how well they are doing in the job and how can they do better in future. They wish to have such information not only for personal satisfaction but also help them to improve performance and qualify for rewards such as promotion and performance incentives. Similarly, to meet organisational needs, employees may require additional training.

Performance appraisal is the process of assessing quantitative and qualitative aspects of an employee’s job performance. It basically involves evaluating the performance of an employee against predetermined targets together with evaluation of personal traits and preparing a development action for the employee.


We can evaluate employees based on the following criteria:

1. Traits – Honesty, Sincerity, industriousness, perseverance

2. Behaviour – Initiative, punctuality, ability to get along with people, meeting deadlines

3. Results – Achievement of sales targets, cost reduction, profitability

In a competitive business environment, companies are concerned with results and therefore it is better to use a combination of measures for assessing the performance of an employee. Of course traits and behaviour would contribute to achievement of individual and organisational objectives.

Performance appraisal provides answers to the following important questions to the employee and the organisation:

1. Employee – How well am I doing and how can I do better and

2. Organisation – How well are our employees doing individually and collectively and what can we do to help them to do better for themselves and for us.

According to Edwin Flippo, “Performance appraisal is a systematic, periodic and so far as humanly possible and impartial rating of employee’s excellence in matters pertaining to his present job and to his potentialities for a better job”.

According to Michael Crino, “Performance appraisal is the process of assessing quantitative and qualitative aspects of employee’s job performance”.

According to Scott, Clothier and Spriegal, “Performance appraisal is a process of evaluating an employee’s performance of a job in terms of its requirements”.

Terms such as employee evaluation, merit rating, employee evaluation, personal review, progress review, service rating are also used for evaluation of the performance of the employee.

Merit rating is basically different from performance appraisal. Merit rating is the impartial evaluation of merit and qualities of each person of a work group. In merit rating, employee’s internal merits and qualities such as initiative, trust, integrity, self-discipline, commitment, etc., are assessed.

The term rating denotes classification according to grade, rank or class. Merit rating is system for analysing and classifying the differences among employees vis-a-vis job standards. The appraisal is done based on employee traits. In the case of performance appraisal, appraisal of the employee is based on quantitative and qualitative aspects of an employee’s job performance.

What is Performance Appraisal – Concept

In today’s competitive scenario, it is important for any organization to keep pace with the changing environment. Human resource is a unique and valuable source that provides competitive advantage to an organization; therefore, it is essential to ensure continued development of human skills to brave out the day-to-day changes. There should be a fair basis for rewarding efficient and competent employees to ensure their optimum performance in future.

In addition, employees should have opportunities for growth and development. Employees’ performance management system provides one such mechanism for employee development as well as for rewarding efficient employees. Performance appraisal forms an important part of organizational development as well, because only happy and satisfied employees will contribute positively towards the organizational goals.

Employee performance includes parameters such as hard work, quantity of output produced, quality of work done, responsibility, initiative, regularity, and punctuality. Performance appraisal is the process by which an organization gets data about an employee’s past and present job performance. Performance appraisal is also known by several terms, such as performance assessment, performance evaluation, merit rating, merit evaluation, and performance management.

Performance appraisal involves the following concepts:

1. Setting standard/goals

2. Internal discussion

3. Appraising/measuring performance relating to standard set

4. Interface discussion

5. Providing feedback, counselling to improve weak areas, or stimulating performers, achievers for maintenance/ continuance of the present level of performance.

According to Dale S Beach – “It is the systematic evaluation of the individual with respect to his/her performance on job and potential for development.”

According to Randall – “Performance Appraisal is a formal, structured system of measuring and evaluating an employee’s job related behaviours 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 so that the employee, organisation and society all benefit.”

The performance appraisal can be defined as a process, typically delivered annually by a supervisor to a subordinate, designed to help employees understand their roles objectives, expectations and performance success. Performance management is the process of creating a work environment in which people can perform to the best of their abilities.

The push toward teamwork, continuous improvement, learning, and the like has caused numerous organisations to rethink their approach to appraisal. Some argue that performance appraisal discourages teamwork because it frequently focuses on individual achievement and produces a self-focus rather than a team focus. Others contend that appraisals are useful only at the extremes-highly effective or highly ineffective employees and are not as useful for the majority of employees in the middle.

Others point out that appraisals may focus on short-term achievements rather than long-term improvement. They are sometimes too subjective or inconsistent or autocratic in that they create a distance between manager and employee rather than creating a team environment. Companies such as Xerox, Motorola, and Procter & Gamble have modified their performance appraisals to better acknowledge the importance of teamwork, continuous improvement, quality, and the like.

What is Performance Appraisal – 5 Main Objectives

Performance evaluations are an organization’s way of evaluating the talent, skills and abilities of the staff. It also offers an opportunity for the employee and manager to have a face-to-face discussion of where the employee stands and what it takes to get him to the next step of the ladder. The purpose of performance evaluation is to provide feedback on an employee’s performance, to create a development plan for him in areas where he needs to develop.

The main objectives of performance appraisal can be listed as follows:

(a) To provide feedback to employees on their performance so that they can improve wherever there are inadequacies reported.

(b) To provide a database for personnel decisions concerning place­ment, pay, promotion, transfer etc.

(c) To facilitate communication between employees and managers and reduce grievances of employees.

(d) To check the effectiveness of recruitment, selection, placement and induction programs.

(e) Performance appraisal should provide the opportunity for orga­nizational diagnosis and development.

What is Performance Appraisal – 6 Major Characteristics

Performance appraisal is an objective assessment of an individual’s performance against well-defined bench marks. It may be understood as the assessment of an individual’s performance in a systematic way. The performance is measured against factors such as job knowledge, quality and quantity of output, initiative, leadership abilities, supervi­sion, dependability, co-operation, judgment, versatility, health etc.

An employee’s potential for performance improvement is also checked in the appraisal. Other terms used for performance appraisal is employee assessment, personnel appraisal, performance rating, merit rating and employee performance review.

The main characteristics of performance appraisal are as follows:

(a) It is a systematic process – It attempts to evaluate performance of all employees of the organization using the same approach. There are various steps that are followed to evaluate an employee’s strengths and weakness.

(b) It is concerned with differences among the employees in terms of their performance. The comparative merit of each individual is calculated objectively.

(c) It tries to establish a plan for performance improvement of all employees after their job evaluation is done.

(d) Major decisions like promotions, transfers, pay increase etc., are done on the basis of merit rating of employees. In fact, merit rating is used to suggest which training is best for employees.

(e) Performance appraisal, though is a systematic and a very com­prehensive process, but is done periodically by once a year or twice a year according to a definite plan. It cannot be done imme­diately and very frequently or it will lose its essence.

(f) Performance appraisal is not job evaluation – It checks how well someone is doing the assigned job. Job evaluation analysis vari­ous jobs and tells about what job demands and does not take into account individual abilities of the job holder. Performance appraisal gives a comparative merit on different individual’s per­formance on job.

(g) Performance appraisal may be formal or informal – Informal per­formance appraisal is subject to a lot of criticism as it can be influenced by personal factors. Some employees are favourite of their bosses and so get better opportunities to grow whereas, oth­ers may be just not qualified for it. The formal system is more objective, fair and is based on information collected through printed appraisal forms.

Some Other Important Characteristics

(i) Performance measurement is mainly concerned with appraisal or rating of employee’s performance in relation to a job.

(ii) It also amounts to examination of strength and weaknesses of employees in relation to performance of job.

(iii) Its main purpose is to find out how well the employee is performing the Job and to recommend a plan of improvement if performance is found to be poor.

(iv) It is a continuous and on-going process as organization wants improvement in quality of work throughout the working life of it and its workers.

A number of crucial decisions about employees are made on the basis of performance appraisal and hence it must be sound and effective.

