Performance appraisal

1. PERFORMANCE
APPRAISAL
MANPREET SINGH
ASST. PROFESSOR
GNA BUSINESS SCHOOL

2. PERFORMANCE APPRAISAL
• Performance Appraisal is defined as a systematic process, in
which the personality and performance of an employee is
assessed by the supervisor or manager, against predefined
standards, such as knowledge of the job, quality and quantity
of output, leadership abilities, attitude towards work,
attendance, cooperation, judgment, versatility, health, initiative
and so forth.
• DEFINITION:
• According to Dale S. Beach, “Performance Appraisal is the
systematic evaluation of the individual with respect to his or
her performance on the job and their potential for the
development.

3. Features of PA
• 1. Systematic process of evaluation of an employee.
• 2. Analysis of the strengths and weaknesses of an
employee.
• 3. To find out how well an employee is performing the
job.
• 4. Performance Appraisal is done periodically.
• 5. It is based on a definite plan.
• 6. It focuses on employee development.

4. Purpose of PA
1. Evaluation
2. Provide continuous feedback
3. Measure performance accurately
4. Provide clarity of expectation and actual result
5. Identify area of weakness of employees
6. Determine training and developmental needs
7. Provide career path
8. Determine promotion of employees
9. Take corrective actions
10. Decide retention and termination of employees
11. Evaluate effectiveness of HRM functions
12. Decide salary and rewards
13. Reduce grievances

5. • Evaluation
• The major purpose of performance appraisal is to evaluate how well
employees have conducted their duty. Performance appraisal helps
to keep a record of each employee’s job performance, including
what efforts they have made and what have they achieved.
Evaluation differentiates employees on the basis of their job
performance, along with other factors like personality, behavior, etc.
• Provide continuous feedback
• It is essential for the employers to know what performance and
achievements have been made by their employees. But, it is also
equally important for an employee to know where they stand, where
they are going and how they are going to get there. Thus, giving
feedback to employees is also a major purpose of performance
appraisal.

6. • Measure performance accurately
• Every company has to set mutually acceptable criteria or
performance standards so that it could compare employee’s
performance with it. This helps in accurate measurement of
employee’s job performance which is necessary for the
company to know where it is heading towards.
• Provide clarity of expectation and actual result
• Every employee wants them to be told about their duties;
what the organization really wants them to do. However, this
is not enough to get good output from them.
• They should also be told how well they have done their duties
and how can they improve their performance. They should be
made clear about how near they are to do their expectation.

7. • Identify area of weakness of employees
• All employees may not be an all-rounder. Some employees may have weak
points as well, which if not sorted out in time, might be a liability for the
company. Performance appraisal helps in identifying such weak points.
• Determine training and developmental needs
• Only determining weak points is not enough. A company should also make
efforts to abolish them. A properly carried out performance appraisal is a
tool to determine what necessary steps are to be taken in order to help the
employees in improving their performance. The increment in skills and
knowledge develop an overall personality, attitude and behavior of the
employees.
• Provide career path
• Performance appraisal works as a mirror to employees and it clearly shows
what they are professionally and where they stand.
On the other hand, it helps the company in recognizing employees with
potential. Companies provide career development opportunities to such
employees and pave their way to a successful and stable career.

8. • Determine promotion of employees
• Performance appraisal helps in charting progress of employees.
Such charts can be used by the employers to determine whether or
not to promote their employees. They also help in identifying the
employees who most deserves to be promoted.
• Take corrective actions
• Performance appraisal distinguishes excellent and poor performing
employees. Results of performance appraisal help the employers in
taking corrective actions. Such actions may be counseling or
warning the poor performers to improve performance and to prevent
the occurrence of undesirable results.
• Decide retention and termination of employees
• Progress report of employees does not only help in determining
promotion but also in determining termination. Employees, with poor
reports, are at first consulted. But, if the supervisors don’t find any
growth, they will be forced to take severe action like termination.

9. • Evaluate effectiveness of HRM functions
• Recruitment, selection, employee training, rewarding, etc. are
some functions of human resource management whose
effectiveness can only be analyzed when the performance of
employees are appraised.
• Decide salary and rewards
• Performance appraisal of employees helps the supervisors in
knowing their job performance and the right amount to pay
them. The employees will receive wages as per the
contribution they have made. The impressive contributors are
also rewarded by the company as per the organization’s
policy.

