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Definition
Performance appraisal has been defined by different scholars in various ways.
According to
Dale S. Beach, performance
appraisal is a “systematic evaluation of the individual with respect to his or
her performance on the job and his or her potential for development”. Randall
S. Schuler defines performance appraisal as a formal, structured system
of measuring and evaluating an employee’s job, related behaviour and outcomes
to discover how and why the employee is presently performing on the job and how
the employee can perform more effectively in the future….."
Dale Yoder, on the other hand, advocates
that performance appraisal includes all formal procedures used to
evaluate personalities and contributions and potentials of group members in a
working organisation.
In short, performance appraisal is the process of assessing employee performance by way of comparing present performance with already established standards and providing feedback to employees about their performance level for the purpose of improving their performance.
Objectives of performance appraisal
1. Maintain records in order to determine compensation packages, wage structure, salaries raises, etc.
2. Identify the strengths and weaknesses of employees to place right men on right job.
3. Assess the potential of an employee for further growth and development.
4. Provide a feedback to employees regarding their performance and scope for development.
5. Groom the working habits of employees.
6. Review ongoing efforts for structural mobility and training opportunities
Advantages of performance appraisal
Performance appraisal is deemed to be a sound investment for an enterprise. It has the following advantages:
1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion programmes for efficient employees. In this regard, inefficient workers can be dismissed or demoted in case.
2. Compensation: Performance Appraisal helps in applying compensation packages for employees. Merit rating is possible through performance appraisal. Performance Appraisal systems valorize good and bad performances. Compensation packages which include bonus, high salary rates, extra benefits, allowances and pre-requisites are dependent on performance appraisal. The criteria for rewarding good performance is generally merit rather than seniority.
3. Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps to analyse strengths and weaknesses of employees so that new jobs can be designed for efficient employees. It also helps in framing future development programmes.
4. Selection Validation: Performance Appraisal helps the supervisors to understand the validity and importance of the selection procedure. The supervisors come to know the validity and, thereby, the strengths and weaknesses of selection procedure. Future changes in selection methods can be made in this regard.
5. Communication: For an organization, effective communication between employees and employers is very important. Through performance appraisal, effective communication can be achieved through better understanding of the skills of employees and teambuilding.
6. Motivation: Performance appraisal serves as a motivation tool. Through evaluating performance of employees, a person’s efficiency can be determined if the targets are achieved. This may well motivate a person for better job and helps him to improve his performance in the future.
Traditional methods of performance appraisal
1. Ranking Method
The ranking system requires the assessor to rank his subordinates on overall performance. This consists in simply ranking an employee within a working group. The relative position of each employee is tested in terms of his numerical rank and/or against another member of another competitive group.
Advantages of Ranking Method
i. Employees are ranked according to their performance levels.
ii. It is easier to rank the best and the worst employee.
Limitations of Ranking Method
iii. In practice, it is very difficult to compare individuals possessing various individual traits.
iv. This method speaks only of the position where an employee stands in his group. It does not test anything about how much better or how much worse an employee is when compared to another employee.
v. When a large number of employees are working, ranking of individuals become a difficult issue.
vi. There is no systematic procedure for ranking individuals in the organization.
vii. The ranking system gives rise the possibility of snap judgments on people.
2. Forced Distribution method
This is a ranking technique where raters are required to allocate a weightage to certain categories (eg: superior, above average, average) or percentiles (eg: top 10 percent, bottom 20 percent etc). Both the number of categories and percentage of employees to be allotted to each category are a function of performance appraisal design and format. The workers of outstanding merit may be placed at top 10 percent of the scale, the rest may be placed as 20 % good, 40 % outstanding, 20 % fair and 10 % fair.
Advantages of Forced Distribution
i. This method tends to eliminate bias
ii. By forcing the distribution according to pre-determined percentages, the problem of making use of different ratings is avoided.
Limitations of Forced Distribution
iii. This method is that it may lead low morale, low productivity and high absenteeism.
iv. Employees who feel that they are productive, but who may find themselves in lower grade may feel frustrated and show reluctance to work.
3. Critical Incident method
Under this method, the manager prepares lists of statements of very effective and ineffective behaviour of an employee. These critical incidents or events represent the outstanding or poor behaviour of employees or the job. The manager maintains logs of each employee, whereby he periodically records critical incidents of the workers behaviour. At the end of the rating period, these recorded critical incidents are used in the evaluation of the worker’s performance.