Given below are the essential characteristics of a sound performance appraisal policy:

1. Reliability and Validity – Appraisal system should provide consistent, reliable and valid outcomes which can protect the organisation even in legal matters. Consistency refers to agreement in ratings given by two equally qualified appraisers using the same appraisal technique. Validity refers to measuring what is supposed to be measured.

2. Job Relative – The appraisal technique should measure the performance and provide information on job related activities and areas.

3. Standardised – All the elements of the appraisal procedure should be uniform across the organisation, e.g., appraisal forms, procedures, administration techniques, ratings etc.

4. Feasibility – The techniques should be practically viable to implement and administer and constantly economical.

5. According to Laws – The appraisal procedure must be in accordance with the labour laws framed by the constitution.

6. Trained Appraisers – Appraisers should be trained to conduct appraisals efficiently.

What is Performance Appraisal – Importance

(a) An effective system of performance appraisal helps the supervisor to evaluate the performance of his employees systematically and periodically. It helps in the placement of the employees on the job for which they are best suited.

(b) Recent research has reported that appraise seems to have greater acceptance of the appraisal process and feel more satisfied with it, when the process is directly linked to rewards.

(c) Performance measures quantitatively tell us something important about our product services and the processes that produce them. They are the tool to help us understand to manage and improve what our organization’s do.

(d) Performance measures are always tied to goal or an objective (the target) and tell us if and where improvements are necessary.

(e) Performance appraisal can also be used for transfer and promotions of employees.

(f) It facilitates human resource planning, career planning and succession planning. It is used to analyse the training and development needs and evaluating the effectiveness of existing training program.

(g) Performance appraisal provides the management an objective basis for discussing salary increases and special increments of the staff.

(h) The result of performance appraisal may be used by the supervisor in constructively guiding the employees in the efficient performance of their jobs.

What is Performance Appraisal – 11 Important Pre-Requisites

A sound appraisal system should comply with the following:

1. Reliability and Validity- The system should be both valid and reliable. The validity of ratings is a degree to which they are truly indicative of the intrinsic merits of employees. The reliability of ratings is the consistency with which the ratings are made, either by different raters, or by one rater at different times. Both validity and reliability results from objective database.

2. Job Relatedness- The evaluator should focus attention on job related behaviour and performance of employees in order to focus attention on behaviour under the employee’s control, raters must become familiar with the observed behaviour. It is also necessary to prepare checklist so as to obtain a review to performance related information. Rating should be tied up with actual performance of units under the ratees control.

3. Standardisation- Well defined performance factors and criteria should be developed. Appraisal forms, procedures, administration of technique, ratings etc., should be standardized as appraisal decision affect all employees of the group. It will help to ensure uniformity and comparison of ratings. They should also be easy to administer and economical to use.

4. Practical Viability- The technique should be practical viable to administer, possible to implement and economical to undertake continuously. It must have the support of all line people, think is too theoretical, too ambitious too unrealistic or those ivory tower staff consultants who’ have no comprehension of the demand on time of the line operators have foisted it on them, and they will resent it.

5. Training to Appraisers- The evaluators or appraisers should, be provided adequate training in evaluating training in evaluating the performance of employees without any bios. Evaluators should also be given in philosophy and techniques of appraisal. They should be provided with knowledge and skills in documenting appraisals, conducting of appraisal interviews, rating errors etc.

6. Open Communication- The system should be open to participative. Not only should it provide feedback to the employee on their performance it should also involve them in goal setting process. The overall purpose of appraisal should be development rather judgmental.

7. Employee Access to Results- Employee should receive adequate feedback to their performance. If performance appraisal was meant were meant for improving employee performance, then whit holding appraisal results would not serve any purpose. If the results or appraisal is negative and goes against the employee, it should be immediately communicated to him so that he may improve his performance or may go for an appeal before the appropriate authority in ease he is not satisfied. Such provision should be made. This will enable the management to gain the confidence of the employee.

8. Clear Objective- The appraisal system should be objective oriented. It should fulfill the desired objectives like determining the potential for higher jobs or for the selection of annual increment in salary or for granting promotion or for transfer or to know the requirement for training. The objective should be relevant, timely and open. The appraisal system should be fair so that it is beneficial to the both the individual employee and the organisation.

9. Post Appraisal Interview- After appraisal, an interview with the employee should be arranged. It is necessary to supply feedback, to know the difficulties under which the employees work and, to identify their training needs. The appraiser should adopt a problem solving approach in the interview and should provide counselling for improving performance.

10. Periodic Review- The system should be periodically evaluated to be sure that it is continuing to meet its goals. Not only there is the danger that subjective criteria may become more salient that the objective standards originally established there is the further danger the system may become rigid, in a tangle or rules and procedures, many of with are no longer useful.

11. Not Vindictive in Nature- It should be noted by the executives at the helm, of the affairs of the organisation that the aim of appraisal or any system for that matter is to improve performance, organisation effectiveness and to accomplish organisational objectives and not to harsh the employs and workers of their organisation who are the vital human resources without whose help nothing can be achieve.

What is Performance Appraisal – 4 Important Performance Criteria

There are a number of performance appraisal criteria, which may be used to measure the proficiency of an employee.

These criteria may be classified into many categories:

1. Objective criteria

2. Subjective criteria

Amount of quality of production, work samples tests, length of service, amount of training necessary, absenteeism, accidents etc. are all examples of objective criteria. Rating of employee’s job proficiency by their superiors, peers and subordinates, extent of upward communication of ideas, degree of knowledge about corporate goals, contribution to social- cultural values etc. are all examples of subjective criteria. Since all subjective criteria depend upon human judgement and opinion, they are subject to certain kinds of errors likely to be found in the rating process.

It should be remembered that whereas objective criteria can be easily laid down at the lower levels of an organization where the jobs are generally specific defined, they are difficult to specify further up in the hierarchy where jobs become more complex and vague. We give below a list of important criteria, which can be used to appraise the performance of different classes of employees in an organization.

I. Performance Criteria for Operatives:

1. Quantity and quality of output in a given period.

2. Work sample tests.

3. Length of service.

4. Amount of training necessary.

5. Ratings by supervisors.

6. Number of accidents in a given period.

7. Number of absents in a given period.

II. Performance Criteria for Front-Line Supervisors:

1. Quantity and quality of output in a given period

2. Labour cost per unit of output in a given period

3. Material cost per unit of output in a given period

4. Total cost per unit of output in a given period

5. Absenteeism rate for a given period

6. Employee turnover rate for a given period

7. Man shifts lost to stoppage of work in a given period

8. Number of accidents in a given period

III. Performance Criteria for Middle Level Managers:

1. Quantity and quality of output in a given period

2. Labour cost per unit of output in a given period

3. Material cost per unit of output in a given period

4. Total cost per unit of output in a given period

5. Rational use of overhead facilities

6. Coordination among supervisors

7. Degree of knowledge among supervisors about corporate goals and policies

8. Extent to which front-line supervisors regard themselves as managers and behave likewise.

9. Extent of upward communication of ideas, information and queries from front-line supervisors.

IV. Performance Criteria for Managers:

1. Return on capital employed

2. Labour productivity indices (improvements in labour productivity arise from capital investment, better work methods, better personnel policies etc. all of which originate at the top echelons of management).

3. Degree of knowledge among middle level managers about corporate goals and policies

4. Extent of upward communication of ideas, information and queries from middle level managers.

5. Extent to which middle level managers regard themselves as managers and behave likewise.

6. Contribution to the socio-cultural values of the environment (a consideration of this aspect is necessary to determine whether the organization has secured a niche for itself as a worthwhile institution in society).

What is Performance Appraisal – Purposes

Appraisal of employees serves several useful purposes:

(1) It can serve as a basis for job change or promotion. By establishing whether the worker can contribute still more in a different or a higher job it helps in his suitable promotion and placement.

(2) The existence of a regular appraisal system tends to make the supervisors and executives more observant of their subordinates because they know that they will be expected periodically to fill out rating forms and would be called upon to justify their estimates. This knowledge results in improved supervision.

