INTRODUCTION

Performance Appraisal is a formal, structured system that compares employee performance to

established standards. Assessment of job performance is shared with employees being appraised
through one of several primary methods of performance appraisals. Elements in performance
appraisal methods are tailored to the organization's employees, jobs, and structure.

Performance appraisals, also known as employee appraisal are essential for the
effective management and evaluation of staff. Appraisals help develop individuals,
improve organizational performance, and feed into business planning. Each staff
member is appraised by their line manager. Directors are appraised by the CEO, who
is appraised by the chairman or company owners, depending on the size and structure
of the organization. Performance appraisal is a part of career development and regular
review of employee performance within organizations.
Annual performance appraisals enable management and monitoring of standards,
agreeing expectations and objectives, and delegation of responsibilities and tasks.
Staff performance appraisals also establish individual training needs and enable
organizational training needs analysis and planning.
Performance appraisal should also be viewed as a system of highly interactive
processes which involve personnel at all levels in differing degrees in determining job
expectations, writing job descriptions, selecting relevant appraisal criteria, developing
assessment tools and procedures, and collecting interpreting, and reporting results
Performance appraisals are important for staff motivation, aligning individual and
organizational aims, and fostering positive relationships between management and
staff.
Appraisals must address 'whole person' development - not just job skills or the skills
required for the next promotion. Appraisals must not discriminate against anyone on
the grounds of age, gender, sexual orientation, race, religion, disability, etc.
Performance appraisals should be positive experiences. The appraisals process
provides the platform for development and motivation, so organizations should foster
a feeling that performance appraisals are positive opportunities, in order to get the
best out of the people and the process.

Requirements for effective performance management system:

1.

Effective performance management requires a good deal of face-to-face supervisoremployee interaction. By knowing the subordinates, a supervisor can steer them onto
a path of greater productivity and optimized output. Long-term successful business
owners view performance appraisal as a process of getting to know the people who
work for them. It is the most significant and indispensable tool for an organization. It

provides information, which helps in taking important decisions for the development
of an individual and the organization.
2.

Thus, one phase of the annual performance management cycle is performance

appraisal, the process of reviewing employee performance vis--vis the set
expectations in a realistic manner, documenting the review, and delivering the review
verbally in a face-to-face meeting, to raise performance standards year over year
through honest and constructive feedback. In the process management expects to
reinforce the employees strengths, identify improvement areas so that one can work
on them and also set stretched goals for the coming year.

An effective review process helps organizations in three areas:

1. Evaluation and improving personnel selection and training systems;
2. Preventing wrongful termination; and
3. Increasing real employee diversity
Some Basic Concepts:

Performance refers to an employees accomplishment of assigned tasks.

Performance Appraisal is the systematic description of the job-relevant strengths and
weaknesses of an individual or a group.
Appraisal period is the length of time during which an employees job performance is
observed in order to make a formal report of it.
Performance Management is the total process of observing an employees performance
in relation to job requirements over a period of time (I.e. clarifying expectations, setting
goals, providing on-the-job coaching, storing and recalling information about
performance) and then making an appraisal of it. Information gained from the process
may be fed back via an appraisal interview to determine the relevance of individual and
work-group performance to organizational purposes, improve the effectiveness of unit
and improve work performance of employees.

Performance and Development Planning (PDP):

PDP is a process for managers that aligns individual performance with company goals and
ensures focus on the development of talent company-wide. PDP is an important step in their
corporate effort to engage and enable employees to deliver their contribution to their business.
Also, PDP serves to enable employees to identify and realize personal opportunities for
development that are aligned to current and future business challenges.

Objectives of Performance Appraisal:

Let the employees know where they stand in so far as their performance is concerned and
to assist them with constructive criticism and guidance for the purpose of their
development.

Assessment of skills within an organization.

Set targets for future performance.

Effect promotions based on competence and performance.

Strengthen relationship between superior and subordinate.

Assess the training and development needs of employees.