Advantages of Critical Incident Method
i. This method provides an objective basis for conducting a thorough discussion of an employee’s performance.
ii. This method avoids recency bias (most recent incidents are too much emphasized).
Limitations of Critical Incident Method
iii. Negative incidents may be more noticeable than positive incidents.
iv. The supervisors have a tendency to unload a series of complaints about the incidents during an annual performance review sessions.
v. It results in very close supervision which may not be liked by an employee.
vi. The recording of incidents may be a chore for the manager concerned, who may be too busy or may forget to do it.
4. Checklists and Weighted Checklists Methods
In this system, a large number of statements that describe a specific job are given. Each statement has a weight or scale value attached to it. While rating an employee, the supervisor checks all those statements that most closely describe the behaviour of the individual under assessment. The rating sheet is then scored by averaging the weights of all the statements checked by the rater. A checklist is constructed for each job by having persons who are quite familiar with the jobs. These statements are then categorized by the judges and weights are assigned to the statements in accordance with the value attached by the judges.
Advantages of Checklists and Weighted Checklists
i. Most frequently used method in evaluation of the employee’s performance.
ii.
Limitations of Checklists and Weighted Checklists
iii. This method is very expensive and time consuming
iv. Rater may be biased in distinguishing the positive and negative questions.
v. It becomes difficult for the manager to assemble, analyze and weigh a number of statements about the employee’s characteristics, contributions and behaviours.
Modern methods of performance appraisal
1. Assessment Centre
This method tests a candidate in different social situations through use of a number of assessor and procedures.
The performance of an employee and his potential for a new job are evaluated in this method by assessing his performance on job related simulations.
Characteristics that the concerned managers feel are important for the success of a particular job are included in these simulations.
Techniques like business games role playing and in basket exercises are used in this method.
The employees are evaluated individually as well as collectively on job related characteristics.
Personal interview and projective tests help in assessing the motivation, career orientation and dependence on others of an employee.
To measure the intellectual capacity written tests are used. The evaluators in this method consist of experienced manager working at different levels who prepare a summary report for the management as well as for the employees.
This technique usually measures the planning ability interpersonal skills and organizational skills of an employee.
2. Human Resource Accounting
Human resources are a valuable asset for any organization and it can be valued in monetary terms. This method evaluates the performance of an employee in terms of costs and contributions. HR costs include expenses incurred on HR planning recruitment selection induction and training. The difference between this costs and the contribution by an employee reflects the performance of that employee.
3. Behaviorally anchored rating scale (BARS)
This method combines the graphic rating scale and the critical incident method. It determines in advance the critical areas of the performance and the most effective behavior to achieve the results. Then the actual job behavior of an employee is evaluated against the predetermined behavior.
The following steps are used for constructing BARS
(i) Supervisor and other persons well acquainted with a job are asked to describe specific critical incidence of effective performance behavior
(ii) Then these persons categorized the incidents into sets of performance dimensions and each set is then defined
(iii) These people then reallocate the original critical incidents. They are given the cluster definition and critical incidents and are asked to re-design each incident to the dimensions that describes it the best and a rating is given to the incident.
(iv) A set of incidents is used for all performance which translate specific types of behavior.
4 Appraisal through management by objectives (MBO)
This concept was introduced by Peter Drucker in 1954 who named it management by objectives and self control. It is also known as goal setting approach. In this process the supervisor and subordinate members jointly identify the common goals of the organization and set the areas of the responsibility of each individual in terms of results expected from that person.
5 The 360 degree appraisal
The 360 degree method of performance appraisal is used to make the appraisal process more transparent, objective and participative. It introduced the concepts of self appraisal subordinates appraisal, peer appraisal and appraisal by customers. It is called a 360 degree method because it involves the evaluation of an employee by persons above him, below him and alongside him. Structured questionnaires are used to collect information from the seniors, subordinates and peers. The employee to be evaluated thus acquires a central position and everyone around him participates in the appraisal process in the 360 degree method.
The main components of 360 degree appraisal are:
(i) Self- appraisal: It allows an employee complete freedom in accessing his or her strengths objectively and identifying the areas of development. The employees get a chance to share the development areas with their seniors based on their self appraisal and jointly worked out a plan in tune with the organizational realities like the availability of resources and time. It also gives a chance to the employee to express his career plans which is in the interest of the organization as it knows beforehand the aspirations of its employee.
(ii) Appraisal by superiors: An appraisal by superiors involves providing constructive, feedback about the performance of any employee as well as his development areas during the review period. It helps in setting goals for the employees that help in achieve the organizational goals and improve the performance of the employee. The career aspirations of an employee are also put in proper prospective.
