Performance Appraisal

Meaning
• Performance appraisal is the process of assessing the
performance and progress of an employee or a group
of employees on a given job and his potential for
future development.
• According to Flippo, “ Performance appraisal is the
systematic, periodic and an impartial rating of an
employee’s excellence in matters pertaining to his
present job and his potential for a better job”
Characteristics of Performance appraisal
 It is a process consisting of a series of steps.
 Systematic examination of an employee’s strengths and
weaknesses in terms of the job
 It is a scientific or objective study
 It is an ongoing and continuous process
 Uses or Importance of Performance
Appraisal
• Performance appraisal provides valuable information
for personnel decision such as pay increases,
promotions, demotions , transfers and terminations.
Thus performance appraisal serves as the basis of
suitable personnel policies.
• It helps to judge the effectiveness of recruitment,
selection, placement and orientation system of the
organization.
• It is useful in analyzing training and development
needs.
• Performance appraisal can be used to improve
performance through appropriate feedback and
counseling to employees
• Performance appraisal facilitates human
resource planning, career planning and
succession planning.
• It promotes a positive work environment
which contributes to productivity
• A competitive spirit is created and employees
are motivated to improve their performance.
• Systematic appraisal of performance helps to
develop confidence among employees
Performance Appraisal Process
1. Objectives of Appraisal:
Objectives of appraisal include effecting
promotions and transfers, assessing training
needs, awarding pay increases. The traditional
approach emphasized on correcting the
problem. But the modern or system approach
aims at improving the performance, instead of
merely assessing it.
2. Establish job Expectations:
This include informing the employee what is
expected of him or her on the job. Individuals
should not be expected to begin the job until
they understand what is expected of them.
3. Design Appraisal Programme:
This poses several questions which need answers
(i) Formal versus informal appraisal ?
(ii) Whose performance is to be assessed ?
(iii) Who are the raters?
(iv) What problems are encountered ?
(v) How to solve the problems?
(vi) What should be evaluated?
(vii) When to evaluate?
(viii) What methods of appraisal are to be used?
Performance Appraisal Methods
 Methods of Appraisal
1. Confidential Report
A confidential report is a report prepared by the
employees immediate superior. It covers the strengths
and weaknesses, main achievements and failure,
personality and behavior of the employee. It is descriptive
appraisal used for promotions and transfers of employees.

2. Free Form or Essay method:

Under this method, the evaluator writes a short essay on
the employee’s performance on the basis of overall
impression.

