A LITERATURE SURVEY

ON
PERFORMANCE APPRAISAL METHODS

DONE BY
SANTOSH.BASAVRAJ
III rd SEM, MBA
DON BOSCO INSTITUTE OF TECHNOLOGY, BANGALORE
IN
GOKALDAS IMAGES. PVT. LIMITED, BANGALORE
AS A PART OF PROJECT WORK

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This literature report gives the insight of:

1) Various methods of Performance Appraisal.

2) Introduction of respective method.

3) How that method works (Methodology).

4) Sample Format (Blank performance appraisal sheet).

5) Relative Advantage & Disadvantage.

6) Companies using these methods.

7) Implications faced by respective companies while using that method.

8) Conclusion.

SOURCES OF DATA COLLECTION:

PRIMARY DATA:
Student survey conducted in Bangalore.

SECONDARY DATA:

1) ICFAI press published H.R.M. Review magazine.

2) Personnel &Human Resource Management, by R.Subba Rao.

3) Human Resource Management, by Dr.K.Aswathappa.

4) Human Resource Management, by Gary Dessler

5) Personnel Management, by C.B.Mamoria.

6) Global Perspective, by Herold Koontz

7) Organization Behavior, by Stephen .P. Robinson.

8) Internet www.google.com (Information regarding companies and various new

methods used by them) &

9) Project Reports from PESIT, Bangalore.

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 LITERATURE SURVEY ON VARIOUS PERFORMANCE APPRAISAL
METHODS

Performance appraisal (PA): It is a record of outcomes on a specified job function or

activity during a specified time period.

Definitions:

“Performance” appraisal is a process of evaluating an employee’s performance of a job in

terms of its requirements.

In simple terms PA is the activity used to determine the extent to which an employee
performs work effectively,

Edwin.B.Flippo defined as “ PA is a systematic periodic and so fall as humanly possible

and impartial rating of an employee excellence in matters pertaining to his present job
and to its potentialities for better job.

Need for PA

• Provide information about the performance ranks, decision regarding, promotion,

transfer and demotions.
• Provide feedback about the level of achievement and behavior of subordinate.
• Provide information which helps to counsel the subordinated.
• Diagnose deficiency in the employee regarding skill, knowledge, determine
training and developmental needs.
• Prevents grievances and indisciplanary activities.

METHODS OF PERFORMANCE APPRAISAL

With the evolution and development of the appraisal system, a number of methods or
techniques of performance appraisal have been developed.

TRADITIONAL METHODS

GRAPHICAL RATING SCALE

Introduction: Graphical ration scale compares individual performance to an absolute

standard.

Methodology: In this method judgments about performance are recorded on a scale. The
appraisers are supplied with printed form, one for each employee these forms contain a
number of objectives, behaviors & trait based qualities and characters to be rated like

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 quality & volume of work etc, and these form contain rating scales, the appraiser assigns
the points to degree.

These character are added up to find overall performance, the finally employee rande on
the basis of total points assigned.

Sample formant 1:

1) Sample items
1) Sample in a in
items Graphic rating
a Graphic scale.
rating scale.

On aOn
scale of 1-5,
a scale rate rate
of 1-5, the employee,
the employee,
5-Excellent, 4-Very good,
5-Excellent, 4-Very good,3-Good, 2-Adequate,
3-Good, 1-Inadequate
2-Adequate, 1-Inadequate

a) The communication
a) The skillsskills
communication of the
of employee can be
the employee canrated as as
be rated

(1) (1)
(2) (2)
(3) (3)
(4) (4)
(5) (5)

b) The job knowledge

b) The job knowledgeof the
of employee is is
the employee
(1) (2)
(1)(3)
(2)(4)
(3)(5)
(4) (5)
Mark Mark against statement
against the that that
the statement best best
describes the employee
describes behavior
the employee behavior

• Is
• always regular
Is always and and
regular punctual () ()
punctual
• Is
• usually regular
Is usually and and
regular punctual () ()
punctual
• Is
• usually regular
Is usually but not
regular but very punctual
not very () ()
punctual
• Is lacks in attendance and punctuality
• Is lacks in attendance and punctuality ( ) ( )
• Is
• often absent
Is often and and
absent frequently late late
frequently () ()

Sample format 2:

Name……… Department………….. Date………….

Outstanding Good Satisfactory Fair Unsatisfactory

Quantity of work
Volume of acceptable work
Under normal conditions

Comments:

Quality of work
Thoroughness, neatness and
Accuracy of work

Comments:

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Advantage: It easy to conduct.
Disadvantage:
• Appraisee may mark only good character which leads to bias information.

• Another disadvantage is regarding the choice of employee behavior categories the

important might ones get missed out and irrelevant ones may get include.
• Different people may interpret the written description in different ways .This may

Companies in which they worked:

1. National Aluminium Company limited (NALCO)/ Field of its human resources is to

attract competent persons with growth potential and develop their skills and capabilities.

2. Mphisis (call center) uses this method along with 360 degree appraisal (source:
Mr. .Manu Thripathi H.R.manager, during student survey) in a congenial work and social
environment through adequate opportunity for advancement.
Methodology used: For the collection of information pertaining to employee’s
performance, communication of goals and review of result, a questionnaire having
similar to graphic ration is used.

3. Birla Jute: Which is the group of Birla corporation ltd, have 8 decades of experience
in his two jute mills have a skilled work force for their appraisal it uses this method.
(Source website)

4. Kannappa Automobile, Lalbhag road, near Al- Ameen College which is an

automobile product producer’s use graphic ration scale for the appraisal is his employee.
(Source: student survey)

Conclusion: this is the oldest and commonly used method, from this method employee
is thoroughly assessed by his supervisor. Even though the method is most commonly
used it is not free from bias. Some modifications are made in this method to overcome
from these problems.

RANKING METHOD OR COMPARATIVE EVALUATION METHOD

Introduction: The employees are ranked from best to worst on some characteristics. The
rater first finds the employee with the highest performance and the employee with the
lowest performance in the particular job category and rates the former as the best and
latter as the poorest .Then the raters selects the next highest and next lowest and so non
until he rates all the employee in that group.

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There are 3 commonly used methods of ranking, namely alternation, paired comparison
and forces distribution. The first two methods are used when there is only a fiw employee
to be ranked, where as the forced distribution method is used in large companies.

