Unit - 4
Performance appraisal
Performance Appraisal is a method of determining and measuring the performance of employees working in an organization. It is a means company to identify how much their employees are contributing to it. Performance appraisal is also termed as employee appraisal, annual review, or performance review. It is an effective tool which helps in recognizing the strengths and weakness of employees thereby understanding their abilities for further development and growth. Recognizing of potentials of all employees helps in placing the right man in the right position which helps in improving productivity.
Performance appraisal helps managers in accessing actual worth of their employees which helps in deciding their pay and bonuses. Managers are able to provide feedback to their employees regarding their performance and provide them with training accordingly. It helps in taking various important decisions like promotion, demotivation, and termination for employees. It helps in regularly comparing the operations of employees with targeted plans and taking necessary actions if any deviations are detected. Fair allocation of funds is necessary as it is limited to every company.
Definition
“Performance appraisal is the process of defining expectations for employee’s performance; measuring, evaluating and recording employee performance relative to those expectations; and providing feedback to the employee.”
Nature
A system which may have the following qualities or characteristics may become sound appraisal
System:
(1) It should be simple and understandable by the employees. Any complications need to be avoidable.
(2) It should be suitable to be adopted for appraisal at regular intervals because periodic appraisal enables the employees to improve.
(3) It should create the atmosphere of mutual understanding and confidence.
(4) The system should be capable of giving equitable justice to all employees. Therefore, it should be objective and free from personal bias.
(5) The employees should be taken in confidence while preparing performance appraisal.
(6) The system should be suitable to the organization from the points of its structure, needs and more essentially based on latest development in the area.
(7) It should be able to fulfill the desired purpose by locating potential for promotion, increments, placements, transfers etc.
(8) Special training is given to evaluated” for making him more impartial and free from bias.
(9) Negative appraisal of any employee should be immediately communicated to him so that he can adopt measures for improvement.
(10) The employee should be allowed to go in appeal in case his performance appraisal is negative if he is not satisfied. By this the management will win the confidence of the employees.
(11) The performance appraisal system should not be aimed at harassing the employees who are vital human resources and play very important role in achieving organizational goals. On the other hand, the top bosses should be made aware that performance appraisal is aimed at improving performance, organizational effectiveness and to accomplish organizational goals.
Performance Appraisal in HRM – 8 Main Objectives
Performance appraisal plans are designed to meet the needs of the organization and the individual. It is viewed as core to good human resource management. According to Cummings, “the overall objective of performance appraisal is to improve the efficiency of an enterprise by attempting to mobilize the best possible efforts from individuals employed in it. Such appraisals achieve four objectives including the salary reviews, the development and training of individuals, planning job rotation and assistance promotions.”
The following main objectives of employee performance appraisal are:
i. To identify employee weaknesses and strengths;
Ii. To identify and meet training needs and aspirations;
Iii. To generate significant, relevant and valid information about employee;
Iv. To provide inputs to increments of rewards, transfers, promotion and salary administration.
v. To help in improving employee’s performance if he is not found to be suitable during the review period;
Vi. To create a desirable culture and tradition in the organization;
Vii. To help in planning career development and human resources planning based on potentialities.
Viii. To provide ‘deadlock’ and research data for improving overall human resources information system.
Key takeaways
Performance appraisal helps managers in accessing actual worth of their employees which helps in deciding their pay and bonuses
1. Establish Performance Standards:
The performance standards for each and every job should be developed and discussed with the superiors after thorough analysis of the job. These standards should be clear and not vague. They must be measurable after certain period.
2. Communicate the Standards:
After setting the performance standards of job, the next activity is to communicate these standards to all concerned; at least two parties – (a) appraiser (b) appraisee. It is necessary, these standards must be modified. The appraiser must ensure that the information communicated by him has been received by appraisee and understood clearly.
As per opinion De Cenzo and Robbins, “too many jobs have vague performance standards and the problem is compound when these standards are set in isolation and do not involve the employee.”
