MODULE 3a

PERFORMANCE MANAGEMENT AND APPRAISAL

# Objectives of Performance Management,
# Performance Management and Performance Appraisal,
# Common Problems with Performance Appraisals,
# Performance Management Process,
# Types of Performance Rating Systems,
# Future of Performance Management.
• Performance refers to the degree of accomplishment of the tasks
that make up an individual’s job.
• Measured in terms of results and not efforts.
• PA indicates how well an individual is fulfilling his job demands.
• A performance appraisal is a regular review of an employee’s job
performance and over all contribution to a company. Also known
as an "annual review”, "performance review or evaluation”, or
“employee appraisal” a performance appraisal evaluates an
employee’s skills, achievements and growth, or lack there of.
• Performance appraisal is a method of evaluating the behaviour of
employees in the workplace, normally including both the qualitative
and quantitative aspects of job performances.
 Introduction
 Performance management is defined as a continuous process
of identifying, measuring, managing, and developing the
performance of individuals and groups in an organization.
 At the basic level, it is about finding out the current level of
employee performance so that appropriate steps can be taken to
eventually upgrade the performance level.
 It is a systematic assessment of employee performance aiming at
performance improvement over time.
 Performance appraisal is the ongoing process of reviews of
employee performance over time, and is one component of the
entire performance management process. It is a formal system,
which requires a manager to carry out this activity in a continuous
manner.
Objectives of Performance Management

Objective for the Employee

1.Personal development
2.Work satisfaction
3.Engagement in the organization

Objective for the organization:

4.Provide information about employees and their development
5.Measure the efficiency with which human resources are being used and
improved
6.Provide linkages to compensation and rewards to employees
7.Maintain organizational control
 Performance Management and Performance Appraisal
Performance Appraisal Performance Management
Focus is on performance appraisal and generation of ratings. Focus is on performance management.
Emphasis is on relative evaluation of individuals. Emphasis is on performance improvements of individual
officer and his departmental or team performance.
Annual exercise though normally periodic evaluations are Continuous process with quarterly or periodic performance
continuous process with quarterly or periodic performance made review discussions.
made.
Emphasis is on ratings and evaluation. Emphasis is on performance planning, analysis, review,
development and improvements.
Rewards and recognition of good performance is an important  Performance rewarding may or may not be an integral
component. part
 Defining and setting performance standards is an integral
part.
Designed and monitored by the personnel/administration Designed by the personnel/HR department but could be
department. monitored by the respective departments themselves.
Ownership is mostly with the administration/personnel. Ownership is with line managers; personnel/administration
facilitates its implementation.
KPAs and KRAs are used for bringing in objectivity. KPAs or KRAs are used as planning mechanisms
Developmental needs are identified at the end of the year on Developmental needs are identified in the beginning of the
the basis of the appraisal of competency gaps. year on the basis of the competency requirements for the
coming year.
There are review mechanisms to ensure objectivity in ratings. There are review mechanisms essentially to bring
performance
Improvements.
It is a system with deadlines, meetings, input, and a format It is a system with deadlines, meetings, input, output, and a
and output. format.
Common Problems with Performance Appraisals

1.Performance appraisal and total quality management.

2.The second set of problems with the system of

performance appraisals is that it is often a flawed process.
The common flaws are as follows:
•Inaccurate
•Infrequent
•Comparison with peers
•Unsuitable for the millennials
Performance Management Process

The circular process consists of six interconnected stages :

1. Contextual preparation
2. Planning
3. Execution
4. Assessment
5. Review
6. Renewal of performance.
 Step 1: Contextual
information (also Described
as Pre-requisites)
• The performance management process, in order to take off successfully in an
organization, requires two key prerequisites.
1. It presupposes that the organization would have clarified its organizational vision,
mission and strategy planning.
2. A mastery over the requirements of the jobs, and more specifically, clear definition of
the roles for performing a given job within the organizational framework is the second
prerequisite.
3. The pre-requisite stage also covers one more important element: the commitment and
support of the senior leadership and top management. The support is manifested
through various steps, which include:
 Challenging work for star performers
 Healthy investment in learning and development projects
 Appropriate structure for dealing with poor performance
 Reward and recognition aligned to PMS
Step 2: Planning