I) Alternation Method: In this method the appraiser ranks his entire employee
from most valuable to lest valuable, based on their performance and
contribution to organization objectives.

This method is simply assigning rank to individual based on his past performance
and potential of development.

Sample format:
Column
Column I (Best)
I (Best) Column
Column II (Worst)
II (Worst)

1 1 . . . .
2 2 . . . .
3 3 . . . .
4 4 . . . .
5 5 . . . .

Advantage: Relatively easy and inexperience.

Disadvantage:
 Its reliability and validity may be open to doubt.
 It may be affected by rater bias or varying performance standards.
 Size of the difference between individuals is not well defined.

Companies using this method:

1) Bajaj Tempo limited: India’s largest automobile producer which produces multi
utility vehicle, light capacity vehicle, in four wheeler, three wheeler and two
wheeler category extensively use this method asses its workers

2) BASF: the chemical company is the world’s leading chemical company which
supports pharmaceutical manufacturer use this method to asses its word force.

Conclusion: The main objective of this method is to segregate well performing worker
and poor performing worker, Employees who are got good ranking are get motivated
those receive lower ranking feel bad, only few employee who have positive attitude can
accept in a positive way.

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PAIRED COMPARISION METHOD

Introduction: This approach was designed to make the ranking process easier for the
superior and perhaps more reliable, especially when there are many people to rank.

Methodology: The Paired Comparison Method presents the supervisor with a series of
cards each of which contains only two subordinate’s names. The supervisor is thin asked
to choose which of these two persons is the high performer, final ranking is then
determined by counting how many times a given employee was choose as the better
performer.

The number of comparison required N (N-1)/2

Where n equals to number of people to be ranked. Thus, with only 10 subordinates a

supervisor will go through 10(10-1)/2 or 45 pair of name.

Sample formant:

Pairedcomparison
Paired comparisonranking
rankingfor
foremployees
employeesinina amarketing
marketingresearch
researchunit.
unit.

Employeestotoranked:
Employees rank:
Leslie Moore Eddie Dorsey
Leslie Moore Eddie Dorsey
TinaLittle
Tina Little
Art Willis
Art Willis
Ratingcards
Rating cardsfilled
filledout
outbybysupervisor
supervisor


________Leslie
________ LeslieMoore
Moore ___________LeslieMoore
___________Leslie Moore _______Leslie
_______LeslieMoore
Moore
_______EddieDorsey
_______Eddie Dorsey __________Tina
__________ TinaLittle
Little ________Art
________ArtWillis
Willis

 
_______Tina
_______ TinaLittle
Little _________ArtWillis
_________Art Willis _______TinaLittle
_______Tina Little
_______Eddie
_______ EddieDorsey
Dorsey _________EddieDorsey
_________Eddie Dorsey ________Art
________ArtWillis
Willis

Finalranking
Final ranking
1.
1. Tina TinaLittle.
Little.
2.2. ArtArtWills.
Wills.
3. Leslie Moore.
3. Leslie Moore.
4.4. Eddie
EddieDorsey.
Dorsey.

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Advantage:
 When employee number is less.
 Simple to use
 Avoids central tendency and other problems.

Disadvantage:
 Rating may still not be precise
 Time consuming.
 In this method employee are simply compared to each other on total performance
rather than specific fob criteria.

Companies using this method

1) KOPRAN: Promoted by Parijat enterprises KOPRN currently an integrated
health care company, International pharmaceutical company extensively use this
method to asses’ department wise workers.

2) NOANIC CHEMICAL INDUSTRIES LTD: ( NOCIL) A Rubber chemical

Division: India’s largest manufactures and suppliers of Rubber chemicals, they
are know for world class product quality, use this tool to rank his employee from
best to worst.

3) OTIS elevator Co: A wholly- owned subsidiary of united Technology’s

corporation is the world’s larges manufacturer, installer and maintainer of
elevators, escalators, for his highly skilled workforce to segregate from poor
performer to good performer use this method.

4) Godrej Soaps: A well known manufacturer of soaps of various categories uses

this method.

Conclusion: Some companies using this method remove the employee from current
position and keep them in some other position. Rather than comparing his performance
with his colleague employees compare their salaries which adversely affect work
environment.

FORCED DISTRIBUTION METHOD:

Introduction: The rater may rate his employees at the higher or at the lower end of the
scale under earlier methods. Forced distribution method is developed to prevent the raters
from rating too high or too low

Methodology: Under this method. The rater after assigning the points to the performance
of each employee has to distribute his rating in a pattern to conform to normal frequency
distribution.
Sample format Forced Distributions on a Bell- Shaped

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 .

10% 20% 40% 20% 10%

Excellent Good Average Below Unsatisfactory
Good
A variation of forced distribution is the point allocation Technique (PAT). In PAT each
rater is given a number of points per employee in the group to be evaluated, and the total
points for all employees evaluated cannot exceed the number of points per employee
times the number of employee evaluated, The points are allocated on criterion bases.

Advantage:

• Designed to prevent” central Tendency” error and clustering of ranking at high or

low end of the distribution.
• Often a “whole person” technique.

Disadvantage:

• In this method employee are placed in certain ranked categories but not ranked
with in the categories
• If one department has all extraordinary employee it would be difficult for rater to
decide who should be placed in the lower categories
• Difficult can also arise when the rater must explain why a individual placed in one
group.

Companies using this method:

1) Ford motor: Ford motor has used forced distribution grading system tat
resulted in many complaints. The HR journal “Wall street Journal”
discusses the Ford Motor informal system.
After years of use, Ford Motors Co. eliminated its grading on a curve
performance evaluation system. A number of current and former Ford
executive field lawsuits claiming the system is discrimination. Ford used a
procedure in which executive were graded as A, B, and C. Ten percent of the
manger being evaluate had to receive a “C” or unsatisfactory performance
grade. Manager who received a C were required to receive coaching and
counseling.

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 The feeling among many mangers at Ford is that a quota system that forces
evaluators to rate at least 10 percent of those being rated as unsatisfactory is
causing morale problems. The Ford appraisal system was copied form
General Electric (GE) which had to deal with their own problems.

GE revised its system, which has a 1 (unsatisfactory) to 5 (excellent) rating

scales. At GE almost everyone except the top 10 percent felt demoralized.GE
streamlined its system to three grades, assigning 70 percent, or the vast
majority, the middle grades and rewarding some of them with stock options.
At Ford, when a manager receives a “C” is no bonus.

