HRM PROJECT

TOPIC: Performance Appraisal – The modern approach

Submitted by: Gurjot singh, MBA Finance, Sec-A, R.no: 27

MEANING: Performance appraisal is the step where the management finds out how
effective it has been at hiring and placing employees. A “Performance appraisal” is a process
of evaluating an employee’s performance of a job in terms of its requirements.

OBJECTIVES: Aims at measuring the efficiency, maintaining organizational control,

assessment of performance, mutual goals of the employees & the organization, work
satisfaction and to keep the employees involved in the organization.

ADVANTAGES:
Documentation: A PA provides a document of employee performance over a specific period
of time. it’s a piece of paper that can be placed in an employee file.
Structure: This process creates a structure where a manager can meet and discuss
performance with an employee. It forces the uncomfortable conversations that often need
to happen.
Feedback: Employees crave feedback and this process allows a manager the opportunity to
provide the employee with feedback about their performance and discuss how well
the employee goals were accomplished. It also provides an opportunity to discuss employee
development opportunities.
Clarify Expectations: Employees need to understand what is expected of them and the PA
process allows for a manager to clarify expectations and discuss issues with their employee.
Annual Planning: It provides a structure for thinking through and planning the upcoming
year and developing employee goals.
Motivation: The process should motivate employees by rewarding them with a merit
increase and as part of a comprehensive compensation strategy.
DISADVANTAGES:
Creates Negative Experience: If not done right, the performance appraisal can create a
negative experience for both the employee as well as the manager. Proper training on
process and techniques can help with this.
Time Consuming: Performance appraisals are very time consuming and can be
overwhelming to managers with many employees. I’ve known managers who were
responsible for doing an annual PA on hundreds of employees.
Natural Biases: Human assessment are subject to natural biases that result in rater errors.
Managers need to understand these biases to eliminate them from the process.
Waste of Time: The entire process can be a waste of time if not done appropriately. Think
about the time investment when the end result is negative. It is time wasted on all fronts.
Stressful Workplace: Performance appraisals can create stressful work environments for
both employees and managers. Proper training can help to reduce the stress involved in the
process.
Finally, performance appraisals are only as good as the performance management system
it operates within. Organizations that only do performance appraisals for the sake of doing
them are wasting their time.

THE NEED?
Some organizations do performance appraisals because they feel obligated to do them –
because everyone else does.
Other organizations do performance appraisals to make sure they have a piece of paper in
the employee’s file – in case they ever need to do corrective action.
But successful organizations understand the importance of incorporating performance
appraisals into their performance management process and strategy.
THE CASE STUDY ON PERFORMANCE APPRAISAL SYSTEM ADOPTED BY XEROX

Xerox corporation was faced with a problem-its performance appraisal system was not
working. Rather than motivating the employees its system was leaving them discouraged
and disgruntled. Xerox recognized this problem and developed a new system altogether.

OLD PERFORMANCE APPRAISAL SYSTEM

The original system used by Xerox encompassed seven main principles:
1. The appraisal occurred once a year.
2. It required employees to document their accomplishments.
3. The manager would assess these accomplishments in writing and assign numerical
ratings.
4. The appraisal included a summary written appraisal and a rating from
1(unsatisfactory)to 5(exceptional).
5. The ratings were on a forced distribution, controlled at the 3level or below.
6. Merit increases were tied to the summary rating level.
7. Merit increase information and performance appraisals occurred in one session.

This system resulted in inequitable ratings and was cited by employees as a major source of
dissatisfaction. Essentially, across-the-board raises were being given to all employees,
regardless of performance.

NEW PERFORMANCE APPRAISAL SYSTEM

Rather than attempting to fix the old appraisal system, Xerox formed a task force to create a
new system from scratch. The task force itself was made up of senior human resources
executives; however, members of the task force also consulted with councils of employees
and a council of middle managers. Together they created a new system, which differed form
the old one in many key respects:

1. The absence of a numerical rating system.

2. The presence of a half-year feedback session.
3. The provision for development planning.
4. Prohibition in the appraisal guidelines of the use of subjective assessments of
performance.
5. The new system has three stages, as opposed to the one-step process of the old
system. These stages are spread out over the course of the year.
 STAGE 1
The first stage occurs at the beginning of the year when the manager meets with
each employee. Together, they work out a written agreement on the employee's
goals, objectives, plans, and tasks for the year. Standards of satisfactory
performance are explicitly spelled out in measurable, attainable, and specific terms.

STAGE 2
The second stage is a mid-year, mandatory feedback and discussion session between
the manager and the employee. Progress toward objectives and performance
strengths and weaknesses are discussed, as well as possible means for improving
performance in the latter half of the year. Both the manager and the employee sign
an "objectives sheet" indicating that the meeting took place.
STAGE 3
The third stage in the appraisal process is the formal performance review, which
takes place at year's end. Both the manager and the employee prepare a written
document, stating how well the employee met the preset performance targets. They
then meet and discuss the performance of the employee, resolving any
discrepancies between the perceptions of the manager and the employee. This
meeting emphasizes feedback and improvement. Efforts are made to stress the
positive aspects of the employee's performance as well as the negative.

This stage also includes a developmental planning session in which training, education, or
development experiences that can help the employee are discussed. The merit increase
discussion takes place in a separate meeting from the performance appraisal, usually a
month or two later. The discussion usually centers on the specific reasons for the merit raise
amount, such as performance, relationship with peers, and position in salary range.This
allows the employee to better see the reasons behind the salary increase amount, as
opposed to the summary rank, which told the emplayee very little.

A follow-up survey was conducted the year after the implementation of the new appraisal
system. Results were as follows:
1. 81 percent better understood work group objectives
2. 84 percent considered the new appraisal fair
3. 72 percent said they understood how their merit raise was determined
4. 70 percent met their personal and work objectives
5. 77 percent considered the system a step in the right direction
ANALYSIS
So why were the results so satisfactory after the new system? The company used a
numerical system earlier and who in that position doesn’t like to add up numbers and rate
things. But the old approach lacked understanding of the needs and wants of the human
resources, a new modern approach was needed which has a mix of quantitative ratings and
grading methods as well as qualitative techniques for a long term resolution.
Xerox Corporation is an American global corporation that sells print and digital document
products and services in more than 160 countries. Having employed such a huge number of
employees, it was the duty of the management to fix the problems bringing down the
performance. Because any kind of problem has a huge impact on the overall results when
done on this large scale.
Analyzing the feedback results where 77% employees considered the new system a step in
right direction, we can say the management has been successful in pointing out the
problems. The new approach focused more on what the employees needed. Instead of
getting done with the things as fast as possible, the management introduced a 3 stage
process that made sense. Defining the targets, objectives and factors of a good performance
in the start of the year gave clarity to the employees about what was expected from them.
Then in the half yearly meeting they discuss with the manager about problems and
performance and at the end of the year evaluation is done.

HIGHLIGHTS:
1. Underperforming employees could be clearly pointed out and were not paid equal
bonuses or benefits in comparison
2. The merit increase process took place separately after the yearly evaluation was
completed. This gave time to employees to analyze their performance and decide
what more they wanted from the organization instead of rushing into things like the
old system.
3. Overall feedback showed a positive response.
4. Developmental planning session in which training, education, or development
experiences that can help the employee was introduced which gave more incentives
to the employees in the form of personal growth and helped the organization too by
providing it with a more efficient human resource.