Performance

Appraisal
by
Dr. Bignya Patnaik
 Meaning

Performance appraisal is a
powerful management tool; To determine whether the
it is a formal employees performance
assessment/evaluation meets the required
procedure of the standard of the post which
performance of the he/she occupies.
employees.
 Definitions
Performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in matters
pertaining to his present job and his potential for a better job. Edwin B. Flippo

Performance appraisal is the systematic evaluation of the individual with regard to his or her performance on the job
and his potential for development. Dale S. Beach

Performance appraisal has many facets. It is an exercise in observation and judgment, it is a feedback process, and it
is an organizational intervention. It is a measurement process as well as an intensely emotional process. After all, it
is an inexact human process. While it is fairly easy to prescribe how the process should work, descriptions of how it
actually works in practice are rather discouraging. W. F. Cascio

“People are like icebergs. What you see above the surface (i.e. performance) is only a small part. A large part of the
attributes needed to perform excellently in a future job, which I call potential, is not immediately visible. it is hidden
bellow the surface” K. Ramachandran
 Purpose of
Performance Appraisal

• To identify employees for salary increases;

promotion, transfer amd lay-off or
termination of services
• to determine training and development
needs of the employees
• to motivate employees by providing
feedback on their performance levels
• to establish abasis for research and
reference for personal decision in future
 PP

Evaluative Developmental
•Compensation Decision •Performance Feedback
•Staffing Decisions •Training and Development
•Evaluate Selecting System Needs
•Feedback for Improvement
 systematic and continuos process

clear objectives

standardization

Trained evaluators

involves information

mutual trust
Characteristics feedback and participation

recognition of differences

take corrective action

achievement by objective

post appraisal interview

 provide feedback

changes behaviour

Functions
helps the manager

develop superior subordinate

relations
 PERFORMANCE APPRAISAL
APPROACH

Casual Approach Traditional Approach Mutual Goal Setting

Approach
 Process of Performance Appraisal

ESTABLISH PERFORMANCE COMMUNICATE PERFORMANCE

STANDARDS EXPECTATION TO EMPLOYEE

COMPARE ACTUAL PERFORMANCE

MEASURE ACTUAL PERFORMANCE
WITH STANDARDS

DISCUSS THE APPRAISAL WITH

INITIATE CORRECTIVE ACTIONS
THE EMPLOYEE
 Traditional methods of Appraisall
• Ranking method
• Paired Comparison
• Grading method
• Forced Distribution
• Forced choice Method
• Checklist method
• Critical Incident method
• Graphic Scale Method
• Essay Method
• Field review Method
• Confidential report
 Ranking Method
The employees are ranked from the highest to the lowest or from the best to the worst.
In doing this, the employee who is the highest on the characteristic being measured and
also the one who is the lowest, are indicated. Then, the next highest and the next lowest
are chosen, alternating between next highest and lowest until all the employees to be
rated have been ranked.

Limitations:
• it does not tell that how much better or worse one is than the other
• the task of ranking individuals is difficult when a large number of employees are
rated
• it is very difficult to compare one individual with others having varying behavioural
traits.
 Paired Comparison

• In this method, each employee is compared with other

employees' basis one trait. The rater is provided with a
bunch of slips each containing a pair of names.
• The rater puts a tick mark against the employee whom he
considers the better of the two.
• The number of times this employee is compared as better
with others determines his or her final ranking.
• Limitation of this method is that it can become unwieldy
when large numbers of employees are being compared.
 Grading Method

• In this method, certain categories of worth are established

in advance and carefully defined.
• For example: there can be three categories established
for employees: outstanding, satisfactory, and
unsatisfactory.
• Employee performance is compared with grade definitions
and then, allocated to the grade that best describes his or
her performance.
 Forced Distribution Method

• Forced Distribution method: This is a

rating system that is used all over the
world by companies to evaluate their
workforce. It requires the supervisor to
assess each employee based on
certain pre-determined parameters,
and thereafter rank them into 3 or 5
categories. Most commonly, the
employees fall into excellent, good or
poor categories. It is also known as
bell curve ranking. This method is
preferred by many employers as it
creates a visible differentiation
between performances of each
employee in the organization.
 Forced choice method

• Forced Choice Appraisal is a method of performance appraisal

in which the rater has to make a forced choice between the
available characteristics, about the employees. The raters are
given a set of multiple-choice questions, from which they are to
select one option and rate the employees. This list contains only
positive or only negative set of choices of behaviors to choose
from. Many companies use this method of appraisal as it is
considered to be a less biased way of appraising an employee.
• With a checklist scale, a
series of questions is asked
and the manager simply
responds yes or no to the
questions, which can fall into
either the behavioral or the trait
method, or both. Another
variation to this scale is a check
mark in the criteria the
employee meets, and a blank in
the areas the employee does
not meet. No detailed answers.
Critical Incident Method
 Graphic Rating Scale Method
• This type of evaluation lists traits
required for the job and asks the
source to rate the individual on
each attribute. This scale
includes a series of mixed
statements representing excellent,
average, and poor performance,
and the manager is asked to rate
a “+” (performance is better than
stated), “0” (performance is at
stated level), or “−” (performance
is below stated level).
 Essay Method of Appraisal