3) USHA: A pioneer manufacturer in home appliances product contains Fans,

Sewing, machines, Air-conditions, Auto competent etc, use this method to
distribute its employee in to Bell-shaped curve,
4) Sound Performance Lab( SPL): Produces wide range of electronic goods
adopted forced distribution to segregate its employees,
5) Mento ware, (call centre), Bangalore: Used this method to segregate its
workforce ( source: Student survey )
6) HBL Global Pvt. Ltd: ( HDFC marketing division), Bangalore. Uses this
method.

Conclusion: The key to this system is that the determined distribution must be followed
by rater, regardless of how well the employee performed. This system bas both pros and
cons and it is widely used by manufacturing sector.

Forced Ranking Method:

Introduction: Forced distribution is a person-to- standard distribution comparison where

force ranking is person-to-person comparison.
There are several differences between these two methods. First, while almost every
organization has some performance appraisal mechanism, only the big boys tend to have
a forced ranking system. A surprisingly large number of companies use this method.
Fortunate estimates that a Quarter of Fortunate 500 companies have institute forced
ranking program.

Other performance appraisal focuses on past but forced ranking focuses exclusively on
the future. Forced ranking process usually only examine people at the top of the
organization

Methodology: Some companies in Fortune 500 practiced this method in this way.
The top leadership group analyzed five critical area

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Criteria for evaluation: - Their criteria for assessing are execute with excellence.
Passion for results, succeed with people and make tough decisions.

Organization level: - How far down in the organization would the ranking process
extend? And would this executive group also be included in the forced ranking
population, latter they decided and vice presidential; group and their direct report would
be included in the process.

Outcomes and consequences: - The question such as arises what will happen once the
ranking process is complete? What will we do with those who are assessed to be the
companies A player? More worrisome to the group what to do this group. They decide to
go like this to reverse development efforts for A player who would enormously benefit
both their fobs moving to another fob that he could handle in an outstanding way or
existed from the company in a dignified way.

Critics about forced ranking method: - Critics of the procedure argue that forced
ranking is discriminatory, subjective, divisive, arbitrary and unfair, actually its not true.
Fork, Conoco, and Microsoft have been hit with class action suits charging that their
ranking systems were used to illegally favour some employees over others.

The Microsoft suit alleges that the system, bolstering a good-old-boy mentality,
encourages white managers to favour their white friends against the organizations black
employees.
The Ford suit, conversely argues the opposite there the middle-aged white men suing
Fork argue that the companies diversity push has forced managers to disproportionately
assign white men to the bottom 10%
Conoco’s unusual suit the American plaintiff’s claimed citizenship discrimination,
arguing that the company illegally favoured Britons and almost all cases are dismissed in
respective courts
Critics also say that these programs run counter to the belief held by many, that almost
any worker is salvageable.

Benefits of forced ranking method:

• It creates and sustains a high performance, high talent culture,

• Since corporate budgets for management and executive development can be
determined
• An effective forced ranking procedure helps to Performance Management a
corporate priority and lets employee know where they stand.

Companies in which the method is worked: - Companies that use a forced ranking
system require their manager to assign employee in to different categories based on both
past performance and leadership potential.
1) General Electric(GE): The company best known for the procedure, sorts
employees in to three groups A top 20% on whom rewards, promotion & stock

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 options are showered a high performing middle 70% with good future, and a 10%
are not likely to stay. GE removes these 10% and deep removing it every year.
Highly admired companies like, Microsoft, Cisco system, Hewlett-Packard and
Sun Micro systems
2) Hewlett-Packard uses a 1-5 scale with 15% receiving the best grade of 5%
receiving other grades
3) Microsoft uses a 2.4-5 scale
4) PepsiCo. Uses a quartling approach where managers allocate their troops in to
one of four quartiles.
5) All 18,000 of Ford Motor’s managers undergo this process. These managers are
divided into groups of 30 to 50 then rated. For each groups 10 percent have to get
and A, 80 percent B, and 10 of C. Anyone receiving a C is restricted from a pay
raise and two consecutive years of a rating result in either a demotion or
transmission.

Conclusion: - This method is extensively used by software industries and manufacturing

sector. Proponents of this method feel that, it eliminates weak performers and make way
for organization to continually increase quality of its work force and reward those who
deserve most.

Checklist Method

The checklist is a simple rating technique in which the supervisor is given a list of
statements or works and asked to check statements representing the characteristic and
performance of each employee.

1) Simple Checklist method:

Introduction: The checklist consists of large number of statements concerning employee

behaviour. This is the very easiest method compare to other method and different type of
organization use this method asses its employee.

Methodology: The rater checks to indicate if the behaviour of an employee is positive or

negative to each statement. Employee performance is rated on the basis of the number of
positive checks and negative checks are not considered. And sometimes checklist is a set
of objectives or descriptive statements, if the rater believes that the employee possess a
traits list, the rater checks the item, if not, the rater leaves it blank, A rating score form
the checklist equals the number of checks.

Advantage: If is easy conduct and analysis.

Disadvantages:

• Some statements may appear to be identical in describing the employee.

• The words or statements may have different meaning to different rater.

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Companies in which the method is used:

1) Human base India Incorporation ( Software industry) uses this method to

assess its workforce (Source: Student survey )
2) Leela Scottish Lace Ltd: In its unit it use simple checklist method along with the
critical incidents method and group appraisal method and field review method to
asses it worker. It is textile Industry ( Source: Student survey)

Conclusion: This is easiest used along with other methods is very convenient tool to
assess his employee by his/her immediate supervisor. A wise knowledge is needed to
prepare checklist.

3) Weighted Checklist:

Introduction: - It is a slight modification of simple checklist method; weight is

assigned to statements in this method.

Methodology: The weighted checklist method involves weighting different items in

the checklist, having a series of statements about an individuals to indicate some are
more important than others, employees has to tick those traits that closely describe
their behaviour an then computed and tabulated by someone else, such as a member
of the personnel unit. The performance ratings of the employee are multiplied by the
weights of statements and the coefficients are added up. The cumulative co-efficient
is the weighted performance score of the employee.

