Performance Appraisal

Performance Appraisal
A process that identifies, evaluates and develops employee performance to meet employee and organisational goal.
It is not a process that happens once a year or every six months, but one that happens every day. It should focus solely on employee performance improvement.

It is an element of the Performance Management system.

It typically involves measuring how well an individual employee is doing their job against a set of criteria (e.g. personal competencies, achievements, behaviour), providing feedback and creating a development plan.
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Steps in Performance Appraisal

Define / understand the job

mutual understanding between the manager and subordinates regarding job responsibilities, duties and standards

Appraising performance

Performance Appraisal

measuring and comparing the actual performance with the standards

discussion sessions to analyse the employees performance and progression

Feedback

Need of Performance Appraisal

Why Performance Appraisal

Measuring employee performance

Determining pay & promotion decision

Career planning

Determining training & development needs

Other benefits

Performance Appraisal Methods

Some of the performance appraisal methods are: Graphic Rating Scale Alternation Ranking Paired Comparison Forced distribution Critical Incident Behaviourally anchored rating scale Essay Descriptions Management By Objective (MBO) Computerised / web based
It is difficult to suggest which system is best because it is difficult to predict how a set of employees will react to a given system. So a mixture of different systems is always recommended.
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Graphic Rating Scale

The oldest, most popular and the simplest technique. Also known as linear rating scale or simple rating scale. Listing a number of traits with a performance range for each. List of traits (e.g. quality, reliability), and a range of performance values (e.g. from unsatisfactory to outstanding) for each trait is listed for rating, and supervisor rates by circling the relevant ones. Excerpts are obtained about the performance standard of employees. General factors and information are sometimes taken from Job Analysis. Employees are ranked on the basis of total points gained.

ADVANTAGES: Quantity and Quality of work can be assessed. Easy to use and permits tabulation of scores of employees. However, it suffers from being arbitrary as the ratings may be subjective.
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Graphic Rating Scale

Graphic Rating Scale

Rating scales are of two types: 1. Continuous rating scale Attitude Measurement Scale: Unsatisfactory Poor Fair Average Good Excellent 0 1 2 3 4 5

2. Discontinuous rating scale Attitude Measurement Scale: No Interest Indifferent Interested Enthusiastic

Alternation / Ranking Method

Ranks employees from best to worst on a particular trait. Employee who is the highest on the characteristic being measured and the one who is the lowest. [BEST ............. WORST] Then the next-highest, and the next-lowest. This becomes the benchmark for performance standard and its appraisal. ADVANTAGES Oldest and simplest form of rating. Easy and inexpensive. Suitable for dealing with small number of employees. However, its reliability and validity is doubtful due to the possibility of subjectivity.
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Paired Comparison
The appraiser ranks the employees by comparing one employee with all other employees in the group, one at a time. Ranks employees by listing all possible pairs of employees for each trait and indicating which is the better of each pair. For every trait (e.g. quantity of work, quality of work, etc.) every subordinate is paired with and compared to every other subordinate. ADVANTAGES: Help in yielding rank order of employees. Helps to make ranking method more precise and comprehensive. Data is more reliable and valid for performance standard appraisal. But time consuming and is applicable where number of employees are less.
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Paired Comparison
(+) means better than; (-) means worse than.

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Forced Distribution
This system is based on the assumption that all employees can be divided into five categories. [Outstanding, Above average, Average, Below Average and Poor. The rater is asked to place the percentage allocations across each of these ranges. The spread of distribution is represented through normal distribution curve. The main idea in this system is to spread ratings in a number of grades. This method is feasible for large group of employees. ADVANTAGES: Eliminates the room for subjective judgement on the part of supervisor. Easy to understand and administer.
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Forced Distribution

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Essay Description A written statement describing employees strengths, weaknesses, past performance and future development. Managers writes the descriptions of the employees by asking supervisors to enumerate specific examples of employee behaviour. ADVANTAGES It minimises supervisory bias and the halo effect. Depends on managers writing skills. However, biasness in writing may also occur. Limitation: Essays are not amenable for evaluation and analysis. Its time consuming and lethargic .
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Essay Description

