1.

THE HISTORY OF PERFORMANCE APPRAISAL

The history of performance appraisal is quite brief. Its roots in the early 20th
century can be traced to Taylor's pioneering Time and Motion studies. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management. Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things historical, it might well lay claim to being the world's second oldest profession!. There is, says Dulewicz (1989), "... a basic human tendency to make judgments about those one is working with, as well as about oneself." Appraisal, it seems, is both inevitable and universal. In the absence of a carefully structured system of appraisal, people will tend to judge the work performance of others, including subordinates, naturally, informally and arbitrarily. The human inclination to judge can create serious motivational, ethical and legal problems in the workplace. Without a structured appraisal system, there is little chance of ensuring that the judgments made will be lawful, fair, defensible and accurate. Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified. The process was firmly linked to material outcomes. If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order. Little consideration, if any, was given to the developmental possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well. Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed. For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance. These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not the only element that had an impact on employee performance. It was found that other issues, such as morale and self-esteem, could also have a major influence. As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 1950s in the United States, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time. Modern Appraisal Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development. In many organizations - but not all - appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of

available merit pay increases, bonuses, and promotions. By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay. (Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay.) Whether this is an appropriate use of performance appraisal - the assignment and justification of rewards and penalties - is a very uncertain and contentious matter.

2. PURPOSE OF PERFORMANCE APPRAISAL

Performance appraisal serves a number of purposes, which include: 2.1. Feedback - This provides a structured format for the discussion of performance issues on a regular basis. Feedback either reinforces performance strengths, or provides the opportunity to discuss resolution of performance deficiencies. As well, feedback is encouraged in both directions: as such, employees are encouraged to prepare ratings of their supervisors. 2.2. Career Development - This provides an opportunity for discussion of career objectives, and creation of a strategy designed to maximize career potential. 2.3. Performance History - This provides a performance history which is not dependent upon human memory, and which may be useful in the full range of personnel decisions, including compensation decision-making. 2.4. Organizational Goals - This provides an opportunity to view one's performance in the context of broader organizational goals. 2.5. Job Standards - This provides an opportunity for clearer articulation and definition of performance expectations.

3. CONDUCTING THE PERFORMANCE APPRAISAL

Your completion of the performance appraisal process is one of the most important of your supervisory/managerial duties. In order to make this process as useful as possible, the following guidelines have been developed. 3.1. Review Purposes of Performance Appraisal handout. 3.2. Review employee file and other pertinent background information, including job description, pre-agreed objectives, status reports, etc. 3.3. Review Performance Appraisal Pitfalls handout.

3.4. Review Factor Definitions: Performance Appraisal handout. 3.5. If you have more than one employee to appraise, then rate each factor on all employees before going on to the next factor. This will aid in minimizing some of the typical rater tendencies. If you have only one employee, rate each factor. As you are rating, focus on typical performance over the entire rating period, and consult the factor definitions to refine your thinking. 3.6. For each factor, comment by use of examples which support the rating criteria chosen. Resist the common tendency to use the rating factor itself and an adjective (i.e. "very good work quality"). 3.7. Use the commentary section on page three to summarize areas of employee strength. 3.8. Use the second commentary section to summarize areas that need improvement. 3.9. Outline the particular steps that must be taken in order to improve areas that are deficient. Consider very carefully, and note, what you can do to assist in improvement of performance (for example: better assignment definition, upgrading of tools or equipment, more time allocation, support of additional training, etc.) 3.10. Note any additional comments that you have which you feel are necessary. 3.11. Discuss the performance appraisal with your supervisor. This is intended to serve as an opportunity for input from a different supervisory/managerial vantage point. Resolve differences, if any, through this discussion process. 3.12. Sign and give to the employee, and set up an appointment to discuss. 3.13. One optional exercise that many find to be valuable is to have both the supervisor and the employee, separately and simultaneously, complete the employee appraisal. This would be followed by exchange of the appraisals, and discussion of differences. The employee should be given both. 3.14. If you have any questions or concerns about process, techniques, definitions, etc., please discuss with your supervisor and/or the Human Resources Director, as appropriate.

4. CONDUCTING THE APPRAISAL INTERVIEW

I. PURPOSE

There are multiple purposes that are served by the Performance Appraisal Interview: A) To inform the employee of his/her overall performance rating, and of the criteria used in determining the rating; B) To clarify misunderstandings about the job and about what is expected of the employee; C) To provide a framework for discussion of employee strengths and how they may be built upon; and weaknesses and how they may be corrected; D) To build a stronger relationship between the employee and supervisor; E) To provide one source of information for compensation decision-making. II. PREPARATION If improperly conducted, the appraisal interview may result in more harm than good. Prior to conducting the appraisal interview, consider the following elements of a successful performance appraisal interview: A) Share with the employee a copy of the performance appraisal form, and schedule a time within 24 hours to discuss it. This will allow the employee an opportunity to reflect on issues that, in his/her opinion, require discussion; B) Select a time and place where you will have sufficient time for thorough discussion, and minimal opportunity for interruption, and maximal privacy; C) Review pertinent background information, which may include personnel records, job description, preagreed objectives, status reports, etc.; D) Review the performance criteria, and reasons for each of the ratings. Prepare to discuss the reasons, and suggestions for improvements; E) Anticipate the employee's likely reaction, and consider yours; F) Be sure that you are in a good frame of mind. If you are angry, upset, or otherwise unable to commit yourself fully and positively to the discussion, reschedule the appointment.

III. CONDUCTING THE INTERVIEW

There is no one ideal way to handle an appraisal interview. Techniques may vary according to the supervisor's assessment of the situation. However, the following are useful, and I think, common sense guidelines. A) Your opening remarks frequently will set the tone for the entire interview: construct your opening remarks to create a friendly, constructive atmosphere. Put the employee at ease and establish rapport; B) Explain the purpose of the interview and how the employee was appraised. The employee should have a clear understanding of the criteria used in determining the rating; C) Address the positive areas of your performance assessment, and express your appreciation for those positive areas, noting particular examples which are supportive of your assessment; D) Address the performance criteria where improvement is needed. Cite examples that illustrate your reasons for your assessment. Ask the employee for suggestions on how performance may be improved. Discuss your ideas similarly and come to agreement on what each of you will do; E) Accept responsibility for those areas in need of improvement where you may not have clearly established expectations, or provided sufficient support; F) In discussing ratings, stick to facts, not broad generalizations; G) Ask questions, and listen closely. Allow the employee to express reactions to the evaluation. Listening carefully may uncover underlying reasons for the performance deficiency; H) Don't interrupt, but do not allow irrelevant topics to dominate discussion; I) Keep the interview focused on the job. Avoid discussing personality shortcomings unless they are directly related to performance deficiency; J) Maintain objectivity. Do not allow yourself to display anger or hostility, despite what the employee may say. If the employee is angry, listen well. K) Distinguish between the person and the performance behaviors that may be deficient. You can assist the employee to maintain a sense of self-respect and self-worth by assuring that criticisms are phrased as positively as may be realistic, and assuring the employee that it is not her/he that is deficient, but his/her performance; L) You may mutually decide with an employee that your independent preparation of performance appraisal is a useful technique for sharing perspectives on the

employee's performance. If so, allow the employee at least a week to do so, and compare notes during the appraisal interview; M) If the employee convinces you that a rating was made without full consideration of the context of his/her performance, make the necessary changes. It is important that this be done where it is equitable to do so, in order that the process maintains credibility; N) Encourage the employee to make written comments; O) Summarize discussion and plans for improvement. If appropriate, develop a set of goals and objectives; P) Schedule a follow-up interview, if necessary; Q) Conclude the interview of a friendly and constructive note. IV. POST -- INTERVIEW ASSESSMENT After concluding the appraisal interview, review the items below to determine how successful the interview was, and ways that you may improve your next one. ! Does the employee have a clear view of his/her performance assessment? ! Does the employee understand the reasons for areas cited as in need of improvement? ! Did you fairly communicate both positive and less than positive performance areas? ! Does the employee understand what he/she needs to do to improve performance? ! Did you spend more than 50% of the time talking? If so, you may want to consider developing a better technique to involve the employee. ! Do both you and the employee have an understanding of what follow-up will occur? ! Did both you and the employee have a productive and positive interchange? ! Note the things that you could have done differently to make the interview more successful. Recall as well that performance appraisal is far easier and more effective when feedback is given on a day-to-daybasis, commit to more frequently praising, criticizing, and giving and soliciting feedback for the next review period.