(3) By identifying the strengths and weaknesses of an employee it serves as a guide for formulating a suitable training and development programme to improve his quality of performance in his present work.

(4) It serves as an important incentive to all the employees who are by the existence of an appraisal system assured of the management’s continued interest in them and of their continuous possibility to develop. The employees realise that not only are they being continuously observed but that they have not been forgotten.

(5) Permanent performance appraisal records of employees help management to give up sole reliance upon personal knowledge of supervisors who may be shifted.

(6) Performance appraisal serves as means for evaluating the effectiveness of devices used for the selection and classification of workers. Alternatively, a knowledge of the characteristics of supervisor and inferior workers can be helpful in selection and placement of workers.

(7) It serves as a feedback to the employee. By letting the employee know how well he is doing or where he stands with his superior it tells him what he can do to improve his present performance and go up in the management hierarchy. The appraisal thus facilitates multiplication of managerial resources.

(8) Performance appraisal often provides the rational foundation for the payment of piece-work wages, bonus, etc., the estimates of the relative contributions of employees help to determine the rewards and privileges rationally.

According to Dalton E. McFarland, “The purpose of any formal method of systematic employee appraisal is to provide greater objectivity in the executive’s judgment about subordinates. It is also an objective to regularise the procedures used by requiring periodic appraisals so that up-to-date information is available for use in making decisions about people”.

What is Performance Appraisal – Top 5 Types: Self-Appraisal, Two-Tier Process, Three-Tier Process, Rating Committee and Comprehensive Approach

1. Self-Appraisal:

The employee assesses his own performance against predetermined objectives for the year under review. Self-appraisal forces the employee to think about him and the work and improves participation of the employee in the appraisal process. The philosophy of self-assessment is based on the theory of human behaviour, i.e., self-direction, self-control and self-appraisal. The employee should be given a fair degree of freedom to direct his own activities and to achieve the objectives which are set in consultation with him.

In many organisations, employees are requested to come prepared with self-appraisal showing their performance against targets/objectives before the performance review meeting with superior. Self-appraisal by employee provides valuable inputs to the manager at the time of formal appraisal. Self-assessment is successful when the employee rates himself in an objective manner. But the disadvantage is that the individual may rate himself high and this may lead to disagreements and unpleasant situation during performance review meeting. Self-appraisal is suitable for higher levels of management.

The concept of on-line appraisal is becoming popular in many organisations. The employee rates himself and this rating goes to his immediate superior for observations and comments. On line appraisal can ensure transparency.

2. Two Tier Process:

Two tier process where the superior (appraiser, rater, and assessor) conducts the appraisal of subordinate (appraisee, ratee or assessee). The immediate supervisor is the most suitable person for assessing the performance of the employee since he interacts with employee frequently, knows the problems and can take corrective steps for improving the performance of the employee.

3. Three Tier Process:

Three tier process in which the subordinate is being appraised by superior as well as boss of the superior (popularly known as Grandfather approach) who plays the role of a moderator. This provides an opportunity to the employee to meet superior’s boss and discuss his own performance. Normally, the moderator checks very high and very low ratings and ensures that the assessment has been done in an objective manner without personal bias.

4. Rating Committee:

Companies also make use of Rating Committees (consisting of superiors, subordinates and peers) to evaluate the performance of employees. The members of the committee have good understanding of the working of the executive and they can come out with an objective and unbiased appraisal of the employee. The demerit of the system is that it reduces the role of the employee’s boss in the appraisal process.

5. The Comprehensive Approach, i.e., 360 Degree Evaluation:

The comprehensive approach, i.e., 360 degree evaluation. It provides for performance feedback from full circle of daily contacts of the employee ranging from superiors, peers to external customers.

What is Performance Appraisal – 3 Major Approaches to Appraise the Sales Managers and Executives

Usually, there are three approaches to appraise the Sales managers and Executives:

1. A casual, unsystematic and often haphazard appraisal

2. Traditional and highly systematic appraisal, and

3. Mutual goal setting through Management by Objective(MBO) programme.

Casual or unsystematic approach is very common, but now trend has been changed and many firms prefer to use systematic method of appraisal.

According to a study conducted by Varney Glenn H., 80 per cent of western companies (out of a sample of 1,000 companies) use formal appraisal system. But still small firms cannot follow this system. In India, apart from small firms, big firms do not use formal appraisal system extensively. However, in India, all firms, irrespective of their size, appraise the performance of their executives one way or the other.

Approach # 1. Informal Method or Appraisal:

In small firms, and in (some big firms, also) informal or casual methods are used. Such methods of appraisal are quite unsystematic and unscientific performances are evaluated by the boss in a primitive way of informal rating system. The rating largely depends on the behaviour, humbleness, loyalty, honesty and obedience in his performance. They (managers) accept the goals set by the boss though unrealistic and whether they are able to achieve them or not. However, they always strive hard to achieve them. The result largely depends upon the value judgement of the boss and what the boss thinks of the subordinates.

The system cannot be said to be rational on two counts – (i) the behaviour of the subordinate may be good towards his boss, whereas his general behaviour and attitude may be harsh towards his customers and colleagues and may be detrimental to the business as a whole; (ii) the boss need not be an expert in rating and evaluation, which affects his value judgement There may be occasions, when the subordinate does not obey his boss, but in the interest of the enterprise, he shall be regarded as disobedient in the eyes of the boss, which may affect the appraisal a lot.

Traditional boss wants implicit obedience of his colleagues which the modern manager does not accept the situation. This approach, therefore, never yield a good result. This is one of the reason, why many of the companies make use of the systematic appraisal mechanism one way or the other.

Approach # 2. Traditional, Formal and Systematic Appraisal:

More and more large scale companies now use most modern appraisal techniques like MBO. But traditional formal and systematic methods are not absent. Systematic approach includes various methods of performance appraisal for managerial personnel including sales managers.

Pertinent among them are:

(i) Ranking,

(ii) Person to person comparison,

(iii) Grading method,

(iv) Graphic scales method,

(v) Check lists method,

(vi) Forced-choice description,

(vii) Selection of critical incidents method,

(viii) Descriptive evaluation method,

(ix) Group appraisal method, and

(x) Field review method.

Now, we shall discuss these systematic methods of appraisal in the following lines one by one:

(i) Ranking Method:

It is one of the oldest and the simplest forms of formal systematic appraisal. Under this method, each person is compared with all others. Various personal attributes like personality traits, achievements, potentialities, and the confidence of top authorities are considered and compared. Man is compared as a whole and no attempt is made to fractionize the rates or his performance.

The appraisal is made either on the basis of written documents and records as maintained by the employer or on personal judgement of the boss. It is a simple process of ranking the executives from the highest to the lowest based on their overall perform on the job.

The method is the best, provided the number of employees is very small and the work done is of quantitative nature, otherwise, the evaluation on this basis is quite impossible in a big concern. In practice, it is very difficult rather undesirable to compare a man with all other executives in the organisation because human personality in itself is very complicated and no one can be compared with all others as a whole. Another difficulty with this system is that, it does not indicate the degree of difference between the first ranked and second ranked persons.

To overcome this problem, a simplified technique of ranking is known as ‘Paired Comparison/ Techniques. Here, each man is compared with all others in pairs. Suppose, for instance, there are five officials in an organisation A, B, C, D, and E. A’s performance is compared to B’s and decision is made whose performance is better. Then A is paired with C, D and E in order. B, C, D and E shall also be compared likewise.

Thus, the use of the paired comparison technique with these five officials would mean a total of ten decisions. Only two, people being involved in each decision. The results of these decisions will be tabulated and rank is allotted from the number of times each person is considered to be superior.