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Critical Incident Examples of employee behaviour that illustrate effective or ineffective job performance. Incidents and employees performance are recorded. Manager then uses the record to assess the employees performance when it is time for PA. Keeping this record provides concrete examples of what the employees can do to eliminate any critical incident and performance deficiencies. Not helpful for comparing employees and making salary decisions.
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Critical Incident
Continuing Duties
Schedule production for plant

Targets
90% utilization of personnel and machinery in plant; orders delivered on time
Minimize inventory costs while keeping adequate supplies on hand

Critical Incidents
Instituted new production scheduling system; decreased late orders by 10% last month; increased machine utilization in plant by 20% last month
Let inventory storage costs rise 15% last month; overordered parts A and B by 20%; underordered part C by 30%

Supervise procurement of raw materials and inventory control Supervise machinery maintenance

No shutdowns due Instituted new preventative to faulty machinery maintenance system for plant; prevented a machine breakdown by discovering faulty part
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MBO
Setting specific measurable goals with employees and periodically reviewing the progress towards the goal. MBO refers to a comprehensive, organisation-wide goal-setting appraisal program, wherein the subordinates and superiors jointly set goals and periodically review the target with the achieved. MBO done away with the judgemental role of the superiors in the appraisal of their subordinates, thereby leading to greater satisfaction, agreement, greater comfort and less tension / hostility. It consists of six main steps: Set the organisation goal Set the departmental goal Discuss departmental goal Define expected result Performance review Provide feedback
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MBO - SMART

Specific

Time Frame

Measurable

MBO

Realistic

Achievable

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MBO Limitations

Applicable only when goal setting is possible by subordinates. Involves considerable time, energy and expenditure. This approach mainly emphasis counselling, training and development. But in practice, its not possible to forego the critical aspect of PA. Setting objectives with subordinates sometimes turns to a tug of war. MBO can be self defeating if it fails to take into consideration the deeper emotions of the employees.
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MBO - Problems

Setting unclear / unrealistic objectives

Time-consuming appraisal process

Problems with MBO

Conflict with subordinates / peers over objectives

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360 Degree Performance Appraisal

It is understood as a systematic collection of performance data on an individual or group, derived from a number of stake holders the stake holders being the immediate supervisors, team members, customers, peers and self. Anyone who has useful information on how an employee does the job may be the appraisers. It provides a broader perspective about an employee performance. By design, this appraisal is effective in identifying and measuring the interpersonal skills, customer satisfaction and team building skills. Limitations: Receiving feedback from multiple sources may be intimidating, time consuming and cumbersome in process.
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360-Degree Feedback

Many firms have expanded the idea of upward feedback into what they call 360-degree feedback.
Here, performance information is collected from all around, from employee, supervisor, subordinates, peers, internal and external customers.

The feedback is generally used for training and development, rather than for pay rises.
It is not an appraisal process, it is a performance appraisal feedback process.
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The Appraiser

Immediate Supervisor

Self-Rating

Peers

Potential Appraisers

Subordinates

Rating Committee

360-Degree Feedback

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Performance Appraisal Problems

Performance Appraisal Problems

Unclear Standards

Halo Effect

Central Tendency

Leniency or Strictness

Biasness

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Performance Appraisal Problems

Unclear Standard - Most of the appraisal scales are unclear. Standards and traits are interpreted differently by different people. Halo Effect When a supervisors rating of a subordinate on one trait biases the rating of all other traits. E.g. An unfriendly employee will often be rated unsatisfactory for all traits rather than just for that specific trait. Central Tendency Tendency to rate all employees the same way the middle of the rating scale; which is usually rating an average rating. Leniency or Strictness Tendency to rate all subordinates either high or low. Biasness Tendency to rate employees based on their differences on age, race, sex, background and other characteristics.
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Essentials of an Effective Appraisal System

Mutual trust and confidence. Reliability & validity Specific objectives Standardisation Training of appraisers Job Relatedness Time feedback to improve performance. Individual differences to be appreciated. Review of PA and appeal
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