3. Straight ranking method:

In this technique, the evaluator assigns relative ranks to all
the employees in the same work unit doing the same job.
Employees are ranked from the best to the poorest on the
basis of overall performance.
4. Paired Comparison Method:
This is a modified form of straight ranking.
Herein each employee is compared with all
the others in pairs one at a time. The number
of times an employee is judged better than
the other determines his rank.
5. Forced Distribution Method:
In this technique, the rater is required to
distribute his ratings in the form of a normal
frequency distribution. The purpose is to
eliminate the rater’s bias of central tendency.
Here also ranking method is used
6. Graphic Rating Scales:
It is a numerical scale indicating different degrees of a
particular trait. The rater is given a printed form for each
employee to be rated. The form contains several
characteristics relating to the personality and performance
of employees. Intelligence, quality of work, leadership
skills, job knowledge etc. The rater records his judgment on
the scale of 0 – 5.
7. Checklist Method:
A checklist is a list of statements that describe the
characteristics and performance of employees on the job.
The rater checks to indicate if the behavior of an employee
is positive or negative to each statement.
There are 3 types of check list:
a. Simple checklist
b. Weighted Checklist
c. Forced choice checklist
8. Critical Incident Method:
In this method, the supervisor keeps a written
record of critical events and how different
employees behaved during such events. The
rating of an employee depends on his
positive/negative behaviors during these events.
These critical incidents are identified after
thorough study of the job and discussion with the
staff.
9. Group Appraisal Method:
Under this method a group of evaluators assesses
employees. This group consists of immediate
supervisor of the employee, other supervisors
having close contact with the employee’s work,
head of the department and a personnel expert.
10. Field Review Method:
In this method, a training officer from the
human resource department interviews line
supervisors to evaluate their respective
subordinates. The interviewer prepares in
advance the questions to be asked. By
answering these questions a supervisor gives
his opinions about the level of performance of
his subordinate, the subordinate’s work
progress, his strengths and weaknesses,
promotion potential.
Modern Methods:
1. Assessment Centre Method:
An assessment centre is a group of employees drawn from
different work units. These employees work together on
an assignment similar to the one they would be handling
when promoted. Evaluators observe and rank the
performance of all the participants. Employees are
evaluated on job-related characteristics considered
important for job success.
2. Human Resource Accounting:
Under this method performance is judged in terms of
costs and contributions of employees. Costs of human
resources consist of expenditure on human resource
planning, recruitment, selections, induction, training,
compensation, etc. Contribution of human resources is
the money value of labour productivity or value added by
human resources. Difference between cost and
contribution will reflect the performance of employees
3. Behaviorally Anchored Rating Scales (BARS):
This method combines graphic rating scales with
critical incidents method. BARS are
descriptions of various degrees of behavior
relating to specific performance dimensions.
Critical areas of job performance and the most
effective behavior for getting results are
determined in advance. The rater records the
observable job behavior of an employee and
compares these observations with BARS. In
this way, an employee’s actual job behavior is
judged against the desired behavior.
4. Appraisal by results or MBO:
The concept of Management By Objectives (MBO) is
developed by Peter Drucker. MBO has been defined as “a
process whereby the superior and subordinate managers of
an organization jointly identify its common goals, define
each individual’s major areas of responsibility in terms of
results expected of him and use these measures as guides
for operating the unit and assessing the contributions of
each of its members.’
MBO involves appraisal of performance against clear, time
bound and mutually agreed job goals.
Steps in MBO:
a. Set organisational Goals
b. Defining Performance Targets
c. Performance Reviews
d. Feedback
5. 360 Degree Appraisal Technique:
In order to make appraisal more objective,
transparent and participative concepts such as self-
appraisal, peer appraisal, subordinate appraisal and
appraisal by customers (both internal and external)
were introduced. These led ultimately to the
introduction of 360 degree feedback system.
Superior

Self Employee Peer

Subordinate
4. Appraise the performance:
Performance is essentially what an employee does or does not do.
Employee performance common to most jobs include the following
elements:
• Quantity of output
• Quality of output
• Timeliness of output
• Presence at work
• Cooperativeness

5. Performance management:
Performance appraisal provides feedback about employee job
performance. Along with feedback 3 more activities need to carried
on :
6. Performance Interview
7. Archiving performance data
8. Use of Appraisal Data
Problems in Performance Appraisal
1. Errors in Rating: Performance appraisal may not
be valid indicator of performance and potential
of employees due to the following type of
errors:
(a) Halo Effect
(b) Stereo Typing
(c) Central Tendency
(d) Constant Error
(e) Personal Bias
(f) Spill over Effect or Recency effect
2.Lack of Reliability
3. Incompetence & Lack of knowledge
4. Negative Approach
5. Multiple Objectives
6. Resistance
 Career Planning
 Career planning is a systematic process by which one
selects career goals and the path to these goals.
 From the organization viewpoint, it means helping the
employees to plan their career in terms of their
capacities within the context of organization's needs.
 It involves designing the organizational system of
career movement and growth opportunities for
employees from the employment stage to the
retirement stage.
 Individuals who can fill planned future positions are
identified and prepared to take up these positions.
 Career planning is the process of matching career goals
and individual capabilities with opportunity for their
fulfillment.
 Objectives of Career Planning
• To attract and retain the right type of persons in
the organization
• To map out careers of employees suitable to their
ability and their willingness to be trained and
developed for higher positions.
• To ensure better use of human resource through
more satisfied and productive employees
• To have a more stable workforce by reducing
labour turnover and absenteeism.
• To increasingly utilize the managerial talent
available at all levels within the organization
• To improve employee morale and motivation by
matching skills to job requirements and by
providing opportunities for promotions
• To ensure that promising persons get experiences
that will equip them to reach responsibility for
which they are able.
• To provide guidance and encourage employees to
fulfill their potentials
• To achieve higher productivity and organizational
development.
 Steps or Process of Career Planning
1. Identifying Individual needs and Aspirations:
Human resource inventory will reveal the age,
qualifications, experience and aptitude of present
employees. Appraisal of employees is then carried out to
identify the employees having the necessary potential for
climbing up the ladder and are willing to be promoted and
to take up higher responsibilities. Such appraisal may
reveal three categories of employees:
(a) Employees who are already fit an willing to take up higher
responsibilities. These can be promoted to fill the higher
level vacancies;
(b) Employees who have the potential and willingness to take
up higher responsibilities but require more training and
experience and
(c) Employees who have the capacity to take higher
responsibility but lack the interest or desire
2. Analyzing career opportunity:
• The organizational set up, future plans and career
system of the employees are analyzed to identify
the career opportunities available within it.
• Career paths can be determined for each position
• It is also necessary to analyze career demands in
terms of knowledge , skills, experience, aptitude
etc.
• Long term and short term career goals can be
defined after relating specific jobs to different
career opportunities.
3. Identifying Match and Mismatch: A mechanism for identifying
congruence between individual current aspirations and
organizational career system is developed to identify and compare
specific areas of match and mismatch for different categories.