Identify the strengths and weaknesses of employees.

Decide upon a pay raise (increments).

Determine whether human resource programs such, as selection, training and transfers
have been effective or not.

Form a basis for personnel decisions-salary (merit) increases, promotions, disciplinary

actions, etc.

Provide the opportunity for organizational diagnosis and development.

Facilitate communication between employee and administrator.

Increase motivation to perform effectively.

Better clarify and define job functions and responsibilities.

Clarify organizational goals so they can be more readily accepted.

Performance Appraisal Process

Prepare - prepare all materials, notes agreed tasks and records of performance,
achievements, incidents, reports etc - anything pertaining to performance and
achievement
Inform - ensure the appraisee is informed of a suitable time and place and clarify
purpose and type of appraisal
Venue - ensure a suitable venue is planned and available - private and free from
interruptions
Introduction - relax the appraisee - open with a positive statement, smile, be warm
and friendly
Review and measure - review the activities, tasks, objectives and achievements one
by one
Agree an action plan - An overall plan should be agreed with the appraisee, which
should take account of the job responsibilities, the appraisee's career aspirations, the
departmental and whole organization's priorities .
Agree necessary support - This is the support required for the appraisee to achieve
the objectives, and can include training and anything relevant and helpful that will
help the person develop towards the standard and agreed task.
Also consider training and development that relates to 'whole-person development'
outside of job skills. Developing the whole person in this way will bring benefits to
their role, and will increase motivation and loyalty.
Invite any other points or questions - make sure you capture any other concerns.
Close positively- Thank the appraisee for their contribution to the meeting and their
effort through the year, and commit to helping in any way you can.
Record main points, agreed actions and follow-up - Swiftly follow-up the meeting
with all necessary copies and confirmations, and ensure documents are filed and
copied to relevant departments.
Designing an appraisal program poses several questions, which need answers. They are:

1. Whose performance is to be assessed?

2. Who are the appraisers?
3. What should be evaluated?
4. When to appraise?
5. What problems are encountered?
6. How to solve the problems?
7. What methods of appraisal are to be used?
Discussion points in the appraisal:
1. Has the past year been good/bad/satisfactory or otherwise for you, and why?
2. What do you consider to be your most important achievements of the past year?
3. What do you like and dislike about working for this organization?
4. What elements of your job do you find most difficult?
5. What elements of your job interest you the most, and least?
6. What do you consider to be your most important tasks in the next year?
Benefits:
The following are the benefits of a successful appraisal system:
1. For the Organization:

Improved performance throughout the organization due to:

-

Effective communication of organizations objectives and values

Increased sense of cohesiveness and loyalty.
Managers are better equipped to use their leadership skills and to develop their staff.

Improved overview of tasks performed by each member of a group.

Identification of ideas for improvement.

Communication to people that they are valued.

2. For the Appraiser:

Opportunity to develop an overview of individual jobs.

Opportunity to identify strengths and weaknesses of appraisees.

Increased job satisfaction.

Opportunity to link team and individual objectives with department & organizational
objectives.

Opportunity to clarify expectations that the manager has from teams and individuals.

Opportunity to re-prioritize targets

Means of forming a more productive relationship with staff based on mutual trust and
understanding.

Due to all above Increased sense of personal value

3. For the Appraisee:

Increased motivation and job satisfaction.

Clear understanding of what is expected and what needs to be done to meet expectations.

Opportunity to discuss aspirations and any guidance, support or training needed to fulfill
these aspirations.

Improved working relationships with the superior.

Opportunity to overcome the weaknesses by way of counseling and guidance from the
superior

Performance appraisal drawbacks:

Performance appraisal program demands and depends too much on supervisors.

Sometimes certain standard ratings tend to vary widely and unfairly.
Some raters can be tough, and some lenient. Some departments have highly competent
people whereas others have less competent people.
Personal bias can replace organizational standards. Because of the bias, some non
competent employees may get a favored treatment.
Sometimes there tends to be lack of communication. The employees may not even know
they are being judged. No performance appraisal system can be effective if the appraised
do not know the criteria under which they have been appraised and judged.