5. PERFORMANCE APPRAISAL PITFALLS

There are a number of tendencies that have been observed among those who conduct performance appraisals. By being aware of these tendencies, we are more capable of avoiding these pitfalls. PITFALLS 6.1. The Halo Effect Tendency to allow ratings on one factor to unduly affect ratings of other factors. SUGGESTIONS Rate factors individually, considering work characteristics that are reflective of each factor. If doing more than one employee appraisal, rate all employees on each factor, one factor at a time. 6.2. Cluster Tendency Tendency to regard everybody being rated as "Outstanding", "Fully Satisfactory" or "Marginally Satisfactory". This is basically the "tough rater" or "easy rater" phenomenon. 6.3. The Isolated Incident Tendency to see one incident, particularly if recent, as reflective of the whole rating period. Recognize that most work groups have people with differing ranges of knowledge, skill, ability and effectiveness, and that failing to make proper distinctions rewards the lower level performers. Consider the whole rating period. Think about a number of occasions that are reflective of the performance, and assign the rating that is typical of the whole rating period. 6.4. Central Tendency Tendency to rate in the middle: may reflect unwillingness to be candid. This is a "safe" rating technique that serves nobody's interests. 6.5. Length of Service Tendency to award higher ratings to employees with longer service, on the assumption that greater experience and training equates to higher performance. Consider that some people may never achieve top ratings, no matter how long they are in service. Be prepared to recognize superior performance among employees with letter duration of service. 6.6. Rating the Job Tendency to assign higher performance ratings to persons whose jobs are higher in the organization's hierarchy. Rate the employee's performance, and not the job.

7. PERFORMANCE APPRAISAL TECHNIQUES

the most commonly used appraisal techniques include: Essay appraisal. Graphic rating scale. Field review. Forced-choice rating. Critical incident appraisal. Management-by-objectives approach. Work-standards approach. Ranking methods. Assessment centers. Using the Appraisal Form Behaviorally anchored rating scales (BARS).

7.1. Essay appraisal In its simplest form, this technique asks the rater to write a paragraph or more covering an individual's strengths, weaknesses, potential, and so on. In most selection situations, particularly those involving professional, sales, or managerial positions, essay appraisals from former employers, teachers, or associates carry significant weight. The assumption seems to be that an honest and informed statement -either by word of mouth or in writing- from someone who knows a man well, is fully as valid as more formal and more complicated methods. The biggest drawback to essay appraisals is their variability in length and content. Moreover, since different essays touch on different aspects of a man's performance or personal qualifications, essay ratings are difficult to combine or compare. For comparability, some type of more formal method, like the graphic rating scale, is desirable.

7.2. Graphic rating scale This technique may not yield the depth of an essay appraisal, but it is more consistent and reliable. Typically, a graphic scale assesses a person on the quality and quantity of his work (is he outstanding, above average, average, or unsatisfactory?) and on a variety of other factors that vary with the job but usually include personal traits like reliability and cooperation. It may also include specific performance items like oral and written communication. The graphic scale has come under frequent attack, but remains the most widely used rating method. In a classic comparison between the "old-fashioned" graphic scale and the much more sophisticated forced-choice technique, the former proved to be fully as valid 8

as the best of the forced-choice forms, and better than most of them. It is also cheaper to develop and more acceptable to raters than the forced-choice form. For many purposes there is no need to use anything more complicated than a graphic scale supplemented by a few essay questions.

7.3. Field review When there is reason to suspect rater bias, when some raters appear to be using higher standards than others, or when comparability of ratings is essential, essay or graphic ratings are often combined with a systematic review process. The field review is one of several techniques for doing this. A member of the personnel or central administrative staff meets with small groups of raters from each supervisory unit and goes over each employee's rating with them to (a) Identify areas of inter-rater disagreement, (b) Help the group arrive at a consensus, and (c) Determine that each rater conceives the standards similarly. This group-judgment technique tends to be fairer and more valid than individual ratings and permits the central staff to develop an awareness of the varying degrees of leniency or severity -as well as bias- exhibited by raters in different departments. On the negative side, the process is very time consuming.

7.4. Forced-choice rating Like the field review, this technique was developed to reduce bias and establish objective standards of comparison between individuals, but it does not involve the intervention of a third party. Although there are many variations of this method, the most common one asks raters to choose from among groups of statements those which best fit the individual being rated and those which least fit him. The statements are then weighted or scored, very much the way a psychological test is scored. People with high scores are, by definition, the better employees; those with low scores are the poorer ones. Since the rater does not know what the scoring weights for each statement are, in theory at least, he cannot play favorites. He simply describes his people, and someone in the personnel department applies the scoring weights to determine who gets the best rating. The rationale behind this technique is difficult to fault. It is the same rationale used in developing selection test batteries. In practice, however, the forcedchoice method tends to irritate raters, who feel they are not being trusted. They want to say openly how they rate someone and not be second-guessed or tricked into making "honest" appraisals.

A few clever raters have even found ways to beat the system. When they want to give average employee Harry Smith a high rating, they simply describe the best employee they know. If the best employee is Elliott Jones, they describe Jones on Smith's forced-choice form. Thus, Smith gets a good rating and hopefully a raise. An additional drawback is the difficulty and cost of developing forms. Consequently, the technique is usually limited to middle- and lower-management levels where the jobs are sufficiently similar to make standard or common forms feasible. Finally, forced-choice forms tend to be of little value- and probably have a negative effect- when used in performance appraisal interviews.

7.5. Critical incident appraisal The discussion of ratings with employees has, in many companies, proved to be a traumatic experience for supervisors. Some have learned from bitter experience what General Electric later documented; people who receive honest but negative feedback are typically not motivated to do better - and often do worse - after the appraisal interview. Consequently, supervisors tend to avoid such interviews, or if forced to hold them, avoid giving negative ratings when the ratings have to be shown to the employee. One stumbling block has no doubt been the unsatisfactory rating form used. Typically, these are graphic scales that often include rather vague traits like initiative, cooperativeness, reliability, and even personality. Discussing these with an employee can be difficult. The critical incident technique looks like a natural to some people for performance review interviews, because it gives a supervisor actual, factual incidents to discuss with an employee. Supervisors are asked to keep a record, a "little black book," on each employee and to record actual incidents of positive or negative behavior.

7.6. Management by objectives To avoid, or to deal with, the feeling that they are being judged by unfairly high standards, employees in some organizations are being asked to set - or help set - their own performance goals. Within the past five or six years, MBO has become something of a fad and is so familiar to most managers that I will not dwell on it here. It should be noted, however, that when MBO is applied at lower organizational levels, employees do not always want to be involved in their own goal setting. As a result, more coercive variations of MBO are becoming increasingly common, and some critics see MBO drifting into a kind of manipulative form of management in which pseudo-participation substitutes for the real thing. Employees are consulted, but management ends up imposing its standards and its objectives. Some organizations, therefore, are introducing a work-standards

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approach to goal setting in which the goals are openly set by management. In fact, there appears to be something of a vogue in the setting of such work standards in white-collar and service areas.

7.7. Work-standards approach Instead of asking employees to set their own performance goals, many organizations set measured daily work standards. In short, the work standards technique establishes work and staffing targets aimed at improving productivity. When realistically used, it can make possible an objective and accurate appraisal of the work of employees and supervisors. To be effective, the standards must be visible and fair. Hence a good deal of time is spent observing employees on the job, simplifying and improving the job where possible, and attempting to arrive at realistic output standards. It is not clear, in every case, that work standards have been integrated with an organization's performance appraisal program. However, since the workstandards program provides each employee with a more or less complete set of his job duties, it would seem only natural that supervisors will eventually relate performance appraisal and interview comments to these duties. I would expect this to happen increasingly where work standards exist. The use of work standards should make performance interviews less threatening than the use of personal, more subjective standards alone. The most serious drawback appears to be the problem of comparability. If people are evaluated on different standards, how can the ratings be brought together for comparison purposes when decisions have to be made on promotions or on salary increases? For these purposes some form of ranking is necessary.

7.8. Ranking methods For comparative purposes, particularly when it is necessary to compare people who work for different supervisors, individual statements, ratings, or appraisal forms are not particularly useful. Instead, it is necessary to recognize that comparisons involve an overall subjective judgment to which a host of additional facts and impressions must somehow be added. There is no single form or way to do this. Comparing people in different units for the purpose of, say, choosing a service supervisor or determining the relative size of salary increases for different supervisors, requires subjective judgment, not statistics. The best approach

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appears to be a ranking technique involving pooled judgment. The two most effective methods are alternation ranking and paired comparison ranking. Alternation ranking: In this method, the names of employees are listed on the lefthand side of a sheet of paper - preferably in random order. If the rankings are for salary purposes, a supervisor is asked to choose the "most valuable" employee on the list, cross his name off, and put it at the top of the column on the righthand side of the sheet. Next, he selects the "least valuable" employee on the list, crosses his name off, and puts it at the bottom of the right-hand column. The ranker then selects the "most valuable" person from the remaining list, crosses his name off and enters it below the top name on the right-hand list, and so on. Paired-comparison ranking: This technique is probably just as accurate as alternation ranking and might be more so. But with large numbers of employees it becomes extremely time consuming and cumbersome. Both ranking techniques, particularly when combined with multiple rankings (i.e., when two or more people are asked to make independent rankings of the same work group and their lists are averaged), are among the best available for generating valid order-of-merit rankings for salary administration purposes.

7.9. Assessment centers So far, we have been talking about assessing past performance. What about the assessment of future performance or potential? In any placement decision and even more so in promotion decisions, some prediction of future performance is necessary. How can this kind of prediction be made most validly and most fairly? One widely used rule of thumb is that "what a man has done is the best predictor of what he will do in the future." But suppose you are picking a man to be a supervisor and this person has never held supervisory responsibility? Or suppose you are selecting a man for a job from among a group of candidates, none of whom has done the job or one like it? In these situations, many organizations use assessment centers to predict future performance more accurately. Typically, individuals from different departments are brought together to spend two or three days working on individual and group assignments similar to the ones they will be handling if they are promoted. The pooled judgment of observers - sometimes derived by paired comparison or alternation ranking leads to an order-of-merit ranking for each participant. Less structured, subjective judgments are also made.

