Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does.
Objectives Of Performance appraisal:
To review the performance of the employees over a given period of time.
To judge the gap between the actual and the desired performance.
To help the management in exercising organizational control.
Helps to strengthen the relationship and communication between superior – subordinates and management – employees.
To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.
To provide feedback to the employees regarding their past performance.
Provide information to assist in the other personal decisions in the organization.
Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.
To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.
To reduce the grievances of the employees.
Performance Appraisal Process
ESTABLISHING PERFORMANCE STANDARDS
The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in measurable terms.
In case the performance of the employee cannot be measured, great care should be taken to describe the standards.
COMMUNICATING THE STANDARDS
Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization.
The employees should be informed and the standards should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators.
MEASURING THE ACTUAL PERFORMANCE
The most difficult part of the Performance appraisal process is measuring the actual performance of the employees that is the work done by the employees during the specified period of time. It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work.
COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCE
The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the employees from the standards set. The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to the employees’ performance.
The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. The purpose of the meeting should be to solve the problems faced and motivate the employees to perform better.
The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotions, demotions, transfers etc.
Methods Of Performance Appraisal:-
1. ESSAY APPRAISAL METHOD
This traditional form of appraisal, also known as "Free Form method" involves a description of the performance of an employee by his superior. The description is an evaluation of the performance of any individual based on the facts and often includes examples and evidences to support the information. A major drawback of the method is the inseparability of the bias of the evaluator.
2. Confidential Reports
3. Critical Incident method: In this method of Performance appraisal, the evaluator rates the employee on the basis of critical events and how the employee behaved during those incidents. It includes both negative and positive points. The drawback of this method is that the supervisor has to note down the critical incidents and the employee behaviour as and when they occur.
4. CHECKLIST METHOD
The rater is given a checklist of the descriptions of the behaviour of the employees on job. The checklist contains a list of statements on the basis of which the rater describes the on the job performance of the employees.
5. RATING SCALE
In this method, an employee’s quality and quantity of work is assessed in a scale indicating different degrees of a particular trait. The factors taken into consideration include both the personal characteristics and characteristics related to the on the job performance of the employees. For example a trait like Job Knowledge may be judged on the range of average, above average, outstanding or unsatisfactory.
6. PAIRED COMPARISON
A better technique of comparison than the straight ranking method, this method compares each employee with all others in the group, one at a time. After all the comparisons on the basis of the overall comparisons, the employees are given the final rankings.
7. STRAIGHT RANKING METHOD
This is one of the oldest and simplest techniques of performance appraisal. In this method, the appraiser ranks the employees from the best to the poorest on the basis of their overall performance. It is quite useful for a comparative evaluation.
1. 360-degree feedback
360-degree feedback, also known as multi-rater feedback, multi source feedback, or multi source assessment, is feedback that comes from members of an employee's immediate work circle.
360 degree appraisal has four integral components:
1. Self appraisal
2. Superior’s appraisal
3. Subordinate’s appraisal
4. Peer appraisal
Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his achievements, and judge his own performance.
Superior’s appraisal forms the traditional part of the 360 degree performance appraisal where the employees’ responsibilities and actual performance is rated by the superior.
Subordinates appraisal gives a chance to judge the employee on the parameters like communication and motivating abilities, superior’s ability to delegate the work, leadership qualities etc.
Also known as internal customers, the correct feedback given by peers can help to find employees’ abilities to work in a team, co-operation and sensitivity towards others.
Advantages of 360 degree appraisal
• Offers a more comprehensive view towards the performance of employees.
• Improve credibility of performance appraisal.
• Such colleague’s feedback will help strengthen self-development.
• Increases responsibilities of employees to their customers.
• The mix of ideas can give a more accurate assessment.
Opinions gathered from lots of staff are sure to be more persuasive.
• People who undervalue themselves are often motivated by feedback from others.
• If more staff takes part in the process of performance appraisal, the organizational culture of the company will become more honest.
Disadvantages of 360 degree appraisal
• Taking a lot of time, and being complex in administration
• Extension of exchange feedback can cause troubles and tensions to several staff.
• There is requirement for training and important effort in order to achieve efficient working.
• It will be very hard to figure out the results.
• Feedback can be useless if it is not carefully and smoothly dealt.
• Can impose an environment of suspicion if the information is not openly and honestly managed.
720 degrees appraisal
Apart from the 4 parties mentioned above, it also includes Customers, vendors, Clients appraisal ie. 50% appraisal from outside the company
2. Management by objectives
Management by objectives (MBO) is a process of defining objectives within an organization so that management and employeesagree to the objectives and understand what they need to do in the organization in order to achieve them.The term "management by objectives" was first popularized by Peter Drucker in his 1954 book 'The Practice of Management'
The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities.
Some of the important features and advantages of MBO are:
1. Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment. This increases employee job satisfaction and commitment.
2. Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the organization and also to solve many problems.
3. Clarity of goals
4. Subordinates tend to have a higher commitment to objectives they set for themselves than those imposed on them by another person.
5. Managers can ensure that objectives of the subordinates are linked to the organization's objectives.
3. BEHAVIORALLY ANCHORED RATING SCALES
Behaviorally Anchored Rating Scales (BARS) is a relatively new technique which combines the rating scale and critical incidents method. It consists of predetermined critical areas of job performance or sets of behavioral statements describing important job performance qualities as good or bad (for eg. the qualities like inter personal relationships, adaptability and reliability, job knowledge etc). These statements are developed from critical incidents.
In this method, an employee’s actual job behaviour is judged against the desired behaviour by recording and comparing the behaviour with BARS. Developing and practicing BARS requires expert knowledge.
4. HUMAN RESOURCE ACCOUNTING METHOD
Human resources are valuable assets for every organization. Human resource accounting method tries to find the relative worth of these assets in the terms of money. In this method the Performance appraisal of the employees is judged in terms of cost and contribution of the employees. The cost of employees include all the expenses incurred on them like their compensation, recruitment and selection costs, induction and training costs etc whereas their contribution includes the total value added (in monetary terms). The difference between the cost and the contribution will be the performance of the employees. Ideally, the contribution of the employees should be greater than the cost incurred on them.
5. ASSESSMENT CENTRES
An assessment centre typically involves the use of methods like social/informal events, tests and exercises, assignments being given to a group of employees to assess their competencies to take higher responsibilities in the future. Generally, employees are given an assignment similar to the job they would be expected to perform if promoted. The trained evaluators observe and evaluate employees as they perform the assigned jobs and are evaluated on job related characteristics.
6. Balanced Scorecard:-
The four perspectives
The 1st generation design method proposed by Kaplan and Norton was based on the use of three non-financial topic areas as prompts to aid the identification of non-financial measures in addition to one looking at financial. Four "perspectives" were proposed
Financial: encourages the identification of a few relevant high-level financial measures.
Customer: encourages the identification of measures that answer the question "How do customers see us?"
Internal business processes: encourages the identification of measures that answer the question "What must we excel at?"
Learning and growth: encourages the identification of measures that answer the question "How can we continue to improve, create value and innovate?"
7. HR Scorecard
3 Pre requisites
- Knowledge about Company’s Starategy
- Process to link HR activities with strategy
- HR metrics
1. Identify Company strategy
2. Outline Company’s Value chain(Refer to Value Chain Analysis taken in class)
3. Identify required workforce behaviors and competency
4. Identify relevant HR strategies and metrics to measure
Barriers to an effective performance appraisal
(Refer to notes dictated in class)