(ii) Person to Person Comparison or Factor Comparison Method:

Under this method, certain factors are selected for the purpose of comparison such as leadership, initiative, dependability, reliability etc. Thereafter, a five point master scale is designed for each factor by the appraiser. A scale of man is also created for each factor putting the best at the top and the worst at the bottom, an average man in the middle and on below average and the other above average. Each executive then compared with the man in the scaled and certain points for each factor are awarded to him, thus, comparing each factor at a time instead of comparing the man as a whole.

The system has very limited use for personnel appraisal, because designing of master scale is a complicated task. This system of measurement now-a-days is used in jobs evaluation being known as ‘factor comparison method.’ Though, it is highly useful in measuring jobs; it has very limited use in measuring people.

(iii) Grading Method:

Under this method certain categories of worth (such as excellent, very good, good average, poor, very poor etc.) are established in advance and defined carefully. The actual performance of each employee is then compared with the grade definitions and the person is allocated to the grade, which best describes his performance. The number of grade may differ from company to company.

The grading system is sometimes modified into ‘forced- distribution system’, in which, certain percentages are fixed for each grade, for example, 10% of total personnel must be in the top grade, 20% to the second and so on. It also tests the rater’s performance. However, this system is not useful in a small group.

(iv) Graphic Scales (or Rating Scales) Method:

It is an approach similar to person-to-person comparison, but with the difference that the degrees on the factor scale is represented by definitions rather than by key people. Various degrees are possible for each factor. For example, exceeded the quota consistently, achieved the quota consistently in all the five preceding years, quota exceeded in certain years and quota achieved in remaining years, achieved fixed quota in most of the years, achieved 75 to 99 per cent quota etc.

The selection of factors is the most important part of the system. There may be two types of factors – (a) executives characteristics, and (b) executives contributions. The characteristics denote the personal quality of the person on the job such as dependability, ability, initiative, leadership, cooperativeness etc., on the other hand, contribution denotes what the person produces such as quality or quantity of work, responsibilities assumed and specific job accomplished. The number of factors ordinarily used varies from nine to twelve.

Graphic scale system is very popular technique for appraising the performance and personal traits, though it imposes a heavy burden on the rater. One must report and evaluate the performance of subordinates on scales involving as many as five degrees on twelve different factors for perhaps twenty to thirty people.

(v) Check List Method or Questionnaire Method:

All the above techniques and their effectiveness depend upon the value judgement of the appraiser. In order to, reduce this excessive dependence on appraiser, a checklist system is utilised. The appraiser does not evaluate executive’s performance. He simply reports the performance. The evaluation of the reported behaviours is finalised by the personnel department.

Under this system, a checklist or questionnaire is prepared in the form of a series of questions concerning the executive and his behaviour. Rater reads the question before the concerned executive and the executive answers the question in yes or no. The personnel department evaluates the executive on the basis of checklist completed by the rater.

The system is subject to bias or prejudice of the rater. Further, it is difficult to assemble, analyse and weigh a number of statements about the personal characteristics and contributions. The system is suitable only in the cases when the appraiser has complete knowledge of the job and the person concerned.

(vi) Forced Choice Technique:

One of the main objectives of this system is to reduce or eliminate the possibility of appraiser’s bias by forcing a choice between descriptive statements of seemingly equal worth. Two or more questions are asked and the rate is expected to select any one of them.

For example, the rater may ask, which of the two statements is more descriptive of the employee in question:

a. Give good and clear instructions to his subordinates;

b. Can be depended upon to complete any job assignment.

The answer then may be compared with the secret scoring keys which are determined in the basis of a study of the existing personnel. As the correct answer to such questions are not apparent it depends, to a large extent, on the rater’s bias.

The system suffers from a number of weaknesses:

a. The system is very costly, lengthy and time consuming,

b. In order to emphasise the employee development, this system provides only very limited scope;

c. Raters often object to being-forced to make decisions, which they feel cannot or should not be made.

(vii) Critical Incidents Methods:

The theory on which this approach rests is that there are certain key acts of behaviour of the employee that make the difference between success or future on the job. The rater must record or check certain kinds of events that occur in the performance of the rater’s job. These events are critical incidents. Such incidents may be- (i) supervising sales personnel, (ii) handling customers’ complaint, (iii) Communicating information and diagnosing special problems. The incidents so collected are weighed and ranked in order of frequency and importance. This provides a basis for rating score.

There is much scope in this method of biased decision. It does not provide sufficient scope for rating all the factors needed since it gives extra emphasis to certain given incidents, it will be very difficult to rate the employee, in case the incident does not happen. It is also difficult for the superior to decide what is critical or exceptional.

(viii) Descriptive Evaluation Method:

Here the appraiser prepares a written descriptive report of the performance of the employee on the job, which includes the factual and concrete description of his personality of behaviour, quality and quantity of work performed by him and his work level. Such description gives complete account of what the appraiser thinks of the man’s personality. Such system is recommended for a senior managerial position. The rater in this method should be more observant.

The system is also not free from defects. It demands more time than average.

(ix) Group Appraisal:

Under this system, the performance is not evaluated by a single rater, but a group of appraisers sit together and evaluate the performance of the employees. The group consists of immediate boss and other similar ranked senior officials having knowledge of the employee under review. The method is objective in appraisal and constructive in approach and does not allow the element of bias, but, the system is very much time consuming.

Thus, the above systematic methods of performance appraisal are used. The appraisal would be more effective if it is undertaken by the immediate superior. Some companies, however; follow this practice with the help of the personnel department. In certain companies, the appraisal is done by a committee considering of immediate boss and two or three more similar ranked managerial personnel. Rating can be made once or twice a year. It is equally important that rater should be trained.

Approach # 3. Management by Objective:

Management by objective is far more than an appraisal process. It is rather a way of management. Organisations are composed of a multitude of people, performing various specialised activities contributing to basic organisational objectives.

The concept of management by objective is a process or a system in which the superior and the subordinate managers, of an organisation jointly identify the organisation’s common goals, defining each individual’s major areas of responsibility in terms of the results, what are expected of him. These goals serve as standards for operating the unit and also in assessing the contribution of its members.

According to Odiorne — “Management by objective is essentially a system of incorporating to a more logical and effective pattern the thing many people are doing, albeit in a somewhat chaotic fashion, or in a way that obscures personal risk and responsibility” – In this context, it can be asserted that the management by objective is a system or technique or management that defines individual executive responsibilities in terms of corporate objectives in order to execute the given programme so as to minimise the expenses and maximise the contribution and also social benefits.

The system is of recent origin. The system was traced to origin by Peter F. Drucker in 1954.

The Process of the System:

The first and foremost step in the process is to formulate a strategic plan and define the corporate aims and objectives in short, medium and long term in the key areas of the business. The plan should include the core of action and the resources required to meet these objectives.

Another important step in the process is to fix up the roles of individual managers and to fix up unit objectives. The desired output at each individual level should be agreed to improvement possibilities are identified and incorporated in individual and corporate achievement plans. After a given time, systematic review should be carried out to assess the result of the performance. In the structure of organisation, it is essential to allow complete freedom of action and flexibility to each manager. Proper motivation also plays a dominant role in the process of MBO.

There are a number of managers in each level i.e. first line, middle line and lower line in an organisation. Each manager functions independently and suggests the goal for himself in identification of the corporate goals as set by the top level manager. At each level, evaluation and review of objectives set and goals achieved are made every now and then.

In the beginning of the budget year, the top level manager and his subordinate managers agree on targets of performance which each of them should achieve for that year. Then, the managers individually set objectives and goals for their respective activity and work accordingly in order to achieve, what they have agreed to attain during the period. The process goes on to down level. The actual performance then evaluated with the set objectives.

Utility of the System:

Thus, MBO involves all the managerial personnel in the organisation hierarchy. The system provides for orderly growth and development of the organisation by means of statements of, what is expected of everyone involved and measurement of what is actually achieved. Many chronic problems of managing managers are thus, solved automatically. It enhances the possibility of obtaining coordinated effort and teamwork without eliminating personal risk taking.