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7.10. Using the Appraisal Form There are several ways to use the appraisal form during the interview. Asking the worker to complete the form before the interview is most effective if you think the person is really interested in self-evaluation and self-improvement. It assures participation by the worker in the evaluation process and sets a positive tone for the interview if the worker is a harsher judge than the interviewer. Then, the supervisor's comments can be mostly positive and supportive. On the other hand, if the supervisor anticipates an inflated self-evaluation from the worker, asking the worker to complete the form beforehand may not be a good idea. The supervisor and the employee can complete the form together during the interview, if the supervisor thinks that the worker is truly interested in selfimprovement and has enough confidence to make valid evaluations. This can reduce uncertainty about acceptance of the supervisor's written evaluation. However, this would not be a very natural approach with a timid, indifferent, or hostile worker. The supervisor can allow the appraised employee to review the completed form beforehand. In order to assure employee participation in the interview, it may be useful to provide a copy of the completed appraisal form a few days prior to the interview. This gives the employee an opportunity to reflect and comment on the evaluation, facilitating the conversation. It might be wise to limit the use of the form during the interview. The report card aspect of a checklist form may not be appropriate for structuring an interview with a mature employee, who has been with the organization for a long time. The form can be used as a guide with which to summarize a general conversation about performance, but the employee should still get a copy of the completed form, to generate comments and questions. The supervisor should be willing to make changes on the form during or after the interview. The supervisor can complete the appraisal form in pencil before the interview and indicate a willingness at the beginning of the interview to make agreed-upon changes. In cases of strong disagreement, the supervisor can offer to record both sides of a discussion. If the form is completed before the interview, each item on it can be discussed individually. After introductory comments to put the worker at ease, the supervisor can hand a copy of the form to the worker, allowing time to read all of it. Then the discussion can begin. If concern is shown about a particular point, the supervisor should discuss it thoroughly, reaching an understanding on the item before moving on.

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7.11. Behaviorally anchored rating scales It combines the benefits of narratives, critical incidents, and quantified (graphic rating scales) by anchoring a rating scales, by anchoring a rating scale with a specific behavioral examples of good and poor performance. Developing a BARS requires five steps 1) Generate critical incidents2) Generate performance dimensions. 3) Reallocate incidents. 4) Scale the incidents. 5) Develop a final instrument. However, any of the above-discussed methods can be apply for performance appraisal, but care should be taken to avoid the following problems. o Guarding Against Bias Although it is impossible to eliminate bias during appraisal interviews, supervisors should do their best to recognize the most common biases and take them into account before the interviews. The "halo effect" occurs if all "excellent" ratings in one area cast a glow over other areas that could use constructive criticism. The "horn effect" is just the opposite--a low rating in one area contaminates areas that deserve to be judged more positively. Many supervisors have a tendency to give too many average ratings to avoid having to justify very positive or very negative judgments. Supervisors also have a tendency to judge according to their personal styles of management. A strict supervisor may make overly harsh judgments, and a lenient supervisor may use very loose standards simply in order to avoid disagreements. Pick the right time for your interview--not on a day when you or the person being evaluated are not in good humor. Also, be sure to allow sufficient time for the interview--an hour is usual. The end of the day generally allows for greater flexibility of time. Privacy is absolutely essential. The interviewer must arrange for a private office and plan not to take phone calls. The interviewer should try to put the appraised worker at ease. For example, you might offer coffee if that is customarily done in the office. If the supervisor feels uncomfortable about conducting an interview, admitting this up front may help reduce tension and make the supervisor seem more approachable and less like a judge in courtroom.

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2. Disagreement Over What Is Said

To avoid misunderstandings, the supervisor should ask the appraised employee to summarize the conversation after it is completed. All agreements and differences (that cannot be resolved) should be clarified. If changes are made in the appraisal, they should be read by both the supervisor and the employee to ensure that both of them understand what the revisions imply. These frequently voiced goals of performance appraisal programs underscore the importance of such programs to any ongoing business organization:

Help or prod supervisors to observe their subordinates more closely and to do a better coaching job. Motivate employees by providing feedback on how they are doing. Provide back-up data for management decisions concerning merit increases, transfers, dismissals, and so on. Improve organization development by identifying people with promotion potential and pin-pointing development needs.

Some common pitfalls Obstacles to the success of formal performance appraisal programs should be familiar to most managers, either from painful personal experience or from the growing body of critical literature. Here are the most troublesome and frequently cited drawbacks: Performance appraisal programs demand too much from supervisors. Formal performance appraisals obviously require at least periodic supervisor observation of subordinates' performance. However, the typical first-line supervisor can hardly know, in a very adequate way, just what each of 20, 30, or more subordinates is doing. Standards and ratings tend to vary widely and, often, unfairly. Some raters are tough, others are lenient. Some departments have highly competent people; others have less competent people. Consequently, employees subject to less competition or lenient ratings can receive higher appraisals than equally competent or superior associates. Personal values and bias can replace organizational standards. An appraiser may not lack standards, but the standards he uses are sometimes the wrong ones. For example, unfairly low ratings may be given to valued subordinates so they will not be promoted out of the rater's department. More often, however, outright bias dictates favored treatment for some employees. Because of lack of communication, employees may not know how they are rated. The standards by which employees think they are being judged are sometimes different from those their superiors actually use. No performance appraisal system can be very effective for management decisions, organization development, or any other purpose until the

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people being appraised know what is expected of them and by what criteria they are being judged. Appraisal techniques tend to be used as performance panaceas. If a worker lacks the basic ability or has not been given the necessary training for his job, it is neither reasonable to try to stimulate adequate performance through performance appraisals, nor fair to base salary, dismissal, or other negative decisions on such an appraisal. No appraisal program can substitute for sound selection, placement, and training programs. Poor performance represents someone else's failure. In many cases, the validity of ratings is reduced by supervisory resistance to making the ratings. Rather than confront their less effective subordinates with negative ratings, negative feedback in appraisal interviews, and below-average salary increases, supervisors often take the more comfortable way out and give average or above-average ratings to inferior performers. Performance appraisal ratings can boomerang when communicated to employees. Negative feedback (i.e., criticism) not only fails to motivate the typical employee, but also can cause him to perform worse. Only those employees who have a high degree of self-esteem appear to be stimulated by criticism to improve their performance.

Performance appraisals interfere with the more constructive coaching relationship that should exist between a superior and his subordinates. Performance appraisal interviews tend to emphasize the superior position of the supervisor by placing him in the role of judge, thus countering his equally important role of teacher and coach. This is particularly damaging in organizations that are attempting to maintain a more participative organizational climate.

8. 360-DEGREE PERFORMANCE APPRAISAL SYSTEMS

INTRODUCTION A 360-degree performance appraisal system is a multi-source assessment approach that taps the collective wisdom of those who work closely with an employee. The employee and their supervisors, colleagues, direct reports (subordinates), internal customers, external customers, and others may be part of the evaluation process. Proponents of the 360-degree feedback approach offer it as a progressive means of conducting performance appraisal. Many contend that 360-degree feedback systems and other forms of multi-source or multi-rater assessment methods in organizations have evolved from an innovative nice-to-have technique administered only to the most senior levels to a must-have tool for integration into overall performance and human resource management strategies. These systems appear well suited for the flexible, teambased, change-oriented organizational cultures of many organizations today.

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360-degree systems are gaining popularity because they tend to reduce the problems of previous generations of assessment methods. 360-degree appraisal moves the manager (as appraiser) back into the comfort zone as she or he is now only one among a number of assessors. It greatly reduces the problems of central tendency, positive skewness, and halo effects in ratings that plague the boss-subordinate approach. 360-degree appraisal reduces defensiveness on the part of the appraisee because there are a variety of assessors, feedback is presented as more balanced, and it is said to have greater face validity. It requires organizations to resolve the issue of what is meant by job effectiveness and what behaviors are causally related to it. It recognizes that subordinates are best placed to assess leadership or people management skills. The technique is helpful in defending legal challenges of the outcome of appraisals, it is presented as important in meeting the demands for employee empowerment and involvement, and finally, it is a useful tool in tapping employee opinions and attitudes. HISTORY OF MULTI-SOURCE FEEDBACK AND 360-DEGREE APPRAISAL One fact regarding 360-degree performance appraisal seems clear; the practice is not new. Contemporary 360-degree methods have roots as early as the 1940s, however, there is some disagreement regarding the exact genesis of the technique. For example, Fleenor and Prince argue that World War II German military assessment centers first recognized the value of measuring performance from multiple perspectives (1). By contrast, Edwards and Ewen contend that the assessment center was developed by British military intelligence in the early 1940s, and was the forerunner to multi-source assessments (2). Despite these disagreements, one point that most scholars can agree on is 360-degree performance appraisal has historical roots within a military context. During the 1950s and 1960s this trend continued in the United States within the Military service academies. At the United States Naval Academy at Annapolis, the midshipmen used a multi-source process called peer grease to evaluate the leadership skills of their classmates. The peer grease process, which is still used today, has a significant impact on class standing and post-graduate assignments. In the corporate world during the 1960s and 1970s, multi-source systems were used in job evaluation committees, hiring and internal selection panels (including executive selection), promotion boards, and talent selection. Organizations like Bank of America, United Airlines, Bell Labs, Disney, Federal Express, Nestle, and RCA experimented with multi-source feedback in a variety of measurement situations. Despite the fact that multi-source feedback systems had been used for several decades, the use of 360-degree instruments for individual performance assessment was rare prior to the 1980s. In previous decades, performance appraisals were typically conducted in a top-down, supervisor-driven framework that was consistent with the hierarchical structure of most organizations. In the mid-1980s, organizations like duPont, Fidelity Bank, Arizona State University,