Sample format:

Weighted checklist for a lead technician position

Check all those statements that are accurate descriptions of the behavior and activities
of______________ for the period from ___________ to ________

Check many or a few as apply WEIGHTS

______ Is a decisive decision maker 10.0

______ Seems to be focused in addressing problems 8.7
_____Is concerned about the quality of the work completed 10.0
_____Review care fully the work of technicians whose report to him /her 7.4
_____ Is able to delegate a job to subordinate technician. 6.3
______Is sensitive to the needs of follow workers 7.9

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 Advantage:

• This method is evaluative as will as developmental.

• Reduce rate bias because he does not know the weights associated with
statements.

Disadvantage:

• It is expensive to design, since the checklist for each different job in the
organization must be prepared
• Time consuming.

Companies in which the method is used:

1) Text port Industries, Rajgopal nagar, Bangalore: A Garment industry uses this
method to asses its worker( Source: Student survey)

Conclusion: In this method the weight and relative importance of the statement is hided,
employee only tick the statement which is relevant to him. So from this employee is
assessed which reduces bias information, It is very widely used traditional method.

Forced-Choice Method:

Introduction: In this method appraiser assign ranks to different attributes of employee.

These attributes seemingly positive have different weight which not known to
appraiser, the human resource department applies weight and arrive at final score.
Methodology: In this method rater must choose from a set of descriptive statements
about an employee. Forced choice items are usually prepared by an HR specialist, and
then supervisors or others familiar with ratee’s performance evaluate how applicable
each statement is that is they determine which statements describe effective or
ineffective behavior.

Then supervisors evaluate their employee and check statements that

describes the employee and then rank the statement from most to least descriptive,
then they adds up the number of each statement to come to conclusion.

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Sample formant

1) Example of force choice ration method

Descriptions of Attribute
Rank

The employee is very sociable and normally gets along well with colleges
_________ The employee is a fast decision-maker
__________
The employee is open to feedback and criticism
_________
The employee is a good team-player
_________
The employee is motivated by rewards
________
The employee exhibits good leadership skills
__________

Sample format 2:
Instructions: Rank from 1 to 4 the following sets of statements according to
how they describe the manner in which (name of the employee)

Performs the job, A rank of 1 should be used for the most descriptive
statement, and a rank of 4 should be give for the least descriptive. No ties are
allowed.
________Does not anticipate difficulties.
______ Grasps explanations quickly
______ Rarely waste time
______ Easy to talk to
_______ A leader in group activities
_______ Wastes time on unimportant things.
________Cool and calm at all times.
________ Hard worker.

Advantage:
• The elements of subjectivity in this mehod are minimized as the appraiser has
to assign unique rank for each of the attribute.
• Eliminates or greatly reduces the raters bias, specifically the tendency to
assign all high or low rating.

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 Disadvantage:

• Difficult to construct and validate the statements under forced choice method
it may be time consuming to prepare statement that suit the demands of a
particular job.

Conclusion: Rater is not allowed to rank his subordinate based on his wimps and
fancies, personal prejudice, halo effect reduced in this method, it is suitable asses clerical
worker and supervisor, HR depart wisely use this method to asses its employees.

Companies which are using this method:

1) WIDIA, Bangalore: uses this method to asses its worker.

2) CEAT: CEAT is among India’s top tyre companies, with strong presence in the
domestic and export market it recently acquired Rado tyres helped it become
leading Indian tyre exporters to USA & German uses forced choice method to
asses its employees.

Critical Incident Technique:

Introduction: Appraiser note down in a note book how well apprise done and
handled in critical incidence in this method. Which also provide documentation for
annual appraisal process.

Methodology: Supervisor continuously records the critical incidents of the employee

performance or behavior relating to all characteristics (both positive and negative)
and these are recorded as and when they occur in a specially designed note book. In
that note book rater maintain a log of behavior incidents that represent either effective
or ineffective performance for each employee being rated. The supervisor rates the
performance of his subordinates on the bases of notes taken by him and it can be
fruitfully employed as documentation of reasons why and employee was rated in a
certain way.

Sample formant 1:

An example of a good critical incident for a sales clerk is as follows:

May 1: Girish listened patiently to the customer’s complaint, answered the

woman’s questions, and then took back the merchandise; given the customer full
credit for the returned product He was polite, prompt, and interested in her
problem.
On the other hand, a bad critical incident might read as follows:

August 12: Girish stayed eight minutes over on his break during the busiest part
of the day. He failed to answer three store manager’s calls on the intercom to
report to cash registrar 4 immediately.

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 Advantage:
• In this method rater considers the records of performance rather than the
subjective points of opinion for example.

Disadvantage:
• What constitutes a critical incident is not defined in the same manner by all
raters.
• Rewarding events continually over a period of time may be resented by the
raters.
• Time consuming.

Companies follow this method:

1) ITC classic finance: It was incorporated in 1986 classic was a non-banking

finance company predominantly engaged in hire purchase and leasing
operation uses this method asses its employee.
2) Voltas Limited: A TATA enterprises subgroup which is India’s largest
projects exporters in mechanical, electrical and public health works adopted
this method it asses its employee, they feel that not happy with this method
and say that manager” Track” and record their performance and begin to
fear about the book manager’s “black book”
3) Vazir Sultan Tobacco company ( VST): Some successful brands such as
Charminar, Charminar special Filter, cigarette producer whose plant located
in Secunderabad uses these method, Manager and raters feels that if such
logs are used, the critical incidents that are recorded arte valuable for
performance evaluation interviews.
(Source: HR Review. ICFAI press)

4) Leela Scottish Lace Ltd: A Garment industries having various plants

spread in Bangalore uses this method along with field review and group
appraisal.
(Source: Student survey)

Conclusion: Appraiser not down as and when incident happens, it is a most reliable
source asses an individual compare to other method. Information gathered form this
method used for both annual appraisal and PA interview.

Essay or free Form Appraisal

Introduction: This method requires the manager to write a short essay describing each
employee’s performance during the rating period. This format emphasizes evaluation of
overall performance, based on strengths/weakness.