Major areas of responsibility for each person are set. One major importance of this system is that, it provides a means of determining each manager’s span of control. It is also helpful in developing the basic characteristics of managers. But, one thing should be observed here that, personality discussion should be avoided as far as possible. The discussion should be concentrated on job, results, objectives, reasons, methods etc.

What is Performance Appraisal – 9 Major Uses

Performance appraisal is significant element of the information control system in an organization.

Performance appraisal is used in order to:

1. Performance appraisal provides valuable information for personal decision such as pay increase promotions, demotions, transfer and terminations. Confirmation provided forms the basis for suitable personnel policies.

2. It provided feedback information about, the level of achievement and behaviour of subordinate, rectifying performance deficiencies and set new standards of work, if necessary. It also identities individual with higher potential who can be groomed up for higher positions.

3. It serves as mean of telling subordinate how he is doing suggesting necessary changes in his knowledge, behaviour and attitudes. Thus provides information, which helps to counsel the subordinate. It also serves to stimulate and guide employee development.

4. It is useful in analyzing training and development needs. These needs can be assessed because performance appraisal reveals people who require further training to remove their weakness. By identifying the weakness of an employee, it serves as a guide for formulating a suitable training and development program to improve his quality of performance in his present work.

5. Performance appraisal serves as means for evaluating the effectiveness of devices used for selection and classification of employees. It therefore helps to judge the effectiveness of recruitment selection, placement and orientation system of the organization.

6. Performance appraisal facilitates a positive work environment, which contributes to productivity. When achievements are recognized and awarded on the basis of objective performance measures there is an improvement in work environment. Performance appraisal is therefore provide the rational foundation for incentives bonus etc. the estimates of the relative contributions of employee help of determine the reward and privileges rationally.

7. The existence of a regular appraisal system tends to make the supervisors and executives more observant of their subordinates because, they know that they will be expected periodically to fill out rating forms and would be called upon to justify their estimates. This knowledge results in improved supervision.

8. Performance appraisal facilitates human resource planning and career planning; permanent performance appraisal records of employees help management to do human resource planning without relying upon personal knowledge of supervisors.

9. Performance appraisal records protect management from charges of favouritism and discrimination. Employer grievances can also be reduced as it helps to develop confidence among employees.

What is Performance Appraisal – 7 Important Steps

The following steps are arranged logically to appraise the performance of employees ideally. Many organizations make every effort to make an ideal/effective performance appraisal system but many others fail to make it due to callousness on their part to ignore some steps in this process. Each step is very crucial for this process to be ideal.

Step 1 – Objectives of Performance Appraisal:

The first step is to iden­tify what task is to be accomplished with the performance appraisal. Objectives of performance appraisal could be promotions, transfers, pay increases or layoffs. Organizations like TCS and HCL have shown door to no less than 500 low performers each. Depending on the objec­tives of the organization, the performance appraisal assumes its orien­tation.

Step 2 – Establish Job Standards:

The second step in the performance appraisal is to establish the job standards. This means informing the employees what is expected out of him on the job. In most cases, superiors call their subordinates and explain to them their major duties on the job. Every employee should be told about the quality standards that the job requires. Unless he knows what is expected out of him on the job, he cannot be expected to attain those standards.

Step 3 – Develop Appraisal Program:

In this step certain questions are to be answered e.g., whose performance is to be appraised? What meth­ods should be used to appraise employees? When to evaluate them? What to evaluate? What are the problems and how to solve them? Whether the appraisal should be formal or informal? etc.

Many organi­zations design formal appraisal programs for getting primary data but for some quantitative data they use informal appraisal method. The group appraisal is done for group incentives and individual appraisal is done for individual promotions etc.

Superiors are asked to appraise the performance of their juniors. In some cases peers and even subordinates are asked to evaluate their superiors. Although, clients of the firm are not used for evaluating the firm’s personnel but nothing prevents the organization from doing so. In hospitability industry, especially, the client’s appraisal of employee’s performance holds importance.

Where superiors, peers, juniors and clients appraise an individual, it is called 360° appraisal. There also is a concept of self-appraisal where an employee himself appraises his per­formance. All these programs are used in appraisal of employees and at times a combination of these is preferred.

Step 4 – Appraise the Performance:

Rating scales, checklist, 360° appraisal etc. are used to evaluate comparative performance of employees. Behaviorally anchored rating scales are used to check ef­fective or ineffective behavior. The major dimensions which employee is rated are quality and quantity of output, timeliness of output, regu­larity and co-operativeness. The performance measured on these scales need to be measured against benchmarks already made.

Step 5 – Performance Interview with Employees:

Once appraisal of employees has been made, performance interview is another step in appraisal process. The raters should then discuss the review of the per­formance with the ratees (employees) so that they receive the feed­back about where they stand in the eyes of superiors. Feedback is nec­essary to effect improvement in performance, specially when it is inade­quate.

Step 6 – Store the Data:

The appraisal data is then stored so that at any point in future, the information can be retrieved and used. If an employee has not been given a raise or promotion due to poor perfor­mance this year, he may confront the management. The management it has the data stored, will find it easy to convince him about their deci­sion. Besides, if someone was not given promotion for some years due to some reason, the person will be considered for promotion this year in some other division.

Step 7 – Use Data for Correction of Performance:

This is the final step in appraisal process. The data and information generated through perfor­mance evaluation must be used by the department in rewarding employees, training and developing employees, promoting and transferring them etc.

What is Performance Appraisal – Challenges of Appraisal Interview 

The appraisal interview plays a prominent role in the success of a performance appraisal system. A well-designed appraisal system also needs to be implemented well. The appraisal procedure in most modern organisations starts with the employee himself.

He evaluates his own performance on the various factors mentioned in the appraisal form and assesses his strengths and weaknesses. This will help him identify the areas that need training or development inputs. Then he discusses his appraisal form with his supervisor, who gives his own inputs and the two together finally reach an agreement on the future course of action.

However, some organisations still follow the traditional method of appraisal, where the supervisor evaluates the performance of his subordinates during the appraisal period. This is then conveyed to the employee. The supervisor and the employee together discuss the appraisal, identify the training and development needs of the employee and draw up an action plan.

The interaction between the employee and the supervisor, in both the cases described above, is formally termed the appraisal interview. This is a critical and sensitive area and should be handled with care to avoid any unpleasant situations.

Challenges of Appraisal Interview:

An appraisal interview is usually not a pleasant experience for the appraiser or the appraisee. The appraisee is apprehensive about receiving any negative feedback, while the appraiser is wary of giving such feedback. Therefore, the atmosphere in an appraisal interview is usually quite tense and not very comfortable.

Some of the main challenges of an appraisal interview are:

1. The Organisational Culture:

Absence of the right kind of organisational culture can lead to an ineffective process of performance appraisal. If the exercise is not valued by the management and not taken seriously by its employees, then it loses its sanctity and credibility.

2. The Relationship between the Employee and his Boss:

The general relationship between the employee and his boss is a big determinant of the nature of the interview. If they share a cordial and friendly relationship, the interview is more likely to proceed smoothly.

3. The Maturity Level of the Individuals:

The maturity level of the individuals involved and their professional attitude play a major role in the conduct of an appraisal interview. If the supervisor gives a feedback saying that the employee needs to improve in a few areas, an immature or unprofessional individual might react in a defensive way, leading to unpleasantness.

4. An Apprehensive Employee:

An apprehensive employee can change the mood of the interview by being very limpid and unco-operative. This might put off the appraiser and the whole process may turn into an unpleasant experience for both. This can happen for any appraiser – appraisee combination, irrespective of hierarchical levels.

5. A Wary Appraiser:

An appraiser might not be very comfortable with the idea of judging and commenting on his colleague’s performance. This effect is more prominent in peer appraisals and subordinate appraisals. The appraiser, with a view to maintaining a cordial relationship with the appraisee, might restrain from giving any negative or constructive feedback. This can make the whole exercise futile.