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and Monsanto began experimenting with multi-source assessment for development and appraisal. However, 360-degree appraisal did not replace supervisory decisions regarding performance measurement. At most, they were used as an aid in the performance measurement process. But things have changed. Since the early 1990s, 360-degree appraisal techniques have gained a wide base of acceptance, and the idea has emerged that 360-degree feedback can be useful for performance appraisal and decision-making purposes. THE PROCESS 360-degree performance appraisal is employed to determine performance evaluation and/or to facilitate employee development. The specific design and implementation procedures are usually guided by the organizations goals. Within 360-degree systems, employees assess themselves, and in turn are evaluated by a number of pertinent stakeholders. Typically, the person to be assessed reports who he or she works with directly. This list would include subordinates, peers and superiors, and may include customers/clients and suppliers . Figure 1 360-degree Performance Appraisal Coworker s

The Individua l Employee

External Customer s

Internal Customer s

The Individua l Employee

Superviso r

Direct Reports Others

SkipLevel Reports

________________________________________________________________ ________ Source: Edwards and Ewen (1996).

18

The supervisor responsible for the evaluation compiles a list of individuals based upon this information and upon her or his own knowledge of the employees work responsibilities. The supervisor may also approach others for suggestions concerning who to contact. Ideally, the supervisor and all those who work directly with the employee rate the employee along a number of predetermined criteria (e.g., employee aptitude, task expectations, interpersonal skills, leadership skills). Usually these criteria are considered in light of specific workplace behavior rather than on more abstract traits. In addition, the employee rates his or herself according to the same standardized criteria. Sometimes raters provide information anonymously. Sometimes this rating is done with the aid of five- or seven-point Likert-type scales, sometimes it is done with narratives, and sometimes with both. Ratings are then analyzed in terms of relative rank (especially extreme rankings) and disparities in ratings. Extremely low scores, and disparities between raters, are used to identify areas to be addressed by the employee. Of particular note are great disparities between employee self-ratings and those of others. After analysis, the ratings are presented to the employee. Typically the supervisor and employee discuss the ratings, consider differences in ratings, decide upon goals to be pursued, and develop an action plan to help the employee meet her or his goals. The action plan may entail participating in professional development programs such as workshops and training programs, it may entail personal reflection and intentional behavior modification, or it may entail a combination of the two. POSSIBLE PROBLEMS WITH 360-DEGREE SYSTEMS Despite the many benefits of utilizing a 360-degree approach, several authors have cautioned that like many other performance appraisal systems, 360-degree methodology is not without its problems. Boyd and Kyle proposed that 360degree systems need to be designed and implemented by employees instead of controlled by management (3). An employee controlled process would reduce a number of psychological contract violations, increase organizational justice, and facilitate a democratic ethos in the workplace. Barnes pointed out that there is a potential for problems with subordinate assessments where employees desire to get the boss or may alternatively scratch the back of a manager for expected future favors (4). Also, the additional time and cost might be an administrative burden. Moreover, Antonioni raises other concerns (5). He proposed that some organizations may be jumping into implementing 360-degree appraisals without clearly defining the mission and scope of the appraisals. To prevent potential pitfalls of the system, the organization must be prepared to design a 360-degree appraisal process that supports specific missions and goals that are central to the organization. Perhaps most importantly, organization members must decide if the 360-degree approach is to be used for employee development or assessment (or both). In addition to these concerns, Edwards and Ewen note a series of common pitfalls with 360-degree methods (2). The number one reason

19

they fail is that organizations attempt to assimilate the 360-degree method within a traditional survey research scheme. In traditional survey research, investigators attempt to maximize data collection with as many items/questions as possible and with large sample sizes. In the case of 360-degree appraisal, creating measurement instruments with many items will substantially increase nonresponse errors. In addition, large sample sizes are not typically possible considering that perhaps 8 or 9 sources will rate an employees performance. As such, statistical procedures that rely on large sample sizes in order to ensure statistical validity might not be appropriate. For example, if only 8 or 9 ratings are used, a simple calculation like the mean (average) might contain measurement error. In addition, organizations must consider other issues like safeguarding the process from unintentional respondent rating errors, communicating to and training organizational members on design, implementation, and evaluation of the system, and culture shock that occurs with any system that creates change. In short, 360-degree systems need to be designed and implemented with a great deal of thought. 360-DEGREE SYSTEMS IN THE PUBLIC SECTOR & ITS FUTURE IN THE FIELD It appears that over 90% of Fortune 1000 firms use multi-source feedback systems for employee development or evaluation, yet its use in the public sector seems to be much more limited (6) (7). It is difficult to assess the actual use of 360-degree performance appraisal systems in the public sector given the paucity of empirical reporting on the topic, however, a 2002 study by Glendinning indicates that 360-degree feedback has not yet been warmly received (8). His survey findings of 64 private and public northeast regional human resource professionals showed that 33% were currently incorporating 360-degree methods into their performance appraisal systems. Another study conducted in the public health sector showed that no local public health departments were utilizing 360degree methods when searching 6 computerized search engines relating to the field of public health (9). The fact that the rates of 360-degree utilization appear small does not mean in reality that it is fractionally employed. It may mean that reporting of its use is lagging behind its actual implementation. This may be the case considering that the call for 360-degree implementation has been strong in the public management and public administration literature. Since the mid to late 1990s many have called for the assimilation of 360-degree performance appraisal into the public sector (10) (11). The pressure for change in the field of public personnel management has rarely been more intense. As Hays and Kearney note, fiscal crises, a brooding and hypercritical public, and stunningly rapid movement in the personnel systems environment have exacerbated the fields traditional problems and fueled renewed calls for reform. 360-degree performance appraisal is but one method in the mix of calls for reform (12). Much of the literature that challenges traditional performance appraisal methods is normative. Empirical studies which assess strategy, design, implementation, and evaluation of contemporary performance appraisal methods in public

20

management are much less visible. Hays and Kearney reported on one study that empirically evaluated modernization within public-sector human resource management, and prospects of its future direction. Included in their analysis was a focus on past and contemporary performance appraisal methods. They conducted their analysis by surveying 295 members of the American Society for Public Administrations (ASPA) Section on Personnel and Labor Relations (SPALR), and personnel directors in federal, state, and local government listed in the 1997 membership directory of the International Personnel Management Association (IPMA). Performance appraisal ranked first in importance and its widespread use was predicted to continue. In addition, they argued that new performance-assessment techniques such as peer evaluations, client evaluations, appraisals by subordinates, team-based evaluations, and the allinclusive 360-degree approach are anticipated to leap ahead of such traditional approaches as rating scales and checklists. Based on their findings, a bright future for 360-degree performance appraisal is anticipated in the next decades within public personnel management. Although the future looks bright for 360-degree implementation, there are challenges that lay ahead. Public management scholars and practitioners will have to study and evaluate the 360-degree method within the context of the public-sector with an eye on the fact that it likely will not automatically transfer from the private-sector. In particular, 360-degree methods will potentially contend with union, civil service, and legislative interests that pervade in the issue networks associated with public personnel management.

21

Performance Management And Appraisal in ActionAid Bangladesh

22

LIST OF CONTENTS

SECTION CONTENTS
PERFORMANCE APPRAISAL 1.1 Statements of Policy 1.2 Time for Performance Appraisal 1.3 Directives for Line Managers 1.4 Performance Appraisal Format 1.5 Guidelines for Evaluators 1.6 Performance Appraisal Procedures 1.7 Steps for Annual Performance Appraisal Procedure 1.8 Annual Increments 1.9 Promotions 1.10 Disposition 1.11 Career Growth 1.12 Human Resource Information 1. 1.1 PERFORMANCE APPRAISAL Statements of Policy 49 49 49 50 51 52 54 56 57 57 57 58

PAGE

Performance Appraisals are means to encourage communications between staff and his/her line manager(s) and also to enable each of them to understand the expectations of the other. Better communications between staff and their Line Manager(s) leads to a better understanding, more effective management and stronger performance. Further, Performance Appraisal is the procedure to formally evaluate the performance of staff, so that good performance is recognised and weaknesses are identified with a view to assisting and guiding the employee in improving their performance. In AAB, every Manager has the responsibility to ensure the development of his/her staff's capabilities required to perform their jobs effectively. Generally, the Line Manager(s) conduct individual meetings with their staff to discuss the employee's performance, achievements, strengths, weak areas, difficulties in job performance, explore the ways to improve performance, staff development and jointly set objectives or goals to be achieved by the next Appraisal (or next Appraisal period).