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Methodology: Under this method, the appraisers prepare documents describing the
performance of the employee questions or guidelines are provided to the appraiser. Based
on which he analyses and describes the employees performance. In some organization the
essay is combined with another form such as graphic rating. In this scale essay
summarize the scale elaborates on some of the ratings or discusses additional dimensions
that are not on the scale.
Sample formant:
Marge has been absolutely dynamic in perking up the San Antonio region’s sales. She
has increased sales an average of 8 percent for the last 11 months, while cutting costs of
acquiring a sale by 8000 Rs

The customer respects her work and style. She also trained three new sales
trainees in the use of the new spreadsheet inventory control system.

Advantage:

• The essay technique minimizes supervisory bias and the halo effect.
• This method is flexible.

Disadvantage:

• Comparing essay written by the same or different rater is difficult.

• Different rater define same incident in different way.
• This method not used when employee number is very large.
• Skilled writer can write a better picture than unskilled writers.

Companies follow this method:

1) Arvind Mills Limited: An Indian Multinational; has grown to become one of India’s
most diversified business houses with a significant presence in the textiles, they have
an effective PMS, which is a combination of MBO and “Essay” type.
2) Wheels India Ltd: Wheels India is promoted by TVS group and was started in the
early 60’s to manufacture automobile wheel. Today wheel India has grown as a
leading manufacturer of Steel Wheels for different type of vehicles. It has three
plants one in Padi, Pune and Rampur having 1400 employees uses essay technique to
appraisee.
3) Bata: A leading manufacturer and retailer of footwear. Women’s shoes, men’s
shoes, the company many plants across the words. In India in its plants it uses essay
appraisal method.

Conclusion: Result of this method only depends o a skilled writer. A skilled writer can
write a rosy picture and it is not free from personal bias, appraiser can change or write
anything he wish.Morever this method solely cannot be used. This can only support
other technique result

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Group Appraisal

Introduction: Under this method an employee is appraised by a group0 of appraisers.

This group consists of the immediate supervisor of the employee is appraised by a group
of appraisers.

Methodology: This group consists of the immediate supervisor of the employee to other
supervisor who have choose contact with the employee’s work, manager or head of the
department and consultants. In this method supervisor may act as the coordinator for the
group activities. This group uses any or multiple techniques discussed earlier, the
supervisor enlightens other member abut job characters, etc. The group appraisers the
employee and compare his performance with set standards.

Advantages:

• It is more reliable way of using one method by a group.

• Absolutely reduces personal bias, leniency bias and personal prejudice.
• Reduces conflicts because group involves assessors who are very well acquainted
with his work.

Disadvantage:

• Very difficult to bring group harmony.

• Some time in a group one can emerge as leader and dominates the other group
member.
•
Companies which are using this method:

1) Kinetic Honda: Pioneer of the two-wheeler Revolution in India, who creating

products of superior quality for the consumer and offering the best services
believes in quality creativity and productivity improved by their committed work
force. To evaluate them it use this method.

Conclusion: In this method a group is involved in assign em0ployee for his

improvement, to prepare action plans, studies the need for change in the job analysis
and standards and recommends change.

Confidential Reports

Introduction: To maintain the report about his subordinates strengths, weakness,

intelligence, attitude to work, sincerity, commitment, punctuality, attendance,
conduct, character, friendliness.

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 Methodology: It is a Traditional method, under this method superior appraises his
subordinates based on his observations, judgments and intuitions. The supervisor
keeps his judgments not allow the report confidentially. In other words, the superior
does not allow the employee to know the report and his performance.

Companies in which method are worked: Though the confidential report is

traditional method ,most public sector use these method such as Karnataka Soaps and
Detergent Ltd(KSDL)

Advantage:

• Employee behavioral traits are documented as and when they occur and make
a PA process a continuous process.
• Provide documented during Appraisal.

Disadvantage:

• Personal prejudice may prevail in some cases.

• Keeping maintaining confidentiality report is cumbersome job for managers.

Conclusion: This method is somewhat similar to essay writing only difference is

ratee might not know someone is observing and documenting his performance ,which
doesn’t affect employee regular work

MODERN METHODS

Behaviorally Anchored rating scales:

Introduction: Smith and Kendall developed what is referred to as behaviorally anchored

rating scale (BARS) or the behavioral expectation scale (BES). This method combines
elements of the traditional rating scales like graphic rating scale and checklist method
combines with critical incident methods. Using BARS, job behaviors are descried more
objectively. The method employs individuals who are familiar with a particular job to
identify its major components.

Methodology: A BARS rating form usually contains 6 to 10 specifically defined

performance dimensions each with five or six critical incident” anchors”

1) Six to ten performance are identified and defined by raters and ratees ( a group is
selected to construct the form)
2) The dimensions are anchored with positive and negative critical incidents.
3) Each rate is then rated on the dimensions.
4) Rating is fed back using the terms displayed on the form.

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 Usually two to four days are needed to develop BARS.
Sample format 1:

Dimension: Planning and organizing

Scale value Anchor

5( ) Excellent
Develops a comprehensive plan,
documents well, obtains approval &
distributes to all concerned.
4( ) Good
Lays out all plans and allows for slack.
Satisfies customer time constraints and
overruns are infrequent.
3( ) Average.
Revises due dates as project progress and
investigates customer complaints. Does
not report slippages in plan.
2( ) Below average
Poor plans and unrealistic time schedules
are common. Cannot plan for more a day
or two ahead.
1( ) Unacceptable
Seldom completes a project and does not
bother. Fails due to lack of planning and
is not interest in improving.

Sample formant 2: This formant present one performance dimension for engineering
competence. For example anchor statement for a rating of 9 is “ This engineer applies a
full rage of technical skills and con be expected to perform all assignments in an
excellent manner”. The rater would read the anchor & place an X at some point on the
scales for the ratee.
A BARS for Police officer.
Job knowledge: Awareness of procedures laws , and court rulings and changes in them.
Very high
Could be expected to follow correct
procedures for evidence preservation at the
scence of crime.

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Could be expected to know he could break
down a locked door while in hot pursuit and
thus arrest a fleeing suspect

Could be expected occasionally have to ask

other officers about point of law

Could be expected to misinform the public

on legal matters through lack of knowledge.

Very low

Ratee__________ Ratee_________

Advantage:
Both the manager and the employee are actively participate in the appraisal process. This
increases the relevant of the system to each job and also improves its acceptance by
employee.
Disadvantage:
It is tedious and needs considerable time and commitment to develop.

Conclusion: This method was developed in the hope that they would yield more objective
rating than other rating scales, formants because they were behaviorally based. And also
they provide some in-depth feeling of employee.