6. A Biased Appraiser:

In some cases, the appraiser might be biased in favour of or against the appraisee for various reasons. This can lead to a completely positive or completely negative feedback, which again renders the exercise futile.

7. Inexperience:

Inexperience or lack of any previous exposure to the process of performance appraisal can result in an ineffective and cursory exercise which might not benefit the individual or the organisation.

How do we face the challenges?

1. The organisation has to develop the culture wherein, the process of appraisal is viewed as a productive and constructive contributor to the growth of the organisation, as well as the individual employees.

2. Appraisal should be of two types – competency appraisal and performance appraisal -which are interlinked. Attaching development to competency appraisals and pay to performance appraisals might be an effective way of dealing with some of the inherent problems in the appraisal process.

3. Setting specific, measurable goals at the beginning of the appraisal period helps. The employee knows where he is heading and the appraiser knows what should be evaluated.

4. Training on how to conduct an appraisal interview would be useful for those employees, who are unfamiliar with the process.

5. The appraisee and the appraiser should both give each other a chance to reflect and respond on every debatable aspect.

What is Performance Appraisal – Essentials of an Effective Performance Appraisal System

For more effective, a performance appraisal system should need the following requirements:

1. Mutual Trust:

Confidence and mutual trust should be created in the organisation before introducing the appraisal system, because it need for frank discussion of appraisal. It also helps to obtain the faith of employees in the appraisal system.

2. Clear Objectives:

The objectives and uses of performance appraisal should be made clear and specific. The objectives should be relevant timely and open.

3. Standardization:

The appraisal system should be performance based and uniform. Employees should be made fully aware of performance standards and should be involved in setting the standards. It will help to ensure uniformity and comparison of ratings. The appraisal techniques should measure what they are supposed to measure.

4. Training:

Evaluators should be given training in philosophy and techniques of appraisal. They should be provided with knowledge and skills in documenting appraisals, conducting post-appraisal interviews, rating errors, etc.

5. Job Relatedness:

The evaluators should focus attention on job-related behaviour and performance of employees. It is also necessary to prepare a checklist so as to obtain and review job performance related information.

6. Documentation:

It will encourage evaluators to make conscious efforts minimising personal biases. It will also help to impact accountability for ratings.

7. Feedback and Participation:

The employees should actively participate in managing performance and in the ongoing process of evaluation. The superior should play the role of coach and counselor.

8. Individual Differences:

Organisations differ in terms of size, nature, needs and environment. The appraisal system should be tailor-made for the particular organisation. The needs of rates in terms of feedback, mobility, confidence and openness should also be considered.

9. Post Appraisal Interview:

After appraisal, an interview with the employee should be arranged. It is necessary to supply feedback, to know the difficulties under which the employees work and to identify their training needs. The later should adopt a problem- solving approach in the interview and should provide counseling for improving performance.

10. Review and Appeal:

The review may be made by a committee consisting of line executives and personnel experts. The committee will see whether the raters are unusually strict or lenient. It may compare ratings with operating results and may require the raters to give specific examples or tangible proof.

What is Performance Appraisal – Employee Potential (With Merits and Limitations)

Generally, potential refers to the abilities present, but not currently utilised. It is the latent capacity to discharge higher responsibilities in future roles.

The potential of employees can be judged by:

(a) Reviewing present performance.

(b) Analysing personality traits.

(c) Re-looking at past experience.

(d) Considering age and qualifications.

(e) Explaining unused knowledge and skills of an employee.


(i) It is able to capture the complexities of an individual’s performance in multiple roles.

(ii) This may reinforce or discord the appraisal of the boss.

(iii) This helps employees compare their own personal evaluations with the views of others.

(iv) This may create an awareness of a person’s needs for development.


(i) Ratings obtained from different sources rarely match as multiple raters often see different factors of an employee’s performance.

(ii) It is time-consuming.

(iii) It is not easy to interpret as the evaluations may vary from person to person.

(iv) Employees may feel nervous about the possibility of everyone ‘ganging-up’ on them in their evaluations.

(v) The competencies of the 360° may not be relevant to firm’s business objectives.

Suggestions to improve 360° appraisal system:

(i) Making sure that the appraisal has a single and clear purpose, that is, development. In case it is used for decision making the employees must be informed of the purpose of appraisal.

(ii) Training all raters to understand the overall process as well as in how to complete forms and avoid common rating errors.

(iii) Creating an environment free from politics and breach of trust.

(iv) Seeking a variety of types of information about the employee’s performance.

(v) Assuring of anonymity so that no employee ever knows how a particular member appraised his performance.

(vi) Preventing members from joining together to give either uniformly high ratings or uniformly low ratings.

(vii) Using statistical procedures such as weighted averages to combine evaluations.

(viii) Checking for prejudices or preferences related to age, gender, ethnicity etc.

(ix) Helping employees to interpret and react to the ratings.

What is Performance Appraisal – Difference between Performance Appraisal and Job Evaluation

Difference # Performance Appraisal:

1. Performance Appraisal is mainly concerned with tracing the differences among the employees in terms of their performance.

2. It considers the abilities and performance of individuals.

3. The purpose of merit rating is to appraise the performance of individuals to take decisions like increase in pay, transfer, promotion etc. It also serves as guidelines for the management to consider the type of training, which should be imparted to the employees.

4. Performance Appraisal rates the man and not the job. It measures the worth of different employees to the organization.

5. Performance Appraisal is used on the basis of personnel policies as regards transfer, promotions, separations etc.

Difference # Job Evaluation:

1. Job Evaluation is the analysis of various jobs to know the demands, which the normal performance of particular jobs make on average employees. It does not take in to account the job holders.

2. It considers the requirement of various jobs description and job specification.

3. The purpose of Job Evaluation is limited to determining the worth of the job on the basis of demands made by a particular job on the average worker. lt also facilitates the fixing of wages.

4. Job Evaluation analyses the job holder to determine the relative the worth and fix their wage levels that are fair and equitable.

5. Job Evaluation is used to shape the wage policy of an organization.

What is Performance Appraisal – Benefits: For the Employees, Supervisors and Organizations

Performance appraisal has benefits for the organization, individual employee and supervisor. The performance appraisal is used for better selection of employees in future, their training and development, their promotions, transfers and pay rise.

Benefits of Performance Appraisal for the Employees:

(a) They can review their own performance and see where they stand in the company. They can try to improve themselves for growth in the same organization.

(b) The ones who get recognized by the organization are able to get their ultimate best because they are highly motivated towards job.

(c) It encourages people on job to take responsibility for their perfor­mance and growth. They do not put the blame on their stagna­tion on anyone else.

(d) A fair performance appraisal gives immense satisfaction to all employees. They respect it and accept all the outcomes of it.

Benefits of Performance Appraisal for Supervisors:

(a) Performance appraisal gives them an insight into employee’s per­ceptions about them, peers and organization. This can serve as a good tool for improving the relations between them and employ­ees.

(b) It guides them decide rewards, promotions etc.

(c) It enables them to identify high performers and not so high per­formers. They then can initiate programs for low performers.

(d) When the manager shows his fairness to all employees in this program, the morale or employees get boosted up and thus their productivity.

Benefits of Performance Appraisal for Organization:

(a) It provides management with first hand data about employee per­formance. This helps them in effective decision making.

(b) Builds stronger work relationships within the organization because all want to be identified as good performers.

(c) Provides a base for general promotional and other policies.

(d) A good performance appraisal boosts up the goodwill of the organization not only in the minds of employees but also in the minds of outsiders who deal with the organization.

Some Other Advantages of Performance Appraisal:

1. Self-evaluation – The employee comes to know as to how he is doing (his own performance) and how he can do better.

2. Identify strengths and weaknesses – Performance appraisal enables the employee to understand his own strengths and weaknesses and how he can overcome his weaknesses.