23

The purpose of the performance appraisal is to : a) give the employee an opportunity for self-assessment of his/her performance and propose means of self improvement and development give the employee feedback on his/her status to meet the objectives which were agreed between the employee and Line Manager enable the employee to understand how the Organisation perceives his/her performance so that it will consequently help the employee to perform accordingly document the employee's performance for current and future reference use as a basis for salary increments, promotions, career developments or disciplinary actions identify need for training or skill development and provide input for management planning.

b)

c)

d) e) f) 1.2

Time for Performance Appraisal A complete and written Performance Appraisal shall be prepared annually in December for regular and long-term Contract employees of AAB. Below are other occasions for Performance Appraisal: i) ii) iii) iv) v) At the end of employee's probation period Before proposing promotion for an employee Before proposing any change in employee's employment status from temporary/contract to regular or from regular to contract status, and for change in roles and responsibilities. Before preparing staff development plan. On transfer

Since AAB recognises HRD as the continuous process, therefore, if required, a Performance Appraisal meeting may be conducted at any time during the year to review and feedback of the performance of the employee. The continuous feedback enables the employee to recognise and keep up his/her strengths and improve any weak areas. Such performance appraisal does not necessarily requires documentation. However, if deemed necessary due to special circumstances a concise written document on the performance appraisal should be prepared,

24

signed by both employee and line manager(s) and provide a copy to the concerned employee after retaining a copy for his/her personal file. 1.3 Directives for Line Manager i) It is the responsibility of all Line Managers to ensure that staff are evaluated in a timely manner on each occasion. The Head of HRD/Admin is responsible for circulating guidelines to each Unit, Department and Project offices prior to the Annual Performance Appraisal of AAB staff. All assessment must be fair, honest, impartial and meticulous in grading the employees. For any kind of misinformation and deliberate disgracing or falsifying the information, which may go against or in favour of any employee unduly, and if it is proved with evidence then the evaluator will have to explain to the AAB Management/AAUK for such unprofessional and unethical acts. The concerned personnel will be subject to disciplinary actions for such misconduct. Performance Appraisal does not mean that the employee shall be promoted or his/her salary shall be increased. The Annual appraisal shall be carried out in relation to the employee's' performance throughout the entire appraisal period and not just on recent performance. Supervisors should discuss the employee's work in a positive manner to help each employee to be more effective in his/her job. Areas for improvement should be reviewed and management should take every possible measures to overcome the weakness. Recommendation/Approval for Increment or Promotions must be consistent with the content of the Employees's Performance Appraisal and within the approved budgetary provisions. It is important that an employee should not be deprived from salary increase if he/she has performed accordingly and eligible for the Increase. Again, a budget provision does not mean that the salary increase of an employee is automatic. The Performance Appraisal shall include an objective assessment (qualitative and quantitative) of employees performance level in relation with his/her current duties and responsibilities, according to the Job Description.

ii)

iii) iv)

v) vi) vii)

viii)

25

ix)

The performance appraisal will look at the employee's job related personal characteristics such as attitude, promptness, initiative, appearance, commitment and team work. The Performance Appraisal will also look at the employee's job related skills and knowledge such as, communication skills, management skills, training skills, reporting skills.

x)

1.4

Performance Appraisal Format

Performance Appraisal of all regular and long-term contract employees shall be done using the AAB designed Performance Appraisal Form. The Annex 11 will be used for all employees. However for senior management staff (grade-I & J) additional attachment can be used along with the standard format. There will be also a Bengali version of the Performance Appraisal From. Performance Appraisal Format includes a number of parts which shall be filled in appropriately by the Line Manager(s) who evaluates their staff, employee and concerned PD, Unit/Dept Head, Head of HRD and CD, where applicable.The items stated in page 2 and 3 depending on the suitability for the post, will be assessed according to instructions in the format. It is expected that AAB Offices will use this standard Performance Appraisal form also at the time of promotions, at the end of probation period and for staff development plan for their employees. For other cases, such as, on transfer, change of employment status of the employees, the line manager will prepare a narrative Performance Appraisal (in brief). 1.5 Guidelines for Evaluators

To ensure the effectiveness of evaluation procedure evaluator's fair judgement is essential. The rating for assessment represents the line manager's evaluation of the employee's actual performance in his/her present job. The following points should be important for the evaluators when carrying out evaluations: i) Line managers, before making Performance Appraisal of staff, must have read the Performance Appraisal policy as described in HRP Manual, Performance Appraisal Format and the issued Guidelines on Performance Appraisal procedure. Supervisor(s) shall make his/her judgements on the job requirements, the job description and the employee's performance in the job. Line managers should consider only one factor at a time. Rating in one trait should not influence the rating of another.

ii) iii)

26

iv) v)

Line managers should conduct the Performance Appraisal with each staff in a one to one discussion. Supervisors will consider the factors those might have affected results, especially those beyond control of the employee, and comment appropriately. In cases where an employee has secondary evaluators, the Line Manager should collect input from these secondary sources prior to completing the appraisal format. Secondary sources will be most helpful if they know at the beginning of the year exactly what type of comments will be required at the end of the year. The Primary Evaluator should communicate with all secondary evaluators early in the year to clarify these expectations.

vi)

Responsibility of Secondary Evaluators : Many staff have secondary evaluators listed on their job descriptions, Secondary evaluators time to time should share comments on the performance of employees with the concerned Primary Evaluator. At the time of preparing the Annual Performance Appraisal, Secondary Evaluators should be asked to submit their comments to the Primary Evaluator to assist in preparing a fair appraisal. In some instances if required, the Secondary Evaluator may be asked to discuss their comments in person with the Primary Evaluator or with the concerned employee. 1.6 Performance Appraisal Procedures

As a fundamental part of the Performance Appraisal procedures every Line Manager shall conduct an individual appraisal review meeting with his/her staff. The purpose of this meeting is to discuss the employee's performance with him/her ensuring the opportunity for participatory review. It is important to recognise good performance so that the employee is aware that he/she is making a positive contribution and encouraged to continue. The meeting also enables the Line manager to provide advice or guideline to the employee in the event there is any weakness or shortcoming in the performance. In this meeting, targets and objectives that have been agreed upon are reviewed and again will be set for the next appraisal period. During this review, the Line Manager attempts to understand the difficulties of his/her staff and to identify his or her developmental needs. Before each review, the employee prepares for the discussion through self-assessment, identifying factors that have contributed to his or her performance and factors that hinder it, as well as the types of support that he or she needs from the supervisor or others in order to do better in the next period. The Line Manager also prepares for the meeting by listing achievements, observations, problems, suggestions, and expectations. During the appraisal meeting, the Line Manager and his/her staff share their observations and concerns. Each responds to the subjects raised by the other. Such discussions help to develop mutual understanding, and the data

27

generated is reported to higher management and is used in making decisions about individual staff development as well as developmental needs of the work group or the entire organisation. The following points are important for success of the Performance Appraisal meeting: Before the meeting: i) Give the employee adequate notice of the meeting and brief him/her on the purpose of the meeting (Employee should be provided with a blank Performance Appraisal Form Annex 11 for his/her reference and self assessment). Prior to the discussion all evaluators must have read and reviewed the following documents: Staff personal file with special focus on notes of the last appraisal conducted. Job Description. Consider the points the Line manager wishes to make and the targets or priorities and expectations which will need to be agreed for the following appraisal period.

ii) iii)

During the meeting: i) Start off by stating the purpose of the meeting and invite the employee to comment on how he/she sees his/her performance (Refer the employee's self assessment). First of all pointing out examples of good performance and then outline areas where improvements are needed. Explore reasons for the strong and weak points. Identify training needs if necessary. Goals, objectives and action for improvement in the following period should be discussed and agreed. Employees should be encouraged to seek and receive guidance in improving performance.

ii) iii) iv) v)

28

After the meeting: On completion of appraisal, evaluators must immediately put down all salient points on paper and share these with the staff member. Subsequently, if possible within the next day, based on the outcome of the Appraisal meeting, the Line managers (1st and 2nd supervisor in consultation with each other) will fill in the Performance Appraisal form with appropriate rating of the traits and other descriptive areas and sign on it. Staff concerned shall be provided with filled in Performance Appraisal(in duplicate) for his/her study and comments. Staff members must be encouraged to put down their comments on the Form itself before signing on it. After return of the Performance Appraisal from the staff, PD, Unit/ Department Head, in consultation with the line manager will fill up the confidential part of the form and thereafter will send all staff Performance Appraisals to HRD/Admin for review, action and record. 1.7 Steps for AAB Annual Performance Appraisal Procedure

Starts on 15 November in the DA office and 1 December in the Country office. 1. 2. At the beginning, HRD/Admin sends guidelines of Performance Appraisal to Projects/Units/Departments for Performance Appraisal. The Unit/Department Heads and PD's hold meetings with their Line managers on the guidelines and their special concern over Performance Appraisal of their staff for the given year. The individual Line Managers notify their staff of the Performance Appraisal meeting. (Probationary staff unless the probation ends within 15 January of the following year and the staff recently evaluated will not require the Annual Performance Appraisal for the given year) Conduct the Performance Appraisal meeting between the respective Line Manager and staff; the feature and the outcome of the meeting is noted. Each office will prepare three copies (for project staff) two copies (for Country office staff) of Performance Appraisal and signed by both the Line Manager(s) and the concerned staff; a copy of the document is given to the staff concerned. The Unit/Deptt. Head or PD in consultation with Line Manager will fill in the confidential part of the Appraisal form. The respective PDs will also prepare a summary of recommendations/approvals for Increments, Promotions, No Increment,

3.