Behavioral Observation scales:

Introduction: It is in developing stage, it uses critical incidents technique to identify a

series of behaviors covering the domain of the job. The difference b/w BARS and BOS is
that instead of identifying those behaviors exhibited by the ratee during a rating period,
the rater indicates on a scale how often the ratee was actually observed engaging in the
specific behaviors identifies in the BOS.

Methodology: In BOS Appraisal 25 behavior items are identified. The maximum score is
125 (25 X 5), and the minimum score is 25. Supervisors with scores above 115 are
considered excellent performers, while a score in the 25 to 35 range is considered
extremely poor. Each firm using a BOS must determine the meaning and im0lortance of
the total scores for its ratee.

Advantage:

Both supervisor and subordinates are involved in the development of the scales, the
scales are better received.
It helps focus manager attention on important critical incidents for effective job
performance and allows superior discuss good & bad performance with ratee and make
feedback most acceptable.

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Conclusion : This method is developed in the hope that they would yield more objective
rating than other rating scale formants ( most notably graphice rating scales ) because
they are behaviourly rank based this mehtos is suitable to appraising first lin supervisor.

Sample Formant: Sample BOS items for supervisor

For each behavior listed use the following .

5 represents 95- 100% of the time.

4 represents 85- 94% of the time.
3 represents 75- 84% of the time.
2 represents 50- 74% of the time.
1 represents 0- 49% of the time.

Is accurate in preparing cost reports for Johnson project crew

I Almost never 1 2 3 4 5 Almost always

Is available for technical consultation when needed

Almost never 1 2 3 4 5 Almost always

Develops fair and equitable work schedule.

Almost never 1 2 3 4 5 Almost always

Assessment centers:

Introduction: An assessment center is not a place where one gets evaluated, it is a

technique to measure individual competency.( competency= Intelligence + education +
experience+ Ethics + interest) . A group of people undergo a series of work related or
unrelated exercises simulations & psychometric tests, their behavior under such situations
is observed by trained and experience observers. The observations thus made are
recorded and integrates dot measure individual compliances.

Methodology: Various activities that would normally form a part of the assessment are
Group Exercise” To test qualifies of leadership, teamwork
Presentations: To test communication skills, domain knowledge.
Writing exercise and case studies: To test analytical abilities, time management.
Psychometric Tests: To identify personal attribute.

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Role play: To test adaptability, influencing skills.

Advantage:
• The exercise and tests can be tailored to the requirements of the organization.
• Research evidence proves that people chosen by this method prove better than
those chosen by other methods.
• All assesees get an equal opportunity to show their talents and capabilities and
secure promotion based on merit; it improves morale of promising candidates
working in less important positions.

Disadvantages:
• Time consuming and costly to operate.

Conclusion: To make the assessment centre successful Top management should be

committed to it and also have to set clear and well-defined objectives. It has to provide
proper two way communication. Which are essential, moreover there should faith in
management by appraisers.

Human Resource Accounting:

Introduction: This technique has not developed and is still in the transition stage. This
method deals with cost and contribution of human resources to the organization.

Methodology: In his method, cost of the employee includes cost of manpower planning,
recruitment, selection, induction, placement, training, development, wages etc. Employee
contribution is the money value of employee service which can be measured by labor
productivity or value added by human resources.
Employee performance can be taken as positive when contribution is more than the cost
and performance can be viewed as negative if cost is more than contribution.

Sample Formant:

Employee cost and contribution.

Rank Rating Percentage of surplus/deficit of

Contribution to cost of employee

i) Extremely good performer over 200

ii) Good performance 150-200
iii) Slightly good performance 100-1500
iv) Neither poor nor good 0-100
v) Slightly poor performance 0
vi) Poor performance 0 to (-50)
vii) Extremely poor performance (-50) to (-100)

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Conclusion: This method even though necessary for organization but it treats human as
an economical man and it affects adverse on employee performance.

Companies using this method:

1) Steel Authority of India Ltd (SAIL): is the leading steel madding company in
India. It is a fully integrated iron and steel makers producing both basic & special
steel for domestic constructions, uses this method to asses its employees.

2) ITC Limited: Which pioneer in cigarette, vagitable oil, extensively use this
method to asses its work force.

3) Bank of Baroda: Pioneer in banking sector use this method appraise its workers
quarterly.

Management by Objectives (MBO)

Introduction: MBO is more than just an evaluation program and process, the main
aspects of MBO are clear and well-defined goals, a definite time-span to achieve the
goals, on action plan and finally, timely and constructive feedback. Also called goal
setting approach, these goals are set with the active participation of the employee and his
supervisor.

Methodology: MBO is a cyclical process consists of four steps.

1) Objective setting: Set by manager Y^& employee with in the context of overall
goals for next calendar year.

2) Action planning: Participative or even independent planning by the employee as

to how to reach those objectives. Employees are their ingenuity and feel more
committed to the plan’s success.

3) Periodic review: Joint assessment of progress towards objectives by manager and

employee, performed informally and sometime spontaneously.

4) Annual evaluation: Formal assessment of success in achieving the employee’s

annual objectives, coupled with renewal of the planning.

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Sample formant: Examples of MBO Evaluation objectives.

OCCUPATION IN TYPE OF OBJECTIVE STATMENT

ORGANIZATION ORGANIZATION

Sales respective Medium: Petrochemical Contact six new clients in West

Firm AVA region and sell to at least
Two of these new clients with
Next semi-annual cycle.

Accountant Small: CDA firm Attend two auditing seminars to

improve and update audit knowledge
by end of summer (Sept 15)

Skilled machinist Small: Job shop Reduce flange rejects by 8 percent by

Aug 15

Engineer Large: Construction Complete power plant tower project with i

Company in 30 days of government specified target
Date (Nov 10)

Advantage:

• Both supervisor and subordinates set goals; results are accepted by subordinates.
• Hence rater are involved in process this obviously enhance their morale.
• This discus about subordinate’s performance centered on results.

Disadvantage:

• Too much paper work is involved

• If too many objective set, confusion may arise.
• It emphasis too much on the short term goals.
• MBO used as a rigid control device that intimate rather than motivates.

Companies using this method:

1) Arvind Mills Ltd: The Arvind Mills Ltd. Is the flagship company worth Rs 20
bn of Lalbhai group found in the year 1908 with a significant presence in
textiles ready-to –wear clothes uses performance management as combination
of MBO and essay type.