• In an essay appraisal, the

source answers a series of
questions about the employee’s
performance in essay form. The
rater writes a narrative
description on an employees’
strengths, weaknesses, past
performances, potential and
suggestions for improvement.
 Confidential and field review method

• Confidential method- One of the most traditional methods

of appraisal, where the supervisor/ manager writes a CR
about the employee.
• Field Review Method- involves outside party or people
from HR to evaluate the performance. This is beneficial
when an objective view of employee’s performance is
mapped and manager’s bias need to be avoided.
 Modern Methods of Appraisal

• Management by objectives
• Behaviourally-anchored rating scale
• Assessment centres
• 360 degree appraisal
• 720 degree appraisal
• Cost accounting method
 Management by Objectives
Propounded by Peter F. Drucker, this method is defined as a process whereby the
superior and subordinate managers of an organization jointly identify its common
goals, define each individual’s major areas of responsibility in terms of results expected
of him and use these measures as guides for operating the unit and assessing the
contributions of each of its members.

This method comprises of four steps:

• Goal-setting
• Performance Standards
• Comparison
• Periodic Review
 BEHAVIOURALLY ANCHORED RATING SCALES
(BARS)
BARS are descriptions of various degrees of behaviour regarding specific performance dimension. It
combines the benefits of narratives, critical incidents, and quantified ratings by anchoring a quantified
scale with specific behavioural examples of good performance.

Developing a BARS typically involves five steps:

• Generating Critical Incidents
• Developing Performance Dimensions
• Reallocating Incidents
• Scaling Incidents
• Developing Final BARS Instrument

BARS method is considered better than the traditional methods because it provides advantages like a
more accurate gauge, clearer standards, better feedback, and consistency in evaluation.
 Assessment Centres
• This method was introduced in 1930s in Germany to appraise its army officers.

• It is a central location where managers come together to participate in well-designed simulated

exercises.

• It is a systematic and rigorous means to identify human behaviour for the purposes of recruitment,
selection, development and promotion within the organization.

• This technique has its limitations and problems such as; it is relatively costly and time consuming,
causes suffocation to the solid performers, discourages to the poor performers (rejected), breeds
unhealthy competition among the assesses and bears adverse effects on those not selected for
assessment.

• In India, HPCL, Crompton Greaves, Eicher, Hindustan Lever and Modi Xerox have adopted this
technique of performance evaluation.
 360 degree appraisal
• This method was first developed and formally used by General Electric Company of USA in 1992.

• In this method an employee is appraised by his supervisor, subordinates, peers, and customers with
whom he interacts in the course of his job performance. All these appraisers provide information or
feedback on an employee by completing survey questionnaires designed for this purpose.

• All information is compiled through the computerised system to prepare individualized reports and
then are presented to the employees being rated. They then meet the appraiser and share the
information they feel as pertinent and useful for developing a self-improvement plan.

• This feedback-based method is generally used for ascertaining training and development requirements,
rather than for pay increase.

• In India, companies like Reliance Industries, Wipro Corporation, Infosys Technologies, Thermax,
Thomas Cook, etc. have been using this method for appraising the performance of their employees.
 720 degree appraisal
• This method is 360-degree performance appraisal process done twice over – once when appraisal and
targets setting is done, and second at the time of feedback. This helps in getting a pre and post round
of feedback and hence is more comprehensive. This method is focused on all round development of
the employee.
• Provides timely feedback about the performance, set targets and monitors the performance based on
the targets set. Helps to check the effectiveness of personnel procedures and practice i.e., validation
• Discovers the work potential and understands the areas where training is required to guide the
employees to perform their best. Understands the expectations of the employees and prevents
grievances and indisciplinary activities.
• 720-degree method ensures not only that feedback is holistic but also more comprehensive which
helps to eliminate bias that might otherwise creep in due to various factors.
• 720-degree performance appraisal comprises of the following seven dimensions:
– Pre-Appraisal Feedback
– Self-Appraisal
– Peers/Colleagues Appraisal
– Customer Appraisal
– Subordinate Appraisal
– Managers/Superiors Appraisal
– Post Appraisal Feedback
 Cost Accounting Method
• This method evaluates an employee’s performance from the monetary benefits the employee yields to
his/her organization.

• While evaluating an employee’s performance under this method, the following factors are taken into
consideration:
– Unit wise average value of production or service
– Quality of product produced, or service rendered
– Overhead cost incurred
– Accidents, damages, errors, spoilage, wastage caused through unusual wear and tear
– Human relationship with others
– Cost of the time supervisor spent in appraising the employee
 Problems in Performance Appraisal

• JUDGMENTAL BIAS
• LENIENCY ERROR
• HALO EFFECT
• CRITICAL BIASES
• FAULTY MANAGERIAL ASSUMPTIONS
• CRITERION PROBLEM
 MAKING PERFORMANCE APPRAISAL
MORE EFFECTIVE
• STANDARD APPRAISAL SCHEME
• PERFORMANCE REVIEWS
• MULTIPLE APPRAISALS
• TRAINED APPRAISERS