4. 5.

6. 7.

29

Separations, Transfers of their staff of each region/sector supported by a narrative (but short) rationale of individual special cases. 8. Each Project Office/Unit/Department send copy (s) of all staff's Performance Appraisal (project office will attach the summary of recommendation), to HRD/Admin. AAB Accounts Department will provide HRD/Admin. with the following year's approved salary level of each office as per the budget so as to reconcile with the recommended/approved Increments/Promotions. HRD/Admin. will review the submitted Performance Appraisals and will act: a) Submit Performance Appraisal of Grade G and above employee and Performance Appraisals with exceptional recommendation such as Disallow Increment, Two step Increment, Promotion, Disciplinary action etc. to the CD, along with summary of recommendation / approvals for his/her review and final approval. HRD Head will write short notes on the Performance Appraisal form in the event the recommendation is not according to the policy and not approved by CD. Prepare relevant letters as finally approved by CD. (for project Grade G to I and for Country office - all).

9.

10.

b) c) 11.

For Project Office, HRD/Admin. will sent out letter for individual staff while giving a copy of the same to PDs along with individual Performance Appraisal (of Grade G-I employees) for their action and employees' personal file. HRD/Admin will also send the summary sheet as approved by CD to respective PDs so that they can issue letters to their individual staff (from Grade A to F). HRD/Admin. will issue letter as per the outcome of their Performance Appraisal to individual staff in the Country office. HRD/Admin. will send a copy to FC of all Increment, Promotion or any letter related to financial matter. HRD/Admin. will keep a copy of Performance Appraisal along with letters of all Country office employees and grade G-I employees of project in the Personal file kept at the Country office. The Performance Appraisal of Project employees from Grade A to F will be kept in a separate file for future reference. HRD/Admin. will record and update Human Resources Information, staff list, data base file.

12. 13. 14.

15.

30

1.8 Annual Increments 1.8.1 1.8.2 Annual Increments are awarded once a year effective 1st January based on employee's performance appraisal. No unconfirmed staff will be eligible for annual increment. Probationary staff, if appointed before 1st October, will be eligible for Increment at the time of confirmation of his/her employment in the following year. Staff must have at least three months period in their Grade/step as of 1st January to be eligible for a step increment. Under very special circumstances a two step Increment may be recommended for an employee's extra - ordinary performance and must be supported by the rationale. Annual Increments are subject to satisfactory performance of staff throughout the year, and are not automatic. Therefore, If the Performance Appraisal of a staff is not satisfactory, he/she will not receive any increase. The receipt of a warning letter usually results in the loss of annual increment depending on the reason for the letter and amount of improvement in the employee is observed after issuance of the letter. Supervisors will give importance to this point while making comment in the Performance Appraisal Form. Supervisor(s) must state the reasons in the confidential section of the performance appraisal form if an employee is not recommended for an increment for that year.

1.8.3 1.8.4

1.8.5

1.8.6

1.8.7

1.9 Promotions 1.9.1 Promotions are only given for employees who will undertake/demonstrated higher responsibilities and possess the qualifications and skills required for the proposed position. All promotions are subject to an existing vacancy in the organization if within budgetary levels. All promotions must be supported by an performance appraisal with rationale either in annual review or in other time. An interview or examination may also be arranged if deemed necessary.

1.9.2 1.9.3

31

1.9.4

While recommending/granting promotion, AAB Position, Grade and Salary chart must be referred to so as to ensure that the appropriate job title and salary is given in the new position. In the event a staff needs trial to perform in a higher position a provisional promotion (in written) may be given. Such Provisional period should be usually for three or six months. At the end of Provisional period the employee's performance should be evaluated so as to determine his/her competency for the new position. If the evaluation proves favourable, the employee's promotion will be confirmed by giving the position and the higher salary. In case the employee fails to meet the requirements for the new position, he/she will revert in his/her previous position. Upon promotion a new job description will be provided to the employee.

1.9.5

1.9.6

1.10 Disposition If a staff member's performance is found to be poor then he/she may be subject to any change of assignment, transfer, demotion, termination or any disciplinary actions if decided so. However, the required procedures must be followed if disciplinary action like dismissal is recommended. All recommendations of disposition must be supported with rationale and should be consistent with the employee's Performance evaluation. 1.11 Career Growth AAB, within its limited scope, will create the opportunities and make appropriate investment for progressive career growth of staff in the organisation. Career growth may involve staff promotion to higher grades with increased responsibilities or may involve lateral change in responsibilities with prospect of broadening the employee's career and promotion in future. 1.11.1 Opportunity for career growth and promotion will result only from vacant position and creation of new positions involving increased or different responsibilities as per the need of the organisation. Discussion about lateral or vertical career growth of each staff will normally emerge at the time of any interim performance appraisal but this must be formally discussed and documented at least once in a year at the time of year end appraisal.

1.11.2

32

1.11.3

Annually, in consultation with Head of HRD/Admin, the Unit/Department Heads and Project Directors will produce a report with the list or staff ready for career growth, potential opportunities and necessary investment for discussion at the Core Management Meeting in the first quarter of each calender year. Agreed and planned career growth appointments for positions in grade F (for project) and below are approved by Project Director and staff in grade G and above (projects) and all of Country office, are approved by the Country Director based on annual appraisal reports and discussions in CMT. In such cases, to facilitate internal career growth, the Country Director can waive the need for advertising for new or vacant positions. Each career growth appointment for grade G and above must have a favourable recommendation from the Head of HRD/Admin. Human Resources Information

1.11.4

1.11.5 1.12

All appropriate information about employees should be stored in a central human resources data bank in data base at the Country office. This includes all basic information about each employee, such as, academic and professional education, types of job performed before, training programmes attended, general skills, professional skills, special skills, performance records, potential appraisals, accomplishments etc. This data is utilised whenever there is a need to identify employees for consideration for special job, additional training, or higher-level jobs, promotion, transfer and secondment. ACTIONAID Bangladesh will also keep its ex-employee's data who have resigned, are terminated, dismissed, retired or made redundant. The data includes past performance level, length of service, reasons of separation, mode and date of separation, final settlement etc. All Project office and Unit/Department shall provide the updated information of their employees to the HRD/Admin. to store in the AAB HRI data base file on six monthly basis. HRD/Admin. shall always keep the HRI data base file updated and shall provide or use the information as and when deemed necessary. The HRD/Admin. Department will initially start the process of keeping HR Information for Grade G-J and gradually will include the junior level positions.

33

Example of Performance Appraisal of an Employee of ActionAid Bangladesh PERFORMANCE APPRAISAL ON COMPLETION OF PROBATION Assessment period: May 2005 to October 2005
Name Md Zakaria Hossain Joining date Due date of confirmation 1st May 2005 1st November 2005

Position & Department Associate Officer, IRM Supervisor Shahamin S Zaman

Background Masters Degree in Management from Jagannath University. Currently enrolled in Evening MBA of DU Worked at Nari Maitree from 1st January 2000 to 30th April 2005 as Sponsorship Communication Officer Worked at AAB from 21st March 2004 to 26th July 2004 on secondment as Sponsorship Officer

Progress Was involved in DA appraisal process of DA 26, 27 and 28 (Case study collection including photographs) Conducted training on CM, CH, and Sponsorship with the DA partner (24 DAs)organizations Carried out NK related data management work for establishing new DAs (DA - 26, 28)

Achievement
Handling NK data management smoothly Dealing with Supporters Queries and maintaining communication with supporters to provide information to them. Conducted training on CM and CH for the partner organizations of the DAs Successfully collected new CHs for the two new DAs (Wave Foundation-DA26 and PSTC-DA28)

34

Successful Undertaking of Assignments Generate data file for sponsorship Communication reports such as CR1, AR, CR2,Amico, General Fund, Photo Level Create Batch for Child Message of CR2 Receiving Child Message from DAs sponsorship staff and providing feed back if necessary Logged 450 supporters letter and Queries for eighteen DAs. Printed envelopes for CR1 (12218), Nex5t Step(5754), AR (9050) , and Child Message collection list of twenty three DAs Log CM, absence, dropouts, photo update in NK Transfer New CHs against Drop Out in Nk Dealing with Profile Summary Report Work on To Do List Dealing with supporters queries (250) Collect new CHs from Wave Foundation-DA26 (700) , PSTC-DA28 (80) Create a new DA of PSTC(DA28) in NK Dealing with Funding Affiliate (UK, Spain)regarding new CHs Collect Photo Update from Green Hill-DA11 (250)

Areas of Improvement
As my job responsibilities are primarily to ensure the smooth operation of NK, I think I should develop a better expertise of this software. Although I can perform the operational side of NK and NKMSB, but I feel I should have a better understanding of the theoretical background of developing these software. I feel I need to improve my skill of communication as I might need to help my teammates prepare the communication materials during the delivery period. It may be mentioned that during my secondment tenure at AAB in 2004 I had handled 9 Annual reports. If it is necessary to do this again a better knowledge of English language will help me to perform my duties successfully.