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 2) American Manufacturing find that some MBO programs are to result oriented
and insufficiently process. Oriented. W.Edward Deming has argued that focus
on numerical goals, managing by results & taking immediate action on error has
led to dysfunctional management style in America Corporation.
Conclusion: MBO is most suitable and commonly used for managers and
professionals. The MBO should be viewed also as impetus for changing the system.

Psychological Appraisal:
Introduction: Large organization uses this full time industrial psychologist, when
psychologists are used for evaluation they assess on individuals future potential and
not past performance. The appraisal normally consists of in-depth interviews,
psychological test discussions with supervisor and review of other evaluation.

Methodology: After conducting various test, interviews and discussions,

psychologist write about an evaluation of employee intellectual motivational,
emotional, and other work related, characteristics, which suggest individual
performance.

Advantage:
• From this method in-depth feeling of employee could be known
• Rather than the past performance it concentrates on potential performance by
employee.

Disadvantage:
• Time consuming & expensive to hire psychologist.

Conclusion: This method is used to make decision regarding employee placement,

career planning and development and training programs. In this method employee
thoroughly assessed compare to any other method, thus results obtained are reliable.

360 degree Appraisal

Introduction: It aims at a comprehensive and objective appraisal of employee

performance. The 360-degree feedback is understood as systematic collection of
performance data on an individual or group, derived from a number of stake holder
the stake holders being the immediate, supervisors, team members, customers, peers
and self, any one who has use full information on how an employee does the job may
be one of the appraisers.

Objectivity:
• Initially it started as fact finding self-development technique perhaps in future
it linked to reward system.
• To find the personality of each manager his talents, behavioral traits, tempers
and other work related qualities.

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Methodology: The methodology involves collecting responses through standard
assessment from about a manager from his bosses, peers and subordinates. They cover
several parameters of performance as well as behavior.

The forms are designed in a way to elect one of the three responses to the subject’s
rating on the parameter, strength, weakness and improvement required. Data collected is
analyzed and graphed by computer. The responses are presented collectively to the
appraiser. Depending on the interpretations of the data and finding’s, counseling sessions
are held to solve the specific problem and the weaknesses are identified by 360-degree
appraisal.

Advantage:
• The organization gains from heightened self awareness of the top managers. If
reveals strength & weakness of their managing style.
• The gap between self-assessment and the views of one’s colleges is reduced.
• Empowerment is facilitated.
• Inflexible managers are forced to imitate self-change.

Disadvantage:
• The system may be used to humiliate people.
• Responses from the people tend to biased.

Companies using this method:

1) Hewlett-Packard (call centre), Bangalore: Use this method to asses its skilled
workforce (Source: student survey)

2) Accenture (Software industry), Bangalore: uses this method to assess its

employees. (Source: student survey)

3) Corporations like General Electric India ( GE), Reliance Industry Ltd (RIL),
Crompton graves, Godrej soaps, Wipro, Infosys, Thermanx and Thomus cook,
HCL, Infosystems, Tata Infotech, Ashok Leyland and Asian paints, Ponds,
Colgate-Palmolive uses this method to asses its employees.

4) 360 degree feedback mechanism at Wipro: Wipro believes that feedback is

very important to enable to make necessary changes either to our, attitude or
work structure.
Wipro GM-HR Prathik Kumar say’s they amongst the first few
organization in India to introduce the 360 degree appraisal system. They believe it
is very effective since it is well institutionalized, According to them people look
forward it and every manager has to go through it , At regular intervals, teams too
get together to give feedback and an outsider facilitates the process. All managers
go through this. The management makes sure that managers go through a rotation
process whereby they can keep a tab on how the person gets along with other

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 teams. Wipro has adopted competency route to leadership development with
focus on people.

5) Motorola has developed a performance-led leadership development model

called Totality of Motorola Leadership (TOML) ( Sharma 2002). At Motorola it
was done by pre-defining competencies and providing customized ( individual),
development planning based on 360-degree feedback to enhance organization
performance.
6) Johnson and Johnson introduced model of leadership called “Standard of
leadership” based on 360- degree feedback in 1996 to ensure business success
and market leadership. It was introduced at the top level.
7) Phillips also used the full circle feedback for identifying “Top potential
category employee: It developed leadership competency model focusing six
competencies including determination for high quality result, search for better
methods, etc. The leadership model has been linked with organization values
and goals.
8) GE introduced 360-degree feedback during 1980, with Jack Welch taking over
as the CEO of corporation. Questionnaire and open reviews are largely used.

Conclusion: The 360-degree feedback provides a broader perspective about

employee strength and weakness. It facilitates greater self development to employees.
It enables an employee to compare his or her perception about self with the
perceptions of the assessors. Besides, 360-degree feedback creates and atmosphere of
more openness, improved interpersonal relation and team work.

SOME LATEST THEORIES IN PERFORMANCE MANAGEMENT SYSTEM

Balance Scorecard Approach:

Introduction: The Balance Scorecard Approach (BSC) concept developed in the early
1990’s by Robert.S. Kalpan and David Nerton. The BSC is revolutionary tool that
motivates staff to make the organization’s vision happen. It doesn’t more than just
measure performance. It is a management system that focuses on the efforts of people
through out the organization toward achieving strategic objectives. It gives feedback
on current performance and targets future performance levels. Putting in other way,
the balanced scorecard converts an organization vision and strategy in to a
comprehensive set of performance and action measures that provide the bases for a
strategic measurement and management system.

Methodology: Implementing balance scorecard involves.

1) Translating strategies in to objectives and measures.

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 2) Cascading objective and measure through the various level of organization

3) Communication strategies, objectives and measures to all levels.

4) Designing BCS’s and related performance reporting and analytical application

(Individual responsibility assigned on the strategy )

5) Assigning with project management and speeding implementation and

tracking for achievement of objective and this is called HR Scorecard.

Companies using this method:

1) Arvind Brands Limited: Arvind brands Ltd uses this method whose plant located
in Bangalore.

2) Many Top Indian companies like Infosys,i2 Technologies ,Godrej consumer

products, GTL, ITC.LTD, Mahindra & Mahindra used this method to convert
their organization vision and strategy in to a comprehensive set of performance
and action measures that provide the basis for strategic measurement and
management system.