10. • Reduce grievances
• Grievances may occur in the company when employees feel unfairly
treated or biased. For an instance, an employee might feel that his
co-worker is being paid more by the company even though both of
them are posted at the same job level. During such situation,
employers can use the reports of performance appraisal to clarify
the employees that they are being paid on the basis of their job
performance, rather than the position they hold.
• Keep communication lines open
• The complete process of performance appraisal includes continuous
feedback from the supervisors. This way, performance appraisal
works as a bridge of communication between the employers and
employees. Also, open communication helps in strengthening the
employer-employee relationship or superior-subordinate
relationship.

11. Process of PA
• 1. Analyzing the job
• 2. Establish Performance Standards:
• 3. Communicate Performance Expectations to
Employees:
• 4. Measure Actual Performance:
• 5. Compare Actual Performance with Standards:
• 6. Discuss the Appraisal with the Employee:
• 7. Initiate Corrective Action:

12. • 1. Analyzing the job: First step in the performance
appraisal is analyzing the job. Analysis of job contains
details about job, its duties, responsibilities, pay of the
job, qualification and skills required for the job etc.

13. Process of PA
• 2. Establish Performance Standards:
• The appraisal process begins with the establishment of performance standards.
The managers must determine what outputs, accomplishments and skills will be
evaluated. These standards should have evolved out of job analysis and job
descriptions.
• These performance standards should also be clear and objective to be
understood and measured. Standards should not be expressed in an articulated
or vague manner such as “a good job” or “a full day’s work” as these vague
phrases tells nothing.
• 3. Communicate Performance Expectations to Employees:
• Once the performance standards are established, this need to be
communicated to the respective employees so that they come to know what is
expected of them. Past experience indicates that not communicating standards
to the employees compounds the appraisal problem.
• Here, it must be noted that mere transference of information (relating to
performance standards, for example) from the manager to the employees is not
communication It becomes communication only when the transference of
information has taken place and has been received and understood by the
employees’.

14. • 4. Measure Actual Performance:
• This is the third step involved in the appraisal process. In this stage,
the actual performance of the employee is measured on the basis of
information available from various sources such as personal
observation, statistical reports, oral reports, and written reports.
• Needless to mention, the evaluator’s feelings should not influence
the performance measurement of the employee. Measurement must
be objective based on facts and findings. This is because what we
measure is more critical and important to the evaluation process
than how we measure.
• 5. Compare Actual Performance with Standards:
• In this stage, the actual performance is compared with the
predetermined standards. Such a comparison may reveal the
deviation between standard performance and actual performance
and will enable the evaluator to proceed to the fifth step in the
process, i.e., the discussion of the appraisal with the concerned
employees.

15. • 6. Discuss the Appraisal with the Employee:
• The fifth step in the appraisal process is to communicate to and discuss with the
employees the results of the appraisal. This is, in fact, one of the most
challenging tasks the manager’s face to present an accurate appraisal to the
employees and then make them accept the appraisal in a constructive manner.
• A discussion on appraisal enables employees to know their strengths and
weaknesses. This has, in turn, impact on their future performance. Yes, the
impact may be positive or negative depending upon how the appraisal is
presented and discussed with the employees.
• 7. Initiate Corrective Action:
• The final step in the appraisal process is the initiation of corrective action when it
is necessary. The areas needing improvement are identified and then, the
measures to correct or improve the performance are identified and initiated.
• The corrective action can be of two types. One is immediate and deals
predominantly with symptoms. This action is often called as “putting out fires.”
The other is basic and delves into causes of deviations and seeks to adjust the
difference permanently.

16. Methods of Performance Appraisal
Methods of
Performance Appraisal
Traditional Methods Modern Methods

17. Traditional Methods
• 1. Ranking Methods
•
(а) Straight Ranking Method:
•
(b) Paired Comparison Method:
•
(c) Forced Distribution Method:
•
2. Graphic Rating Scale Method:
•
3. Critical Incidents Methods:
•
4. Checklist Methods:
•
5. Essay Appraisal Method:
•
6. Field Review Method:
•