Relationships

35

With Partners: As I have been a sponsorship officer of DA 14, I understand the psyche of the team players of our partner organizations. This has helped to communicate with them and create a more in-depth understanding with our partner organizations. I am responsible for communicating with our partner organizations regarding photo update, CH collection, CM collection and information for supporter query. With the Team Members and other staff of AAB : During the last six month I have had the opportunity to work with AAB colleagues of other units as well as my team members of IRM during the DA appraisal of Speed Trust. Apart from my regular duties I have provided support to my team members during the sponsorship annual communication training, and sponsorship orientation training at WAVE and PSTC.
With Funding Affiliate: I have been in close contact with our FA s (Italy and UK) to ensure the smooth operation of the supporter query ,overseas memo list ,transfer templates, welcome templates and NK related issues.

Feedback to Supervisor: As a new member of the sponsorship unit I have received full support and cooperation from my line manager and team members. My supervisor was very helpful in providing sponsorship orientation and feedback about my work. I received updated information regarding NK, FA policy and other issues regarding sponsorship from my supervisor, which helped me to get an overall picture of AAB program and policy Areas where I got special support from my Supervisor I have received support from my supervisor regarding Nk training, management of supporter query etc. My supervisor has also motivated and guided me to perform my duties. I also rely on my supervisor for information regarding responding to any special queries from the FAs.

Md Zakaria Hossain Associate Officer Sponsorship

36

Performance Management And Appraisal in Arab Bangladesh Bank Limited

37

Arab Bangladesh Bank Limited Arab Bangladesh Bank Limited is committed to formulate a market competitive performance based reward policy which recognises contribution of each of the employees and links to the market competitive pay to performance to achieve overall target of the Bank. What is the Plan for People Reward? The objective of the Plan for People Reward is to provide an overall view of how people in Arab Bangladesh Bank Limited are paid in terms of salary and other benefits based on their performance. In the section, Plan for People Performance, explains how to measure the contribution of the people and recognise this accordingly. Plan for People Reward explains how that contribution is rewarded. This policy has a direct link with the plan for retention. What does Plan for People Reward cover? This section of the booklet covers: The guiding principles of the reward policy; The structure of the remuneration package; The main elements of the structure of the pay package; Types of rewards and their eligibility

The principles described in this section of the booklet apply throughout the Bank. As far as local market practice and regulations permit, AB Bank aims to maintain a structure pay arrangements for all the employees in a similar way. This section aims to provide you with a high level view of the reward policy of the bank. Detailed information on pay arrangements can be obtained from HR Division.

38

The strategic role of reward Reward, together with Recruitment, Development and Performance, is a key activity for all our managers. The role of the Banks reward policy based on performance is to help managers deliver improved performance through our people.

The reward will be viewed as a part of the Banks retention policy.

People Policy
(Aligned to business needs)

Improving performance through people

Recruitment

Development

Performance

Reward

HR service delivery

Who determines reward policy? Reward policy is determined by the Management Committee with the approval from the Board of Directors whenever necessary. The management committee is responsible to develop clear people management strategy, policies and processes which are aligned to business direction and express the Banks values consistently across the Bank. The Reward Policy will be reviewed periodically to make this competitive in the market. 39

Principles of the reward policy Banks reward policy is based on three principles: Pay for Performance Our total pay package should enable the Bank to attract and retain people of the highest quality. Our total pay package should be linked to: Consistent As a part of the retention policy, individual pay package relative to others in the Bank should be explainable and consistent. Competitive The pay package of the individual should be competitive. It should be fair and equitable and should be relative to what one can earn in other Bank in the market of similar size, type, and standing & competition edge against us. Structure of the pay package General policy The Bank operates a job evaluated salary structure to ensure that employees are placed in a salary range that relates accurately to: the job they are filling in terms of its technical demands and responsibilities in relationship to other jobs in the Bank. a fixed pay for the holder of the post. The performance of the Bank as a whole; The performance of the region, country, business or support function in which our people work; The contribution of our people;

The salary structure is determined by the Board and can be changed anytime at its discretion. Once placed between the salary range, employees proceed through the range at varying rates related to their performance, appraisal and their position in the range at anytime.

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Every employee has the right to be told his/her grade and the minimum and maximum salary assigned to that grade and one immediately above. Job Evaluation The first stage in salary administration is the evaluation of each position by the Management Committee. For this purpose, supervising officers must ensure that any substantial changes in the job requirement or responsibilities are incorporated in the revised job descriptions. As a minimum, they should review descriptions once a year as part of the appraisal process. As a result of job evaluation, each job will be placed in a grade with an associated salary range to be applied to its incumbent. Positioning of staff within ranges The Bank follows the merit related policy for moving upward: should reward employees who by their individual efforts and performance are making progress in their positions and; assures fair and equitable pay for all employees in relation to performance in their positions.

Generally, the minimum range is considered to be fair pay for the employee who is qualified to perform in the position at the beginning level or the minimum standard of performance, the mid point range is regarded as a fair level of compensation for employees who by experience and effort have achieved a "Very Good" standard of performance and the upper part of the range should be regarded as an area of performance that is Outstanding" or Excellent. As a rule, employee salaries should not exceed the maximum of the salary range for the grade level in which they are performing and classified. When an individual is approaching or has reached the salary maximum for the position, the management should consider- if the individual is qualified and eligible for a higher level position. Full details of the procedures involved in positioning staff salary ranges are set out in the salary structure as approved by the Board from time to time. AB Bank will seek to express the principles by structuring pay arrangements for its employee throughout the Bank in a similar way to comprise the following five elements. a. Gross salary: Gross salary of the individual may comprise of the following components.

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For Executives: For Officers: Basic salary; House rent allowances including maintenance; Medical allowances; Conveyance allowances; Leave fair concession. Basic salary; House rent allowances including maintenance; Corporate allowances; Medical allowances; Leave fair concession; Guard and gardener allowance.

Individual rates of pay based on: Skills and experience; Individual performance in the job; The level of the job relative to others in the Bank;

b. Annual bonus The Board of Directors may declare annual bonus to be paid to the employees, provided a satisfactory profit is made by the Bank. Payment of this bonus remains at the entire discretion of the Board. An employee prior to such announcement may be entitled to the bonus for the period of his/her employment during that year, provided the employee's employment is not terminated for any disciplinary reasons. The bonus may be of two types: Festival Bonus All the employees are entitled to get two festival bonuses (Eid) to celebrate religious festivals. Performance Bonus Festival Bonus; Performance Bonus.

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Performance bonus will be flexible in nature which might be reviewed year to year basis. This will depend on:

Business performance of the branch; Individual Performance against target; this performance is relative to that of other participating branch.

c.

Long-term incentive Death-cum-survival benefit under ABBL superannuation fund: The benefit will be provided to the employees of the Bank and their dependants as per scheme approved by the Board. Provident Fund: As per approved Provident Fund Rules by the Board. House building scheme as per guideline approved by the Board Furniture, Fixture scheme as per guideline approved by the Board Medical hospitalisation scheme: The Bank has launched a medical coverage for the employees of the bank with Delta Life Insurance. All the hospitalisation and treatment cost up to the limits approved for each grade will be borne. The scheme will be reviewed from time to time. Gratuity scheme as per guideline: The object of the gratuity is to compensate the concerned employee for the past services rendered to the Bank. The Bank shall create a gratuity fund by annual charge to revenue expenditure and all gratuity payments shall be made out of the said fund; The gratuity shall be paid at the rate of one basic salary for each completed year of service; The basic pay for the calculation of gratuity shall be the basic pay drawn by the employee concerned for the immediate last month; An employee who has completed 10 (ten) years permanent and continuous service shall be entitled to gratuity; Notwithstanding anything contained above, the gratuity may be paid at the discretion of the management to an employee who has not completed 10 (ten) years of service under the following circumstances: o On the death of an employee leaving behind family, i.e. wife and children or parents;

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o o o

On retirement or resignation or termination due to certain permanent mental and physical incapability; On termination of service due to reduction of establishment or abolition of any post; In any other appropriate case.

The gratuity shall be paid to the employee concerned. In case of his/her death, the gratuity shall be payable: To the person(s) nominated by him/her before his/her death; To his/her legal heirs in the absence of any nomination. The Board may amend, alter or modify any of the provisions of gratuity it may deem fit and proper in the interest of the Bank. d. Honorarium On successful completion of part-I & part-II of Banking Diploma examination of the Institute of Bankers, Bangladesh - or any other Institute of Bankers recognised by the Bank, an employee shall be entitled to the honorarium at the rate to be prescribed by the Board and the honorarium will be paid on production of satisfactory documentary evidence. The amount of honorarium will be reviewed from time to time. e. Other benefits A package of non-cash benefits may be paid to the individuals reflecting market practice and as far as is possible to be tax effective to be delivered on a flexible; Cash equivalent basis. Fixation of salary on promotion When an employee is promoted, his/her substantive salary will be fixed at the minimum level of the salary range for the new position. In case the employee's existing substantive salary exceeds the minimum level for the new position, it should be fixed at a level in the higher salary range which is immediately above the existing substantive salary of the employee. Payment of Salary Substantive salary and allowances shall accrue from the commencement of the active service of an employee and shall generally become payable on a working day during the last week of each month which is determined by management from time to time.