3. Measure Actual Performance:
Now the next activity is to measure actual performance of appraisee on the job after certain period. Generally, four common sources are used by appraiser to measure actual performance, personal observation, statistical reports, oral reports and written reports.
4. Compare Actual Performance with Standards:
The fourth activity is the comparison of actual performance with standards. Sometimes actual performance may be better than standards and sometimes it may go off the track. Any deviations between actual performance and standard performance may be noted carefully for next activity.
5. Feedback to the Employee:
In this activity the results of stage forth are discussed with employee. The information which is received by appraisee about his assessment has a great impact on his performance. Communicating poor performance is difficult task of appraiser.
6. Taking Corrective Action, if Necessary:
This is the final or last activity of the performance appraisal process. In this stage two types of corrective action may be recommended by the appraiser. One is positive means salary increase or promotion if actual performance of appraisee is up to the mark and second is negative means coaching and counselling may be done if the performance is poor. If necessary appraisee may be deputed for formal training courses.
There are various methods for conducting performance appraisal to identify areas of performance that should be modified or improved and to provide information to management for specific actions such as promotion, transfers and compensation adjustment.
Various methods of conducting performance appraisal are explained below:
1. Ranking Method:
This method requires the evaluator to list all salespeople in order of their performance, beginning with the top performer. A number of ranking methods are used for conducting the performance appraisal of employees.
Some of the important ones are listed as under:
Simple Ranking Method: In this method all the employees are rated on the same set of factors and ranks as given to them on the basis of their performance in relation to others in the group. They are all rated from the first to the last in order of their performance.
Paired Comparison Method: In this method all the employees’ performances are compared with other employees but comparison is made with only one member at a time. The number of times each member is preferred over the other is recorded. These numbers determine the ranks of members and obviously the top performers will be those with highest ranks for more number of times.
Forced Distribution Method: It is a method to evaluate employee performance according to a predetermined distribution scale. Generally, the organizations use five grade scales where one end of the scale represents the best job performance and the other represents the poorest job performance. All the employees are rated somewhere on the scale according to their level of performance in comparison to other employees.
2. Graphic Rating Scale Method: Graphic rating scale method identifies specific desired traits, behaviour factors or performance criteria, such as, quality and quantity of work, cooperativeness, analytical ability, decisiveness, initiative, emotional stability, etc. Employees are rated on a scale based on the extent to which they exhibit the desired behaviour or the extent to which they meet the desired performance criteria. The rating for each factor will be done on the basis of numbers (1, 2, 3, 4, and 5) or descriptions (excellent, very good, average, poor, etc.) The central idea behind using rating scales is to provide the appraiser with a continuous representation of various degrees of particular qualities or characteristics being present in employees.
3. Critical Incidents Method: Under this method the immediate supervisor tries to make a continuous record of all the good or bad incidents of a person’s work-related behaviour. Whenever employees are found doing something good or positive which contribute towards increasing the overall productivity of the organization or creating a healthy work atmosphere it is recorded as their positive contribution. At the same time whenever they commit a mistake, a blunder or an error because of which damage has been incurred to machinery or the overall productivity of the organization gets adversely affected it adds to their negative contributions. At the end of the rating period, these recorded critical incidents whether positive or negative are used in the evaluation of the employee’s performance. The biggest positive feature of this technique is that it measures behaviours which are critical to the effective performance of the job.
4. Checklist Method: In this method the employer starts with a list of factors in their checklist, such as, does the employee cooperate with other co-workers, do they keep their work place neat and clean, do they follow their supervisors instructions closely, do they reach on their workplace in time, and are they able to achieve the work targets assigned to them properly. Each factor or item receives a numerical value based on its perceived importance to successful job performance. Those items that are deemed more important are assigned higher values. The actual performance of all the employees on the job is measured and is compared against the checklist. Their scores on the appraisal are determined by summing the scores of the factors checked by the rater. One of the biggest advantages of using the checklist method is the convenience to the supervisors as they simply have to say yes or no in front of the statements or the factors provided to them. It saves their time and the same checklist can be discussed with the employees and a feedback can be given to them.