• The goals of the performance planning are:

1. To build agreement on the employee’s job responsibilities.
2. To clear doubts about targets and objectives that needs to be achieved.
3. To bring into focus the competencies relevant for the job.
4. To develop a career development plan for the employee.
• Performance plan has the following elements:
 Key Accountabilities  they are broad areas of a job for which the employee is
responsible for producing results.
 Specific Objectives  they are statements of outcomes a model way to develop
outcomes is by using the acronym SMART. SMART stands for specific,
measurable, attainable, realistic, and timely.
 Performance Standards  the performance standards/criteria used in
organizations are as diverse as traits, behaviors, competencies, goal
achievement, and potential to improve.
Step 3: Performance Execution

• Performance execution is the joint responsibility for both the

employee and the manager.
• Employee responsibility:
1. Committing to goal achievement
2.Seek performance feedback
3.Effective and periodical communication with manager
4.Collection and sharing of information on performance
5.Active participation in performance reviews
• Manager responsibility:
1.Creating suitable work environment to motivate the employee
2.Timely documentation of performance
3.Updatation of initial goals
4.Feedback and coaching
 Stage 4: Performance Assessment

• Using multiple sources (peers, customers, and subordinates) improves

the ownership of the employee and also opens up wider area of
information.
• Rater problems
 Problems with standards of evaluation: perceptual divergence in the use
of words (e.g. good, adequate, satisfactory) among multiple evaluators.
 Halo effect: assigning values on the basis of an overall impression of the
rate, created by a positive first impression.
 Leniency or harshness: seeing everything good, or everything bad in a
rate.
 Central tendency error: avoiding use of high or low ratings, rather rate all
employees on an average basis.
 ‘Recency of events’ error: rating an employee more on the basis of
recent past behaviour (e.g., last five weeks) rather than overall
performance
 Contracts effects: raters let another employee’s performance influence
The Choice of Raters
Table Showing a Comparative Efficacy of
Different Rater Systems
Rater Advantages Disadvantages Remedies
1. The supervisor may not
be in regular contact. In
modern organizations with
virtual teams, Internet-
linked offices,
The supervisor is the most Use multiple evaluators,
telecommuting, and
1. The immediate natural choice as he is the one including the supervisor to
complexity of tasks, the
supervisor most likely to know what the improve the objectivity
supervisor may not be
employee should be doing. quotient.
familiar either with the
employee in person or his
tasks.
2. Personal bias might hinder
objective evaluation.
1. Can be suitably
1. Often know the job of the moderated by the
employee more closely manager based on
than the supervisor and observed patterns.
1. Possibilities of a different
are more directly affected 2. Possibilities for personal­ity
kind of bias. Ego conflicts
by the employee’s conflicts/bias
and personal biases can
2. Peers actions. notwithstanding, peer
colour perceptions of
2. In a Team environment , evaluations can provide
individual employees in
peers can accurately clear insight into the inner
respect of their peers.
assess the interpersonal functioning of a team,
competencies of the especially when the
employee. supervisor has infrequent
interaction with the team.
Subordinates 1. Can provide valuable 1. Evaluations may get 1. Outliers can be
insight into the tinted by wanting to identified and biased
managerial practices of punish the supervisor ratings can be
people in control other for unwanted tasks or moderated.
employ­ees in the for disciplining them for 2. Keeping the
organization. lapse in work. evaluations
2. Evaluations can be anonymous.
inaccurate for lack of
familiarity of the
supervisor’s actual
responsibilities.
Self 1. Self evaluations, formal The degree of accuracy of Skewed assessments can
or informal, are bound the self assessment varies be adjusted.
to occur in an appraisal with the variance in
process and they knowledge and skill levels.
provide a relevant
perspective.
Customers 1. Is relevant when the Can get subjective, The known bias can be
employee regularly inaccurate, or biased. adjusted. Negative and
interacts with internal positive comments can be
or external customers. compared.
360 degrees Originally designed by Requires huge investments Best used for 360°
DuPont, but currently in time and money. individual development,
considered a useful talent rather than for
assessment tool especially administrative evaluative
Stage Five: Performance Review
 At the review meeting the employee and manager discuss the ‘what’ and the
‘how’ of results achieved against performance plans.
 The manager and employee should discuss:
1. Commitments, if any, from the last review meeting.
2. Specific achievements since the last conversation.
3. Difficulties hampering performance, the reasons and the ways and means of
overcoming them, including use of skills in past achievements.
4. The implications of changing behaviors.
5. Action plan for future.
Stage Six: Renewal