3. Training and development – The appraisal system points out individual and group deficiencies which can be corrected through appropriate training programmes.

4. Promotion and performance incentives – The output of performance appraisal can be used for taking decisions on promotion, performance incentives etc.

5. Personnel decisions – Lay-offs, transfers, demotions, and separation may be justified only if they are based on performance appraisal.

6. Wages and salary administration – Increments, additional financial benefits are normally based on performance appraisal of the employee.

7. Employee motivation – It motivates all employees to improve performance so they may become eligible for incentives.

8. Employer-employee relations – Grievances of employees on promotion, transfers, increments, incentives, etc., are minimised. Similarly, favouritism/partiality, etc., are considerably reduced since the benefits given are based on performance appraisal of the employees. Employee develops confidence when they know that the management follows transparent personnel policies.

9. Communication – There is direct communication between the superior and the employee for setting objectives (targets) and periodical review of employee performance. This builds up good relations and understanding among employees.

10. Feedback on HR policies – The management receives valuable inputs through performance appraisal on matters such as wages, salary, incentives, career growth, training needs, terms and conditions of employment, etc., which will help them to review the existing HR policies.

What is Performance Appraisal – Problems Associated with Performance Appraisal

1. An organisation may have a systematic and objective method of performance appraisal, but it is almost impossible to eliminate personal and subjective element from it. It is not a mathematical calculation but involves managerial judgement.

2. ‘Halo’ effect – Here, one trait influences the rating of other traits. The superior is influenced by one or two good or bad performances and he evaluates the entire performance accordingly. It may be positive ‘Halo’ or negative ‘Halo’.

3. Constant error – When the same group of employees is rated by a different rater, the scores may be consistently different than the scores of another rater. These differences are not due to differences in performance but due to differences in the judging standard.

4. Personal bias – Assessors are human beings and have liking and disliking for people. Assessors tend to give high rating to persons whom they like and low rating to whom they dislike.

5. Leniency – Some assessors generally give high rating to all employees (positive leniency) whereas some are strict and give low rating to all employees.

6. Central-tendency – Some assessors have a tendency to avoid extremes and cluster their rating near the middle of the scale. Example – on a rating scale of 1-5, rating of 3 is preferred.

7. Logical error – If an employee is good in one, he is supposed to good in another also.

8. Recency error – The assessor considers the recent performance of the employee, instead of the performance during the entire review period, while rating the employee.

9. Projective error – Some raters think of others like themselves. A hard-working assessor thinks that all others are also hard-working.

10. Contrast error – To rate a person in a manner opposite to the manner in which the assessor judges himself. Example – Initiative and lack of initiative.

11. Some of the subordinates are not satisfied with the assessment done by their superior. Example – Salary increase does not reflect performance rating level and subordinate feels demotivated.

12. Average performers do not attach much importance to performance appraisal and they feel that it is another activity conducted during December/March by management. It has not motivated average performers.

13. Many managers feel that they know the working of the employee closely and therefore do not spend sufficient time in assessing the performance of the employee.

14. In many organisations, no major HR activities (follow up) take place after the formal appraisal interviews and the employees consider performance appraisal more as a ritual conducted every year by the management.

15. Hardworking versus Smart working.

What is Performance Appraisal – 10 Important Remedies for Pitfalls

1. Design – The reward system must be designed or re-designed in such a way that all the standards are very clear and transparent to all the employees. This will help them to improve their performance and eliminate deficiencies if any.

2. Integration – The rewards system must be integrated with the strategic, departmental, and organisational objectives. If it is not integrated, the employees would be confused to understand the objectives set and as a result expected level of performance would not be achieved and hence the reward system may fail as a whole.

3. Leadership – In order to successfully achieve individual and organisational goals and be eligible for additional rewards, better mentoring or leadership must be provided. A leader helps his followers in achieving the desired level of performance through constant feedback and goal sharing. This helps to strengthen the reward system of the organisation.

4. Competence – Competence basically talks about the KSAs (Knowledge, Skills and Attitudes) of the employees. The rewards system must be designed in such a way that it helps the individual increase his knowledge base, develop the right kind of attitude and enhance the skills level.

5. Implementation – Just the way, the designing of the reward system is important, similarly the implementation of the reward system has a major role to play. If the reward system is not implemented in an expected way, the performance evaluation and performance management cannot be regulated properly in the organisation.

6. Motivation – It must be remembered that the reward system of the organisation should be a source of motivation for the employees, because when the employees are motivated, the entire organisation can be developed and the performance level of the organisation can be taken to the next level.

7. Reward System – The reward system of the organisation should be encouraging enough so that all the employees would be interested in performing beyond their limits just to get additional rewards. The rewards should be monetary as well as non­monetary and the targets set for the rewards should not be too complicated or impractical.

8. Communication – Communication is the most important part in any activity in the organisation. Without communication almost all the processes will fail. Right from designing the reward system till the implementation, every little aspect must be communicated to the employees across the organisation. Transparency in communication improves the chances of better performance and commitment towards the organisation.

9. Monitoring – Supervision or monitoring is also an important aspect of reward system. Supervision helps employees understand their mistakes in run time, also it is kind of an on-the-job training provided by the supervisor to the employees. Hence this is a must.

10. Evaluation – The performance evaluation measures must be open and communicated to the employees. The openness in the system helps to improve the performance level and thereby achievement of targets.

What is Performance Appraisal – Simple Guidelines for Performance Appraisal in the Organistaions 

Performance management tells the employees what they have to do but having standards set for the performance management tells them how well they have to do a particular task. Implementing a performance management system must be considered as an equally important process in the organisation like any other business tool.

Given below are the simple guidelines for performance management in the organisation:

1. Checklist for Performance Management:

(a) Employee involvement in the decision making

(b) Sharing the performance standard statement with the employees

(c) Setting and communicating the expectations from the employees

(d) Declaring the measurement tool of overall performance

(e) Implementation of formal performance appraisal process annually or twice a year but having a feedback system run continuously in the organisation.

(f) Including specific and to-the-point suggestions for improving the performance further.

(g) Evaluation of the entire process as well as the outcome.

2. Setting the Objectives:

While implementing the performance management system in the organisation it must be carefully noted that the objectives behind having the system must be clearly communicated and understood by the employees. Any confusion or misunderstanding will not serve the purpose of enhancing the performance. The objectives stage also involves identification of high performance standard for the purpose of giving rewards.

3. Performance Planning:

Performance planning is the process of defining expectations, setting measures to analyze the performance level and identifying and allocating appropriate resources to execute the process of performance management. It should be carefully noted that the measures adopted by the organisation for the purpose of checking the performance must relate to the results or output given by the employees.

4. Feedback:

Once the performance planning is done and it has started taking place in the organisation, timely and constructive feedback must be shared with the employees in order to improve their performance further. If there is no proper feedback, employees will not understand the exact level of performance expected by them and hence will never be eligible for rewards. Lack of rewards will demotivate the employee which will again impact the performance of the individual in the organisation. This vicious circle needs to be broken.

5. Counselling:

This is the most important stage in the performance management system. Many a times it happens in the organisation that not every employee understands the standards and executes in exactly the same way as expected. There are some to whom the standard is not much clear and out of fear they never ask it to their subordinates or superiors. This leads to getting low grades during the performance management period. Such people need more attention and guidance on how to improve the performance level and be at par with the other employees in the team.

What is Performance Appraisal Performance Appraisal in Indian Industries

Some Practices of Performance Appraisal in Indian Industries and Feedback about Performance Reviews:

So far as performance appraisal practices in Indian industries are concerned, there is no uniformity, and different methods are being followed by different organisations. Some organisations have been shifting from one method of appraisal to another. For example, recently three top IT firms—Wipro, TCS and Infosys—have abandoned ‘bell curve’ appraisal and adopted a new one.