Biases in Performance Appraisal

Types

Explanation

Example

Performance Appraisal Techniques:

Traditional Methods of Appraisals:

1. Ranking
In this, the superior ranks his/her subordinates in order of their merit, from best to worst.
- It is done in a competitive group.
- It is done by placing the appraisee on numerical scales I.e. 1st, 2nd, 3rd etc. in the total group.
- Ranking of an appraisee on his job performance/traits against that of another member.

2. Person-to-Person/Paired Comparison
Under this method the appraiser compares each employee with every other employee, one at a
time.
- Certain key performance areas/traits are developed. E.g.: Leadership, Creativity, Initiative etc.
- A scale for each factor is designed.
- A scale of people is also created for each factor.
- Each Appraisee is compared to every other person on the scale.
- Certain scores for each factor are awarded to the appraisee.

3. Grading
- Certain categories of traits/performance criteria, which are worth of appraising, are established.
E.g. cooperativeness, self-expression, dependability, job knowledge etc.
- The actual performance (Key performance area) of an employee is then compared to the
predetermined grade definitions.
- Appraisee is allotted with the grade, which describes his performance in the best possible
manner.
- Any grade that is selected should be well defined.
4. Graphic Scales
- A printed form, one for each person to be rated is used.

- The factors included in the form are Employee characteristics such as leadership,
cooperativeness, enthusiasm, loyalty etc. or Employee contribution which includes quantity and
quality of work, specific goals achieved, regularity of attendance, responsibility assumed etc.
- The traits can be evaluated on continuous scale the appraiser places a mark along a continuum
(range).

5. Checklist
- A series of questions are presented concerning an appraisees behavior.
- The appraiser has to reply to the questions in either negative or positive tone- (Yes/No).
- The value of each question may be weighted I.e. one can have predetermined scale and scoring
to those questions.

6. Essay
- A blank form is given to the appraiser.
- The form contains main heading such as employees characteristics, attitudes, job knowledge,
potential etc.
- The appraiser is asked to put in words his impressions about the employee..
- It gives specific information about the employee.

7. Confidential Reporting
- It is the most traditional way of appraising employees performance. The basic assumption here
is that since the superior is in direct contact he knows his subordinates better than any other and
hence his appraisal would be more appropriate.
- The superior writes a paragraph or so about his subordinates strengths, weaknesses,
intelligence, attitude to work, attendance, conduct and character, work efficiency, etc.

8. Critical Incident Method

- Initially a set of noteworthy (good or bad) on-the-job behavior is prepared. This is usually in
the form of incidents.

- These incidents are given to a group of experts who assign scale values depending upon the
degree of desirability for the job.
- This checklist is used by superiors for evaluating the employees.
- This method helps in identifying the key areas where the employees are weak or strong.
- It emphasizes rating on objective evidence and helps in counseling.

9. Forced Choice Technique

- In forced choice system the appraiser is forced to choose one from among a group of 4
statements that best fits the individual being rated and one which least fits him.
- Each statement is given a value or a score.
- The evaluator does not know the score value of statements; hence he cannot show any favor
towards the appraisee.
- The method of arranging the traits involves a long process from getting the description of
good or bad employees to establishing their validity and reliability.

Modern Methods of Appraisal:

1. Behaviorally Anchored Rating Scales:

Behaviorally Anchored Rating Scales (BARS) is a relatively new technique which

combines the graphic rating scale and critical incidents method. It consists of
predetermined critical areas of job performance or sets of behavioral statements
describing important job performance qualities as good or bad (for eg. the qualities like
inter-personal relationships, adaptability and reliability, job knowledge etc). In this
method, an employees actual job behaviour is judged against the desired behaviour by
recording and comparing the behaviour with BARS. Developing and practicing BARS
requires expert knowledge.
2. Human Resource Accounting Method
Human resources are valuable assets for every organization. Human resource accounting
method tries to find the relative worth of these assets in the terms of money. In this
method the performance of the employees is judged in terms of cost and contribution of
the employees. The cost of employees include all the expenses incurred on them like their
compensation, recruitment and selection costs, induction and training costs etc whereas
their contribution includes the total value added (in monetary terms). The difference
between the cost and the contribution will be the performance of the employees. Ideally,
the contribution of the employees should be greater than the cost incurred on them.
3. Assessment Centres
An assessment centre typically involves the use of methods like social/informal events,
tests and exercises, assignments being given to a group of employees to assess their
competencies to take higher responsibilities in the future. Generally, employees are given
an assignment similar to the job they would be expected to perform if promoted. The
trained evaluators observe and evaluate employees as they perform the assigned jobs and
are evaluated on job related characteristics.
The major competencies that are judged in assessment centres are interpersonal skills,
intellectual capability, planning and organizing capabilities, motivation, career orientation
etc. assessment centres are also an effective way to determine the training and
development needs of the targeted employees.

4. Management by Objectives
The concept of Management by Objectives (MBO) was first given by Peter Drucker in
1954.

Management by Objectives is basically a process whereby the superior and the

subordinate managers of an enterprise jointly identify its common goals, define each
individuals major areas of responsibility in terms of the results expected of him and use
these measures as guides for operating the unit and assessing the contribution of each of
its members. Management by Objectives is primarily to change the behaviour and
attitude towards getting an activity or assignment completed in a manner that it is
beneficial for the organization. Management by objectives is a result-oriented process,
wherein emphasis is on results and goals rather than a prescribed method. A number of
companies have had significant success in broadening individual responsibility and
involvement in work planning at the lowest organizational levels.
Management by Objectives is a process having following basic steps:
I.
II.
III.
IV.
V.

Set Organizational Goals

Joint Goal Setting
Performance Reviews
Set check posts
Feedback

5. 360 Feedback
The 360 Feedback process is called multi-source assessment, taps the collective
wisdom of those who work most closely with the employee, superiors, colleagues
(peers), direct reports and possibly internal and often external customers. The collective
intelligence these people provide on critical competencies or specific behaviours and
skills gives the employee a clear understanding of personal strengths and areas ripe for
development. Employees also view this performance information from multiple
perspectives as fair, accurate, credible, and motivating.
As the 360 Feedback process better serves the needs of employees, it serves the
changing needs of their organizations too. Organizations are reducing hierarchy by
removing layers of management and putting more emphasis on empowerment,
teamwork, continuous learning, individual development, and self-responsibility. The
360 Feedback Model aligns with these organizational goals to create opportunities for
personal and career development.
360 degree appraisal has four integral components:
1. Self appraisal
2. Superiors appraisal

3. Subordinates appraisal
4. Peer appraisal.

Electronic Appraisal System (eAPPRAISAL)

eAppraisal is a recently introduced method of performance appraisal that eliminates paper work.
eAppraisal simplifies and enhances the employee performance appraisal process. It provides an
organization with a powerful tool to help develop organizations critical talent all year round. It
is easier to conduct eAppraisals by automating the time-consuming process of administrating
employee performance reviews. It is flexible and can be customized to suit an organizations

needs. The comprehensive workflow makes it easy for human resource professionals to manage
the process by approving appraisal forms, monitoring the status and sending automatic email
notifications to managers.
I. Features:

intranet-based
Ease of use
Sophisticated workflow
Centralized
User customizable performance appraisal forms
Automated email notification and reminder notice
Comprehensive status and action view for HR manager
Competency-based text answers and/or range scale
Self-rating capabilities

II. Benefits:
Appraisals are processed more quickly and efficiently.
Appraisal data is received by concerned superior/manager in virtual real-time when
the appraisal is uploaded into eAppraisal system..
Appraisals cannot be misplaced or lost, as is possible with hardcopies. Appraisals can
be stored electronically and available online