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.
According to Flippo, a prominent personality in the field of Human resources, “performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in the matters pertaining to his present job and his potential for a better job.” Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future.
It is a powerful tool to calibrate, refine and reward the performance of the employee. It helps to analyze his achievements and evaluate his contribution towards the achievements of the overall organizational goals.
By focusing the attention on performance, performance appraisal goes to the heart of personnel management and reflects the management’s interest in the progress of the employees.
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.
Traditional Methods of Performance Appraisal
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.
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.
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.
CRITICAL INCIDENTS METHODS: 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.
FIELD REVIEW: In this method, a senior member of the HR department or a training officer discusses and interviews the supervisors to evaluate and rate their respective subordinates. A major drawback of this method is that it is a very time consuming method. But this method helps to reduce the superiors’ personal bias.
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.
GRAPHIC RATING SCALE: In this method, an employee’s quality and quantity of work is assessed in a graphic 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.
FORCED DISTRIBUTION: To eliminate the element of bias from the rater’s ratings, the evaluator is asked to distribute the employees in some fixed categories of ratings like on a normal distribution curve. The rater chooses the appropriate fit for the categories on his own discretion.
Modern Methods of Performance Appraisal
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. The major competencies that are judged in assessment centres are interpersonal skills, intellectual capability, planning and organizing capabilities, motivation, career orientation etc. assessment centres are also an effective way to determine the training and development needs of the targeted employees.
BEHAVIORALLY ANCHORED RATING SCALES: Behaviorally Anchored Rating Scales (BARS) is a relatively new technique which combines the graphic 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.
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.
360-Degree-Performance-Appraisal Method: 360 degree feedback, also known as ‘multi-rater feedback’, is the most comprehensive appraisal where the feedback about the employees’ performance comes from all the sources that come in contact with the employee on his job. 360 degree respondents for an employee can be his/her peers, managers (i.e. superior), subordinates, team members, customers, suppliers/ vendors – anyone who comes into contact with the employee and can provide valuable insights and information or feedback regarding the “on-the-job” performance of the employee.
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.
360 degree performance appraisal is also a powerful developmental tool because when conducted at regular intervals it helps to keep a track of the changes others’ perceptions about the employees. A 360 degree appraisal is generally found more suitable for the managers as it helps to assess their leadership and managing styles. This technique is being effectively used across the globe for performance appraisals. Some of the organizations following it are Wipro, Infosys, and Reliance Industries etc.
PROCESS OF PERFORMANCE APPRAISAL
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.
DISCUSSING RESULTS: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.
DECISION MAKING: 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.
Purpose Of Performance Appraisal: Performance Appraisal is being practiced in 90% of the organisations worldwide. Self-appraisal and potential appraisal also form a part of the performance appraisal processes. Performance Appraisal is aimed at:
●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.
●To diagnose the training and development needs of the future.
●Provide information to assist in the HR decisions like promotions, transfers etc.
●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.
●Helps to strengthen the relationship and communication between superior – subordinates and management – employees.
The most significant reasons of using Performance appraisal are:
●Making payroll and compensation decisions – 80%
●Training and development needs – 71%
●Identifying the gaps in desired and actual performance and its cause – 76%
●Deciding future goals and course of action – 42%
●Promotions, demotions and transfers – 49%
●Other purposes – 6% (including job analysis and providing superior support, assistance and counseling)
Performance Appraisals as Career Development: Performance appraisal is a part of career development. The latest mantra being followed by organizations across the world being – “get paid according to what you contribute” – the focus of the organizations is turning to performance management and specifically to individual performance. Performance appraisal helps to rate the performance of the employees and evaluate their contribution towards the organizational goals. Performance appraisal as Career Development leads to the recognition of the work done by the employees, many a times by the means of rewards and appreciation etc. It plays the role of the link between the organization and the employees’ personal career goals.
Potential appraisal, a part of Performance appraisal, helps to identify the hidden talents and potential of the individuals. Identifying these potential talents can help in preparing the individuals for higher responsibilities and positions in the future. The performance appraisal process in itself is developmental in nature.
Performance appraisal is also closely linked to other HR processes like helps to identify the training and development needs, promotions, demotions, changes in the compensation etc. A feedback communicated in a positive manner goes a long way to motivate the employees and helps to identify individual career developmental plans. Based on the evaluation, employees can develop their career goals, achieve new levels of competencies and chart their career progression. Performance appraisal encourages employees to reinforce their strengths and overcome their weaknesses.
Performance Appraisal Feedback: Performance appraisal process is incomplete without the feedback given to the employee about his appraisal and his performance. But the way of giving as well as receiving the feedback differs from person to person and their way of handling and their outlook towards the issue. Therefore, On the part of the person receiving the feedback, the following points are important to be taken care of:
●The employee should have a positive attitude towards the feedback process
●He should listen to the suggestions of the appraiser calmly and try to incorporate them in his plans.
●He should not hesitate to ask for the help of his superiors.
●Should have a co-operative attitude during the feedback meeting.
●Should take the feedback objectively.
●Should not judge the appraiser as a person on the basis of the feedback.
On the part of the appraiser or the manager / person giving the feedback, the following points are to be taken care of:
●The appraiser should make the receiver feel comfortable during the feedback meeting.
●The appraiser should make it a two – way conversation i.e. let the employee speak.
●Listen to the employee and note his points, suggestions, problems etc.
●The appraiser should not adopt a confrontational approach towards the meeting. The goal is not to criticize the employee.
●Provide a constructive feedback to the employee i.e. in a way which will motivate him to perform better.
●Have a positive attitude towards the process
●Be fair and objective
●Prepare yourself for what to say and how to say.
●Make the appraisal feedback meeting useful and productive for the organization and the employee.