 In the last phase, the manager uses insights and learning from the last
cycle to more effectively plan performance in the next cycle.
 The manager and employee review and make appropriate adjustment of
goals in tune with the organization’s mission, vision, values, and strategy.
This could lead to setting new objectives and standards, new
accountabilities , development of new competencies for the upcoming
performance period; and creating the ongoing and continuous nature of the
performance management cycle.
METHODS OF
PERFORMANCE
APPRAISAL
Traditional Methods
STRAIGHT RANKING
Methods

Modern
 ASSESSMENT CENTRE
 COMPARISON – man –
man/
to – paired
 MBO
 GRADING
 GRAPHIC RATING -
 HUMAN RESOURCE
scale ACCOUNTING
 DESCRIPTION
FORCED CHOICE  BEHAVIOURLY
 FORCED
DISTRIBUTION ANCHORED
 CHECKLIST RATING SCALE
 FREE FORM ESSAY (BARS)
 CRITICAL INCIDENT  PSYCHOLOGICA
 GROUP APPRAISAL
 FIELD REVIEW L APPRAISAL
 CONFIDENTIAL  360 degree
REPORT
1.Straight ranking method
 In this technique, the evaluator assigns relative ranks to
all the employees in the same work unit doing the same
job. The evaluator provides a rank to the employees from
good to poor on the basis of their performance. For
Example, if five persons A, B, C, D, and E get a rank on
the basis of their performance, it will be like:
2. Man – to –man/
paired comparison
Method of evaluation in
each employe and
which job is compared with
othe e each
employe
rperformed usually on the
and Employee
job.basis comparisons
of overall
performance,
e are
3.Grading
This method assesses the degree of certain qualities
the jobfor
required such as reliabilityand dependability. ...
actual performance of each employee is Then the
these grade, and the person is allocated to the grade
compared with
which best
describes his performance.
4.Graphic Rating Scale
 Graphic Rating Scale is a type of
performance appraisal method.
 In this method traits or behaviours that are important for
effective performance are listed out and each employee is
rated against these traits.
 The rating helps employers to quantify the behaviours
displayed by its employees.
 5.FORCED CHOICE METHOD
 In this method the rater is forced to
select the statements that are
readymade
 There are several sets of paired statements

and the rater is required to select a

description that is most suitable to a
particular worker
6.FORCED DISTRIBUTION
• It requires the rater to assess each
employee based on certain pre-
determined parameters, and
thereafter rank them into 3 or more
categories.
• Most commonly, the employees fall into
high performers, average performers,
and under performers categories,
which can be expanded by the
organisation to a 5-point scale as well.
• It was introduced by General Electric in
1980s
• It is also called bell-curve rating or stacked ranking.
• This method is preferred by many employers as it
creates a visible differentiation between performances
of each employee in the organisation.
• This method of performance management typically
chooses the
normal distribution curve to represent the performance
distribution.
• This ensures that a small fraction of the entire workforce is
to be placed at the extremes, which is the outstanding
performers and poor performers. A relatively large section
of the workforce fall in the middle of the distribution.
7. CHECKLIST
 Under this method, checklist of statements of
traits of employee in the form is prepared
with questions/ statements. Here the rater
only does the reporting or checking and
HR department does the actual evaluation.
 They are of 3 types
 Simple checklist
 Forced choice checklist

 Weighted checklist
8. FREE FORM ESSAY
 In this method the rater writes down the
employee description in detail within a number
of broad categories like,
overall impression of performance, promote
ability of employee, existing capabilities and
qualifications of performing jobs, strengths and
weaknesses and training needs of the
employee.
9. CRITICAL INCIDENT
 In this method, the manager writes down the positive and
negative behavioral performance of the employees. This is
done throughout the performance period and the final
report is submitted as the assessment of the employees.
This method helps employees in managing their
performance and improves the quality of their work.
10. GROUP APPRAISAL
 In this method employees are
rated by a group of assessors.

the group of assessors comprise of
immediate supervisor of the employee
and other supervisor who have the
knowledge of
the employee work along with the
concerned head of the department and a
personnel expert.
 The group determines the

standard for performance, and

measures the actual performance
of the employee at the job.
11. FIELD REVIEW
 Inthis method appraisal is done by
someone outside the department.
 An expert from the HR/Personnel

department interviews the line

manager to assess the executives.
 Mainly used for executives who go to

the field to meet the clients.