5. Essay Method: Brief narratives by the manager describe the performance of an employee. A manager may write a detailed write-up on the job knowledge and potential of the employee; employees understanding of the company’s programs, policies, and objectives; employees promotability; overall appraisal of the employee’s performance; and employees’ relation with their co-workers and superiors; and so forth. Essay method provides detailed information about the employee’s performance by the managers who have seen them closely on the job. The essay method provides a great deal of information about the employee, which provides useful feedback to the employee for further improvement in the job performance. Although this method allows more flexibility and appears to be simple, it is not consistent and tends to be subjective as each supervisor has a different writing style and emphasis.
6. Management by Objectives Method: Management by objectives (MBO) is a comprehensive management approach which is used for conducting performance appraisal. It is considered as one of the most scientific and objective method as a set procedure is followed. The primary focus in this method is on developing a set of objectives which are to be realized by the employees. These objectives are later used as criteria for measuring the performance of the employees, or in other words the extent to which these objectives have been achieved by the employees. So, in this method at the first stage detailed objectives for the employees are clearly set. In the light of these objectives the individual employees’ responsibilities and tasks are clearly laid down.
7. 360° Feedback Appraisal: The term 360° feedback appraisal is also known as multi-rater feedback, multisource feedback, full circle appraisal and group performance review. This concept was developed in the US in the year 1998. This concept involves a process of collecting information about a person’s behaviour from the people around him – his boss (es), colleagues, fellow members in the team, suppliers, as well as customers. The basic assumption underlying this approach is that a person who works closely with an employee sees his or her behaviour in various settings and circumstances that a supervisor might not be able to see. Thus, the term 360° implies that everyone around is involved in evaluating the performance
8. Potential appraisal – This is done to predict whether an employee is capable of taking on more demanding work, and the speed at which he or she is capable of advancing. This appraisal method tries to judge the potential of employees for being promoted to higher positions. In this method it is necessary to inform employees of their future prospects and give them an opportunity to perform to the best of their capacity.
This is done to predict whether an employee is capable of taking on more demanding work, and the speed at which he or she is capable of advancing. This appraisal method tries to judge the potential of employees for being promoted to higher positions. In this method it is necessary to inform employees of their future prospects and give them an opportunity to perform to the best of their capacity.
The organization also might have to modify and update training and development programs and advice employees of what they must do to enhance their career prospects. In the potential appraisal process, attempt is made to match the employee’s abilities and aspirations with the organization’s forecast of requirements for higher-level managerial staff.
This aspect of employee appraisal is considered as a highly positive and motivating because this tries to give an employee an incentive to work hard as they can look forward to growing up in their career path. The potential appraisal is concerned with forecasting the direction in which subordinates career can and should go and the rate at which he or she is expected to develop.
The assessment of potential requires an analysis of the existing skills, qualities, and how they can be developed to the mutual advantage of the company and the employee. There is also an important counseling aspect to the review of potential which consists of discussions with the individual about his or her aspirations and how these can best be matched to the future foreseen for him or her. They can also provide employees with additional motivation and encouragement which they need to remain with the company.
Finally, once the employee’s performance has been evaluated with the help of any of the methods listed above, the results should be reviewed in a meeting with the manager. This discussion should be viewed as a counselling session, in which the manager explains the person’s achievements on each evaluation factors and points out how the results compared with the standards.
Then the manager and the employee together may try to determine the reasons for the performance variations above or below the standards. Based on their review of all evaluation factors, the manager and the employee can then establish goals and an operating plan for the coming period.
Key takeaways
The assessment of potential requires an analysis of the existing skills, qualities, and how they can be developed to the mutual advantage of the company and the employee
References:
- Gary Dessler. A Framework for Human Resource Management. Pearson
- DeCenzo, D.A. And S.P. Robbins, “Personnel/Human Resource Management”, Prentice Hall of India, New Delhi.
- Bohlendar and Snell, Principals of Human Resource Management, Cengage Learning.
- Chhabra, T.N. Essentials of Human Resource Management. Sun India Publication, New Delhi.