18. • 1. Ranking Methods:
• Ranking can be based on the followings:
• (а) Straight Ranking Method:
• This is one of the oldest and simplest techniques of performance
appraisal. In this method, the appraiser or evaluator ranks the
employees from the best to the poorest on the basis of their overall
performance. It is very useful for a comparative evaluation.
• (b) Paired Comparison Method:
• It is a better way of comparison than the straight ranking method. In this
method each employee is compared with all others on a one- to-one
basis, and then ranked.
• (c) Forced Distribution Method:
• It is a method of appraising employees on the basis of a predetermined
distribution scale. The evaluator is asked to rank 10% employees in the
best category, 20% in the next category, 40% in the middle category,
20% in before the low, and 10% in the lowest brackets

19. • 2. Graphic Rating Scale Method:
• In this method, an employee’s quality and quantity of work is assessed in a
graphic scale indicating different degrees of a particular trait, i.e., behavior
or characteristics as they relate to work performance.
• For example a trait like Job knowledge may be judged on the range of
average, above average, outstanding or unsatisfactory or on the basis of
numbers (1,2,3,4, 5, and so on). The list of factors to be appraised is
dependent upon the company requirements.
• 3. Critical Incidents Methods:
• In this method, the evaluator rates the employee on the basis of critical
events and how the employee behaved during those incidents. It includes
both negative and positive points. The negative point incident might be
damage to machinery because of not following safety measures.
• 4. Checklist Methods:
• The appraiser is given a checklist of several behaviours, traits, or job
characteristics of the employees on job. The checklist contains a list of
statements on the basis of which the evaluator describes the on the job
performance of the employees. If the rater believes that employee does
have a particular listed trait it is marked as positive check, otherwise the
item is left blank.

20. • 5. Essay Appraisal Method:
• It is also known as “Free Form Method”. It involves a description of the
performance in a number of broad performance criteria of an individual
employee by his superior based on the facts and often supported by
examples and evidences. A major drawback of the method is how to
keep the bias of the evaluator away.
• 6. Field Review Method:
• In this method, a representative of the HR department or a training
officer discusses and interviews the supervisors to evaluate and rate
their respective subordinates. This method is very time consuming
method. However, this method helps to reduce the superiors’ personal
bias.
• At this stage it would not be out of context to mention some of the
limitations associated with trait-based methods of performance
evaluation. First, the trait-based methods are based upon traits (like
integrity and consciousness) which may not be directly related to
successful job performance. An employee can change behaviour, but
not personality.

21. Modern Methods
1. Management by Objectives
2. 360 -Degree Feedback Appraisal Method
3. Assessment Centres
4. Human Resource Accounting Method
5. Balanced Score Card

22. • 1. Management by Objectives:
• The concept of ‘Management by Objectives’ (MBO) was given by
Peter F. Drucker in 1954. It can be expressed as a process whereby
the employees and the superiors come together to identify common
goals – the organizational goals as well as individual goals, the
standards to be taken as the criteria for measurement of their
performance and contribution and deciding the course of action to
be followed.

23. • 2. 360 -Degree Feedback Appraisal Method:
• 360-degree feedback, also known as ‘multi-rater feedback’, is the
most comprehensive appraisal where the feedback about the
employees’ performance comes from all the sources that come in
contact with the employee on his job.
• These sources include superiors, subordinates, peers, team
members, customers, and suppliers apart from the employee
himself (see Figure 18.10), who can provide feedback on the
employee’s job performance.

24. • 3. Assessment Centres:
• Assessment centres are a contribution of German
psychologists. The main feature of assessment centres
is that they process. Assessment Centres consist of
many multiples.
• Two assessment centers are
• 1. Cost center: to analyse cost on HR.
• 2. Profit center: to analyze profit from HR.

25. • 4. Human Resource Accounting Method:
• Human resources are valuable assets for every organization.
Human resource accounting method values the relative worth of
these assets in the terms of money. In this method the valuation of
the employees is calculated in terms of cost and contribution to the
employers.
• The cost of employees includes all the expenses incurred on them ,
viz., their compensation, recruitment and selection costs, induction
and training costs etc., whereas their contribution includes the total
value added (in monetary terms).
• 5. Balanced Score Card:
• It was developed by Robert Kaplan and David Norton in 1990s. The
purpose of balanced scorecard is to evaluate the organizational and
employee performance in performance appraisal management
processes. The conventional approach measures the performance
only on a few parameters like the action processes, results achieved
or the financial measures etc.

27. Problems or Issues with PA
1. Unclear standards
2. Leniency or Strictness Tenancy
3. Similarity Error
4. Compare/Contrast Error
5. Average Rating Problem
6. Bias of Appraiser
7. Influence of Man’s Job