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Advance payment of leave salaries Employees proceeding on leave may be allowed to draw their salary in advance for the period of their leave as per following provisions: Advance will be drawn on the working day immediately prior to his/her date of availing leave. Request for advance must be received by the HR Division at least 7 days prior to the date of availing leave. The amount of the advance salary payment will depend on the period of leave desired to avail. In no case more than one month's salary may be allowed to be drawn in advance.

Travelling, daily and transfer allowance Travelling allowances on tour/transfer will be admissible as per scheme approved by the Board. Staff Loans As per schemes approved by the Board from time to time. Roles and responsibilities Rewarding people is a management responsibility. Decisions on pay are made by management with the approval from the Board. It is the managers responsibility to link reward to contribution in line with the decision of the management in a fair, equitable, consistent and explainable way. That means that the managers are responsible for: communicating the individuals about the Banks overall business targets to them; agreeing business targets for their own area and setting annual target; defining job roles and responsibilities for all the employees; monitoring performance against agreed targets; adjusting priorities to meet the challenges and business need; evaluating the performance of their people;

The role of HR is to assist managers to recognise contribution and link market competitive pay package to performance. That means it is the responsibility of HR to provide: reward policies which are aligned to business needs; policy guidelines and process documentation; advice to managers on reward issues; collect external data on best practice; 45

information on how much our competitors pay, to guide managers on market competitive pay; The role of the individual is to help managers plan, monitor and evaluate performance. That means the individuals are responsible for; Determining how they can most effectively contribute to the achievement of business targets; Planning their own performance and adjusting priorities to meet the changing needs of the business; Preparing draft objectives for discussion and agreement with their manager; Regularly assessing their own progress against objectives; Participating in progress reviews and year-end assessment reviews with their manager/ departmental/divisional heads. How will we know that the Plan for People Reward is working? Our objective is to recognise the contribution of our people and reward their success accordingly. We will know that the Plan for People- Reward is working when we will see: The Bank is able to attract, retain and motivate staff who give us competitive advantage in our chosen competitive markets; Our people believe that they are recognised and valued; Our people believe that their pay is linked to: Performance; Market competitive pay rates; in a way which is fair equitable consistent explainable The annual bonus plan This section of Plan for People Reward explains how annual bonuses are determined for those people who participate in achieving the target of the Bank. The annual festival bonus is distributed to all the employees permanent in nature having good performance rating.

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The annual performance bonus is a special recognition of exceptional performance. If you are eligible for a discretionary annual bonus, your bonus award will be a based on following two aspects: a. b. Business performance and Individual performance

How your bonus will be determined As illustrated below, all of the Banks bonus plans represent business performance on a vertical axis and individual performance on a horizontal axis. The better that your part of the Banks business has performed the bigger the bonus pool in which you will share. The better your overall performance compared to our peers, the bigger your share in the bonus pool will be.

The four bonus zones + Business performance Bonus may be paid Bonus is relatively high + Individual performance

Bonus, if any, is low Bonus may be paid The link between performance and your bonus is explained below in terms of these four zones. Performance Zone + Business above target results Bonus payment are The bonus paid will reflect these achievements

+ Individual performance is above target

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Business results are below Individual success is offset by business shortfall. Bonus may target be earned if the business + Individual performance is results are not below a minimum acceptable standard. above + target + Business above target are Business success is offset by individual shortfall. Bonus may be earned if the individual performance is not below a Individual performance is minimum acceptable standard below target Business results are below Business shortfall is made worse by individual shortfall. If target neither business results nor individual performance are Individual performance is below a minimum acceptable standard some bonus (festival) below target may be earned. The following sections provide an overview of how business and individual performance is linked to the annual bonus award. Business performance The Management Committee of the Bank will evaluate the Banks business performance each year. Banks business performance will be evaluated against annual targets which are sent by the Board at the beginning of the year to focus on: Profit; Deposits; LDOs; Costs; Quality factors, such as audit results, credit quality, business development and people management; Recovery of Bad debts; and EOL/TOD position etc. At the end of the year, the Management Committee evaluates the Banks actual business performance relative to: Overall trend of the performance Last years performance; Annual targets; Overall market trends of other banks having similar situation. results

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The Committee will then plan the recommendations for approval of the Board. Guideline for recommendations of performance bonus: A Business Performance Ratio above 1.0 means that overall the business has out-performed, and actual results have exceeded in line with the reasonable expectation; A Business Performance Ratio of 1.0 means that the overall quality of business performance is broadly similar to what was achieved last year. This does not mean that the Banks performance is the same as it was last year. The expectation is that performance must improve from year to year. A Business Performance Ratio of 1.0 means that business performance has improved in line with reasonable expectations; A Business Performance Ratio below 1.0 means that overall business performance has weakened. This does not necessarily mean that the Banks financial performance has deteriorated. A Business Performance Ratio below 1.0 may mean that business performance has failed to improve in line with reasonable expectations.

The bonus pools A bonus pool is determined for the Bank as a motivational tool and recognition of the performers. The bonus pool is the amount of money available for annual bonus awards. It is calculated by multiplying the amount of money paid in bonuses last year by this years Business Performance Ratio. Before this calculation is made, the amount of money paid in bonuses last year is adjusted to take into account: Changes in participation: for example, to take into account leavers, new joiners and promotions; Structural adjustments: for example, to change the balance between fixed salary and variable bonus and to ensure that total pay is competitive in the market.

Participation in bonus plans The bonus plan in which you participate reflects your role in the Bank. In this way, you will share in a bonus pool which is based on the contribution of your own business or support function relative to the Banks overall results. Individual performance

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Individual performance will be expressed as an overall performance rating. The way in which performance is managed and evaluated is described in Plan for People-Performance. The following section provides a summary. Your line manager will assess your overall performance using guidelines provided in the section. Your performance will be reflected in an overall performance rating using a four point rating scale. Overall Rating Excellent (90% and marks) above Rating 1 Overall performance Exceeded all or most objectives and added value well beyond the scope of the normal job. Exceptional performance clearly higher that competent peers would be expected to achieve. Achieved all aspects of most objectives and of the normal job and exceeded in a number of areas. Achieved the essential requirements of the most important objectives and of the normal job. Meet minimum requirements in meeting the non-financial target/financial target for the self and for the branch having achieved good in core and auxiliary competencies; Did not achieve sufficiently against objectives and/or normal job requirements.

Outstanding (75% to 89% marks) Very Good (60% to 74% marks)

Good (50 to 60% marks)

Poor ( below 50% marks)

Your overall performance rating, together with the Business Performance Ratio, will determine the Bonus Zone within which your bonus will be determined. The degree of difficulty involved in individual objectives may vary from one participant to another. Consequently, individual bonus awards to staff at the same level with the same overall performance rating may be different when the branch performances will be poor. Using the bonus plan to improve performance

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The structure of the bonus plan allows your manager to build an approach to annual bonus awards which best suits the area in which you work. Business priorities will be reflected in your objectives and those of the people with whom you work. A team bonus can be created by giving all members of the team the same overall performance rating. This would result in everyone having a similar share in a bonus pool based on their collective performance as expressed by the business results which they have achieved together. Alternatively a manager can place greater emphasis on recognizing and rewarding outstanding individual performance by rating a few people- more highly than others. This would result in far larger bonuses for those people with the highest ratings and lower bonuses for others. Annual bonus summary Your management will decide how much bonus you will be awarded based on: The size of the bonus pool which is based on business performance; Your overall performance against individual objectives; Your performance relative to the performance of other people participating in the same bonus pool. Eligibility People will be eligible for bonus based on their role in the Bank to which they are assigned as of 31st December. Any bonus awarded to participants who have transferred between areas during the year will be determined by HR Committee. Any bonus award for staff is subject to adverse audits or any other disciplinary procedure will be reduced, postponed or withheld accordingly. For new employees joined in the year 6 months prior to the date of declaration will be reviewed by HR Committee. For people who leave the Bank during the year for any other reason, for example, because of retirement or redundancy, payment in respect of bonus, if any, will be made at the time that they leave the Bank. No bonus will be paid to people who choose to leave the Bank or who have given notice of leaving the Bank prior to the bonus payment date. Other Performance Award To motivate the employees and recognising their achievements, the Management might declare some awards to the employees such as: Chairmans gold medal Vice Chairmans gold medal Directors silver medal

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Presidents gold medal DMDs silver medal Publishing photo in the newspaper Sending greeting cards on various occasions Airfare for the person including family members Crest for achievement Certificate for achievement Gift voucher etc.

The management committee should finalise the qualifications to achieve the awards considering the field of activities. The parameters are to be declared so that all the employees are well aware.

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Performance Management And Appraisal

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in RanksTel

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