(iii) Appraisal by subordinates: This is a unique feature of the 360 degree method of appraisal. As the subordinates play an important role in the performance of the employee. The feedback by the subordinates gives firsthand account of how they look at their superior in terms of working style. The capability of a superior in motivating, delegating the work, building a team and communicating with them effectively form the basis of appraisal by the subordinates.
(iv)Peer appraisal: It also plays an important role in 360 degree appraisal as the role of peers is quite important in life of an employee. Selecting the right peers is very important and peers from the departments that are directly related with the department of the employee should also be included. It mainly focuses on feedback about the style of functioning of the employee under review and can also include his ability to work as team leader besides his co-operation and collaboration.
Potential appraisal: It is different from performance appraisal as it refers to the abilities of the employees that are not being used at the time of appraisal. It searches for the latent abilities of the employee in discharging higher responsibilities in future. The potential of the employees is judged on the basis of his present performance, personality traits, past experience and age and qualification. It also looks at the unused skills and knowledge of an employee. It aims at informing the employee of their future prospectus and helps the organization in drawing a suitable successions plan. It also consolidates training efforts at regular intervals and enable the employees to improve their career prospectus.
Self-awareness and self-assessment
While some view employee self-evaluations as just another tedious step that adds more work and paper to an already onerous performance appraisal, self-evaluations are in fact a vital activity that can help make the performance appraisal process more effective. Done properly, employee self-evaluations can provide the following key benefits to the organization:
(i) Engage employees in the performance appraisal process
Including employee self-assessments as part of a performance management process gives employees an active role to play. Rather than simply being the "recipient" of feedback from their manager, the employee is given a voice, and can inform or shape their performance appraisal and ratings. This active participation helps them to be more engaged with both their performance and the review process overall.
(ii) Give managers a broader perspective
Having the employee complete a self-assessment first can help give their manager better insight into the employee's performance as well as their perceptions about their performance. Even for managers who work closely with their employees, it is not always possible to see the full picture and understand all the factors that affect employee performance. Having the employee complete a self-assessment allows the manager to view performance through their eyes and get the employee's "side of the story". It can also help the manager understand their employee's strengths and weaknesses from the employee’s perspective, as well as training needs/desires.
(iii) Flag differences in perception before the review meeting
It is inevitable, a manager and employee will have different impressions of the employee's performance. While one would hope that the manager would be aware of any differences, it is often not the case. Many managers have been caught off guard in an employee performance review meeting to discover that the employee has a completely different perception of their performance and value, or that they themselves are lacking vital information that affects employee ratings. An employee self-appraisal can help identify differences in perception that might not surface otherwise, allowing the manager to prepare appropriately for the review meeting and ensure a fruitful discussion and fair performance ratings. In some cases, the information revealed in the self-appraisal might even guide or redirect the manager's assessment.
(iv) Promote more effective discussions about performance
An employee self-assessment gives each employee that opportunity. They can provide their evaluation of their performance along with relevant background information first, which predisposes them to hear the feedback their manager has to offer.
Effective management requires an ongoing, two-way discussion between a manager and employee about performance, priorities and challenges. A performance management program that includes employee self-appraisals, formalizes this two-way dialogue, thus avoiding top down evaluations that often serve to discourage or disengage employees.
Importance of self-awareness and self-assessment
In short, there are four different perspectives on performance – manager, subordinate, customer and self – and the best all-round assessment will combine all four.
Self-awareness and self-assessment help break down appraisers’ inhibitions.
Those who are appraised usually rate themselves lower than managers do. Therefore, self-assessment promotes positive and collaborative discussion.
Self-assessment makes the employee active and pro-active rather than passive and reactive. It further promotes openness and communication, ownership and empowerment.
How to instil self-awareness for better self-assessment
Enough publicity must be given to the fact that all systems of performance appraisal are better served by the process of self-appraisal, by what is generally referred to as intra-personal intelligence. Self-appraisal is an introspective exercise which requires that the individual must be objective in his own evaluation and fearless.
One must also know how to balance the reward mechanism with developmental objectives of the organization.
The organization must structure the appraisal process to require self-assessment first, management assessment later on.
The organization must give ownership for managing the self-assessment process to individuals and use 360-degree appraisal to make managerial appraisal more objective.
In a nutshell the firm must promote self-management activities in order to allow staff to have their own personal development plans.
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