And some MNC’s such as Unilever, Fed Express uses this method.

3) BSC method at i2 Technologies India: i2 is the leader in solutions that allow

companies to dynamically manage their extended supply chain, also known as
value chain.

Employees are assessed on quarterly basis. There different parameters to

judge performance at different levels. The first one is on the performance of the
company as a whose; the second is based on the performance of at particular business
unit with in organization and third is at the individual level. All employees have to
reach a certain level of performance based on their position. These quarterly appraisal
form part of the annual appraisal, that shape the salary of an employee.

4) A number of Japanese companies have implemented the BSC. Some of those

companies include Ricohco.Ltd, Takara Shuqo Ltd. Kensai Electric power Co.
Phillips Japan Ltd. Oki Electric Industry. Based on the Japanese experience a
Japanese-type BSC model is emerging.

Some software are available for BSC implementation one of them is eHalogen software
companies such as Truro (oil industry), O’SULLIVAN CREEL LLP (full- service and
accounting & consulting firms, Oil States (manufacturer of diversified products for the
oil industry changed their traditional appraisal system to BSC.

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Conclusion: It is a innovative technique of PMS it includes financial as well as non-
financial out comes. Since the introduction BSC evolved as a result of improvisations to
suits the needs of different users. First generation of BSC focuses on evaluating
performance, second as a management system & third as a framework for organization
change.

People Capability Maturity Model (PCMM)

Introduction: PCMM is an organization development framework that can be used to

build competences and is being adopted by leading software companies. This concept is
direct offshoot of the capability maturity model (CMM) it was developed to asses
software standards.

Methodology: PCMM is aimed at assessing the capability of an organization to attract,

retain, and nurture competent individuals. It operates at 5 level of maturity. An
organization can be assessed on these levels based on the achievement of specified
objectives; level 5 is the highest level of achievement.

Companies using this method:

Ericsson and Boeing have acquired the PCMM certification. In India Wipro and Sitara
Technologies have had the honor of achieving PCMM level 5

Pay for Performance (PFP)

Introduction: To drive employee performance to high-level and reward them for meeting
or exceeding performance goals, are growing in popularity across organization, they are
not only used in traditional, production oriented organization or sales professional but
also in service and public sector.

Methodology:

i) Set the objectives or standards.

ii) Review whether employee achieved or not.
iii) Pay based on his performance.

In certain circumstances this method is not suitable

• If in an organization employees mostly professional, implementing a PFP is risky.

• PFP increases pressure on employees who are doing well on their job it is better
to let the employee enjoy their job with out putting them under pressure.

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Companies which use this method:

At GE (general Electric): workers get paid for performance: they are paid bonuses when
they achieve challenging goals instead of tenure of service.
The GE medical system group has a quick thanks program that lets employee nominate
colleagues for an exceptional performance.
At Lincon Electric incentive plan has been the model for other companies for years. The
pressure to perform is great at Lincon.

Conclusion: PFP is know a days widely used by manufacturing sectors and IT sector, no
doubts that it create pressure on employee but its essential for any organization to achieve
its objectives in a determined time span.

Benchmarking:

Introduction: This is a form of goal setting though it is meant to be more inclusive and
is often portrayed as part of comparing work and service methods against the best
practices and outcomes for the purposes of identifying changes stated as specific goals
that well result in higher-quality output.

Benchmarking incorporates the use of goal setting to set targets that are pursued,
identified, and then used as the basis for future action.

The Benchmarking process involves looking both inside an outside the organization for a
way of improving performance.

Companies using this method: IBM and Magnavox, IBM benchmarked its efforts in
comparison to Xerox, Motorola, 3M, Heweltt-Packard,
Magnavox benchmarked a series of HR practices.

Conclusion: Benchmarking provides a means of determining how well a business unit or

organization is perform compared with similar units in the organization or externally.

The ACHIEVE model:

Introduction: May manager are strong in problem but are much weaker in problem
analysis, or diagnosis. The ACHIEVE model was designed by Paul Hersey and Marshall
Goldsmith to help managers determine why performance problem may have occurred and
then developed change strategies aimed at solving those problems.

Methodology: In using the ACHIEVE model, the manager evaluates how each factor
will affect the current or potential performance of followers for a given task. Then the
manager should take the steps that “ fit” the unique cause(s) of the performance problem.
The seven factors in the ACHIEVE model, along with typical problem solving
alternatives are listed below.

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A-Ability (knowledge and skills): The manager study follower knowledge, skill and
experience to complete the task successfully, if the problem, solutions may include
specific training, coaching, formal educational courses.

C-Clarity (Understanding or Role-Perception)

The follower needs to understand clearly what the major goals and objectives are how
they should be accomplished and their priorities.

H-Help (Organizational Support)

Some organization supports factors include adequate budget and personnel suitable
equipment and facilities, and necessary supports form other departments. If there is lack
in support manager should clearly identify where the problem exists and has to work on
that.

I-Incentive (Motivation and willingness)

People have a natural tendency to pursue tasks that are rewarded and avoid tasks that are
not manager has to motivate employee by providing proper incentive plans.

E-Evaluation (Coaching and performance Feedback)

Evaluation refers to informal day-to-day performance feedback as well as formal periodic
reviews. An effective feedback process lets followers know-how well their doing the job.

V-Validity (Valid and Legal personnel practices)

The term validity refers to the appropriateness and legality of human resources decision
made by the manager. Manager need to make sure that decision about people is
appropriate in light of laws, court divisions and company policies.

E-Environment: This term refers to the external factors that influence performance such
as competition, chanting market condition.

Conclusion: ACHIEVE model is totally different from all other models it focuses mainly
on manager what has to take the steps during PMS process, still the process is in
developing process.

SOME OTHER COMPANIES HAVING THEIR OWN PMS

Xerox: Provide a core set of metrics for use across the organization.
Toyota: Focus performance reviews on goals gather than numbers to ensure employ
alignment
Toyota: Measure newer reps more frequently to concentrate coaching effort.
Fiber Mark: Conduct frequent review of employee performance.
Xerox Corporation: Promote manger-rep coaching sessions.
Dupont: Monitor rep’s calls periodically to facilitate coaching.
Unilever: Design a scorecard to evaluate performance and target improvement
opportunities.

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