The central idea behind this shift is that not only do these companies want individuals and their teams to win but their victories should also contribute to the success of the organisation. To use a cricketing analogy, a century makes sense only if it helps the team win.

For example, at Wipro, the new structure is different from the previous one, as the emphasis on performances of individual client accounts has been placed on employees working closely as a team. The new structure will further underscore the importance of collabora­tive behaviour and bring teams together to work towards a common goal.

Simply put, the company is not looking for individual heroes. It wants a team of champions. The new structure will be applicable to CEO Abidali Neemuchwala, his/her direct reports and a level below them across verticals and horizontals.

As the Indian IT sector moves away from the relative ranking of its three million employees, most companies are bringing in new models. TCS is rebuilding its appraisal system from the ground up. It plans to strengthen out the ‘Bell Curve’ with new appraisal system. To begin with, some employees will be assessed after a project is completed instead of half-yearly.

Indian IT services companies and large firms across the world will keenly watch how TCS manages its appraisals, given the scales of the exercise. KPMG, Microsoft, Accenture and Deloitte have abandoned the bell curve, a performance rating system that requires managers to rank employees against each other.

It was reported earlier also that TCS was building a technology platform to manage the process of regular feedback. A TCS executive said that the company will modify an existing platform for IT apprais­als, while for BPO employees, it would be more of social media system.

Like the internal Knome platform that TCS uses, the system for BPO employees would be more based on social media. The change in the performance review process has started for some TCS employees. Earlier in November 2016, a subset of employees received an email detailing the modifications.

‘This is with reference to certain changes being introduced in the Performance Management System. Stage-wise timeline for appraisal process were dis­continued last year to encourage continuous feedback’, the email said. TCS is now moving towards having one appraisal cycle for entire year applicable for all employees.

Instead of half-yearly appraisals, targeted employees would move to a project-end appraisal cycle— that the project could last anywhere from two months to a year. These appraisal cycle changes are in a beta mode and will get rolled out to other employees over time.

TCS is not the only IT Company building new platforms—HCL Technologies has one called ‘iSuccess’ and Wipro’s is called ‘PerformanceNext’. Infosys launched its ‘iCount’ platform this year and is building a mobile application to record real-time feedback.

Infosys has put in place a new incentive structure called iCount as a part of its performance appraisal system for employees that seeks to disproportionately reward individual performers on the basis of spe­cific targets, an overall that comes months after India’s second largest software exporters gave up the so-called bell curve assessment tool.

Infosys had in September 2015 bid adieu to the bell curve method that fits categories of performers into a certain bracket depending on whether they have met their targets. Infosys has changed the way performance management is done, with higher focus on individual performance rather than relative performance.

It has moved away from forced ranking curve and given its managers more flexibility and empowerment while still retaining focus on maintaining a high performance culture.

IBM recently adopted the ‘Checkpoint’ model, in which employees are put through four reviews in a year, instead of one annual appraisal. Another global tech firm, Accenture has also ditched annual appraisals and the bell curve system. HCL Technologies is also in the process of overhauling existing appraisal systems. Microsoft, GEC and HCL Technologies have also moved away from forced rating in some form or the other.

As progressive organisations move towards creating the future workplace, there is a decisive case for companies to give up the punitive system of forced ratings. One’s accomplishments should stand for what one actually does, and not against what someone else does.

The removal of rating, however, does not mean that differentiation in recognition and reward will not happen. Organisations know that they need to differentiate and ensure higher rewards for performers.

In a globally competitive environment, it is all about impact. Teams that make an impact deserve to be rewarded. Otherwise, organisations will be left with low-performing, complacent teams.

Some Recent Innovations in Appraisals – Setting the Standards:

Some of the recent innovations in performance appraisal are as follows:

i. Axis Bank:

Axis has introduced the Enhancement Program. This is a ‘second chance’ where employees can volunteer to take on stretch targets to get a retrospective upgrade in their rating. With this, the bank has managed to do away with employees’ negative perceptions around lower performance ratings while keeping the meritocracy intact.

ii. Deloitte India:

Deloitte has launched ‘Reinventing Performance Management’ (RPM)—a system that has no once-a-year review or 360 degree feedback tools. Instead, it is hallmarked by speed, agility, engagement and one-size- fits-one approach. It also offers the staff real-time performance feedback from the team leader. RPM also gives professionals, 80 per cent of whom are millennial, instant feedback.

iii. Godrej Industries:

Godrej focuses on not only the achievement of specific goals (the ‘what’) but also how they are achieved with reference to Godrej Capability Factors, a set of key capabilities unique to the organisation (‘the how’). Technology is used to analyse performance of each team member and enable managers to cascade their expectations to team.

iv. Sun Pharma:

PRIDE was designed as the new global performance management process for Sun Pharma, enabling an employee to perform, reflect, invest, develop and excel. This process is tech-enabled and includes long- term professional development objectives, backed by a formal mid-year process.

v. Accenture:

Accenture has shifted from an annual performance management process to perform achievement. The company has eliminated performance reviews, rating and ranking. The focus is on setting priorities, growing strengths and creating rewarding career opportunities for the people to help them be more suc­cessful. This means the leaders spend more time coaching and talking with employees.

Performance appraisal in Indian industries leaves much to be desired. For example, in the bell curve system, large number of employees get antagonised that their managers, super managers and the organ­isation have all failed to acknowledge their hard work.

As per Times Jobs survey performance reviews of over 1,000 employees, reported in The Economic Times of 1 December 2015, nearly 60 per cent of India Inc. employees are unhappy with their perfor­mance reviews. Poor informal feedback and hypocrisy are reasons for dissatisfaction about performance reviews.

Most of the respondents held their immediate reporting manager responsible for performance review dissatisfaction.

The survey also revealed bad performance review on productivity at work.

So far as satisfaction on performance reviews is concerned, the survey under discussion revealed that while 42 per cent of the respondents were happy, 58 per cent were not happy with the way they were reviewed.

As far as qualities of an ideal performance review process are concerned, the survey revealed that 34 per cent of the respondents cited fairness and transparency as the most important quality of an ideal performance review.

PricewaterhouseCoopers dropped the bell curve evaluation for its 12,000 employees in India earlier this year. At Persistent, performance is assessed objectively with the help of clear goals and measureable key result areas (KRAs).

A forced relative ranking like bell curve is yesterday’s approach. Its antiquated and small thinking. If the goals are measureable and aligned with the organisation’s goals then it is good for us if talent meets the ‘Goals’ because that means the organisation meets its ‘Goals’.

Surprise Appraisals:

Today, many organisations such as BookMyShow, KPMG, RPG Enterprises, IBM and HCL Infosystems have initiated a system of instant appraisals.

The new assessment styles have also turned informal. While some companies have turned to quick, app-based appraisals, some of them do it over a cup of coffee. For example, KPMG India now allows managers to catch up with employees and have a chat on the performance as and when required.

The benefit is immediate feedback and guidance, rather than delayed postmortem. It may be recalled that in appraisals, activities that one can recall from the last few months often tends to take precedent. The appraiser may not be able to attribute certain accomplishments to the defined metrics, thus throwing a different results.

There are also some other examples of instant appraisals. For instance, HCL Infosystems has introduced a weekly evaluation programme that uses a mobile-enabled platform to assess employees.

The idea is to fill the binary responses to a set of short and crisp questions in the app; there is no appraisal form. The focus is on self-assessment for employees and course correction, wherever required, on a weekly basis. Everything is now-instant, then why to wait for a year to fix loopholes.

Another such example is BookMyShow which has a system of weekly appraisals, every Friday. Managers get a reminder SMS that their team needs to be rated.

IBM also uses a mobile app to assess employees. The app ACE is used for instant feedback on employ­ees. However, headhunters confess that annual performance sessions still have relevance. According to KPMG, changes are taking place.

Of course, success is heavily dependent on the maturity of the organisation. A wrong sense could lead to the entire people strategy going astray.

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