 12. CONFIDENTIAL REPORT
 It is the traditional way of
appraising employees
mainly in the Government
Departments.
 Here the report is given in

the form of Annual

Confidentiality Report
(ACR) and may record
ratings with respect to
following items;
attendance, self
expression, team work,
leadership, initiative,
13. Self Appraisal
A self-appraisal is an assessment
written to characterize your
performance during a specific period
at work.
 a self-appraisal is written as a part

of your annual performance

evaluation.
 It should most likely include
achievements, accomplished goals
and any metrics on how you helped
Modern Methods of PAS
 ASSESSMENT CENTRE
 MBO

 BEHAVIOURLY ANCHORED
RATING SCALE (BARS)
 PSYCHOLOGICAL APPRAISAL

 360 degree APPRAISAL

 1. MBO
 Management by objectives (MBO), also
known as management by results (MBR), was first
popularized by Peter Drucker in his 1954 book The Practice
of Management.
 Management by objectives is the process of defining
specific objectives within an organization that management
can convey to organization members, then deciding how to
achieve each objective in sequence.
 This process allows managers to take work that needs to be
done one step at a time to allow for a calm, yet productive
work environment.
 This process also helps organization members to see their
accomplishments as they achieve each objective, which
reinforces a positive work environment and a sense of
achievement.
 An important part of MBO is the measurement and
comparison of an employee's actual performance with the
standards set. Ideally, when employees themselves
 2. 360 Degree Method
360 degree appraisal has
four integral
components: 1.Self
appraisal
2.Superior’s appraisal
3.Subordinate’s
appraisal 4.Peer
appraisal.

Most organizations
that focus on
employee
development use the
360- degree tool to
assess performance
and potential of staff
and enable the
employees to map
their career path
 3.Assessment Centre

• This technique was first developed in USA and UK in 1943. An

assessment center is a central location where managers may
come together to have their participation in job related
exercises evaluated by trained observers.

• It is more focused on observation of behaviors across a series

of select exercises or work samples. Assesses are requested
to participate in in- basket exercises, work groups, computer
simulations, role playing and other similar activities which
require same attributes for successful performance in actual
job.

• The characteristics assessed in assessment center can be

assertiveness, persuasive ability, communicating ability,
planning and organizational ability, self confidence,
resistance to stress, energy level, decision making, sensitivity
4.Behaviorally Anchored Rating scale
(BARS)
 “Behavioral Anchored Rating Scales (BARS)”
ly
developed was 1960s.
around
 BARS are descriptions of various behavior
degrees of regard to a specific with
 performance dimension.
It combines the benefits of narratives, critical
incidents, and quantified ratings by anchoring a
quantified scale with specific behavioral examples of
good or poor performance.
 Behaviorally anchored rating scale is a
measuring system which rates employees or
trainees according to their performance and
specific behavioral patterns.
 BARS is designed to bring the benefits of both
quantitative and qualitative data to employee
appraisal process as it mechanism combines the
benefits of narratives, critical incidents and
 5.Psychological Appraisal
 This method focuses on analyzing an
employee's future performance
rather than their past work.
 Qualified psychologists conduct a

variety of tests (in-depth

interviews,psychological tests,
discussions, and more) to identify an
employee's emotional, intellectual,
and other related traits that suggest
individual potential and
may predict future performance
6. Human Resource Accounting
We have seen traditional & modern
methods of performance appraisal.

Can you differentiate these

methods as Past oriented
(Performance Appraisal) and
Future oriented (Potential
Appraisal) Methods.
The Critical Success Factors for
Performance Management System

 Strong commitment from the top management

 Alignment with strategy
 Alignment with other HR systems

 Acceptance by all levels of employees

 Adequate organizational training

 Automation