4. Formulating and Implementing Strategies:

Alternative strategies and action plans for dealing with mismatch are
formulated and implemented
 Changes in the career system by creating new career paths, by
providing opportunities for lateral movements through job redesign
etc.
 Changing employee needs and aspirations by helping them to scale
down unrealistic goals and aspirations or by creating new
aspirations
 Seeking new basis of integration through problem-solving,
negotiations and compromises etc
 Training and development of suitable people, so as to meet the
needs of both the individuals and the organization
5. Reviewing Career Path:
A periodic review of career plans is necessary to know
whether the plans are contributing to effective
utilization of human resources by matching employee
objectives to job needs. Review will also indicate to
employees in which direction the organization is
moving, what changes are likely to take place and what
skills are needed to adapt to the changing needs of the
organization.
Career Stages:
1.Exploration
2. Establishment
3. Mid career
4. Late career
5. Decline
1. Exploration: Very early in life of a person, parents begin to explore career
choices. The exploration period ends for most of us in mid-twenties as we
make the transition from college to work. This stage involves self-analysis
and exploration of different types of available jobs.

2. Establishment: This stage begins with search for work and includes the first
job, learning it and being accepted by peers. It is also marked by mistakes
and good performance. Employment sought in this stage is guided by what
was learnt during exploration.

3. Mid Career: At this Point in a career people may move up or reassess their
priorities.

4. Late Career: Those who continue to grow through the mid-career stage, this
stage is pleasant. One can enjoy success and respect from younger
employees. Those who have stagnated, they realize that they cannot change
the world. One starts looking forward to retirement, due to career
plateauing.

5. Decline: The final stage is difficult for everyone. After several decades of
continuous achievements, the time has come for retirement.
 Career Development Initiatives
• Career Planning Workshop
Structured workshops are available to guide employees
individually through systematic self assessment of
values, interest, abilities, goals and personal
development plans. During workshops, employees are
made to define and match their specific career
objectives with the needs of the company
• Career Counseling
Career counseling helps employees discuss their career
goals in one-to-one counseling sessions. Along with
goals, other variables identified are capabilities,
interests and current job activities and performance.
• Mentoring:
Mentoring involves coaching, advising and encouraging employees
of usually lesser ranks.

• Sabbaticals:
These are temporary leaves of absence from an organization,
usually at a reduced amount of pay. These help employees in terms
of refreshing their learning and rejuvenating their energies.

• Personal development Plans (PDP’s):

In these, employees write their own personal development plans.
Such development plans include development needs and action
plans to achieve them.

• Career workbooks:
These consists of questions and exercise designed to guide
individuals to figure out their strengths and weakness, job and
career opportunities, and necessary steps for reaching their goals.
Many workbooks are tailor-made for a particular firm and can be
completed in several sessions.