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All organisations use performance appraisal for various purposes. The main issue hovers around the
question of what criteria should be used to appraise performance. Given that all appraisals involve
judgments which are not always fair, orgnisations uses multifarious techniques and too old to
measure performance appraisal requires a consistent approach, clear standards and measures and bias
free ratings. A critical part of the evaluation process is the preparation of the rater. Raters must be
trained on the system being used and its purpose to ensure consistency and accuracy. Finally, if the
employees performance is to improve, they must be provided feedback on their performance and
advice on how to make improvements.
After an employee has been selected for a job, has been trained to do it and has worked on it for a
period of time, his performance should be evaluated. Performance Evaluation or Appraisal is the
process of deciding how employees do their, jobs. Performance here refers to the degree of
accomplishment of the tasks that make up an individuals job. It indicates how well an individual in
fulfilling the job requirements. Remember the performance is always measured in terms of results.
Performance appraisal is method of evaluating the behavior of employees in the work spot, normally
including both the quantitative and qualitative aspects of job performance. It is systematic and
objectives way of evaluating both work related behavior and potential of employees. It is a process
that involves determining and communicating to an employee how he or she is performing the job
and ideally, establishing a plan of improvement.
The main characteristics of performance appraisal may be listed thus:


The appraised is a systematic process involving three steps :

Setting work standards.
Assessing employees actual performance relative to these standards.
Offering feedback to the employees so that he can eliminate deficiencies and improve
performances in course of time.

It tries to find out how well the employee is performing the job and tries to establish a plan
for further improvement.
The appraisal is carried out periodically, according to a definite plan. It is certainly not a one
shot deal.
Performance appraisal is not a past oriented activity, with the intention of putting poor
performance in a spot. Rather, it is a future oriented activity showing employees where things
have gone wrong, how to set everything in order, and deliver results using their potential in a
proper way.
Performance appraisal is not job evaluation. Performance appraisal refers to how well
someone is doing an assigned job. Job evaluation, on the other hand determines how much a
job is worth to the organization and therefore, what range of pay should be assigned to the

Performance appraisal is not limited to calling the fouls. Its focus is on employee
development. It forces managers to become coaches rather than judges.
Performance appraisal may be formal or informal. The informal evaluation is more likely to
be subjective and influenced by personal factors. Some employees are liked better than
others and have, for that reason only, better chances of receiving various kinds of rewards
than others. The formal system is likely to be more fair and objective, since it s carried out in
a systematic manner, using printed appraisal forms.
Performance appraisal could be taken either for evaluating the performance of employees or for
developing them. The evaluation is of two types, telling the employees where he or she stands and
using the data for personnel decisions concerning pay, promotions, etc. The developmental
objectives focus on finding individual and organizational strengths and weaknesses; developing
healthy superior subordinate relations and offering appropriate counseling / coaching to the
employee with a view to develop his potential in future.
Appraisal of employees serves several useful purposes :
9 Compensation decisions: It can serve as a basis for pay raises.
9 Promotion decisions : It can serve as a useful basis for job change or promotion.
9 Training and development programmes : It can serve as a guide for formulating a suitable
training and development programme need to an employee.
9 Feedback : Performance appraisal enables the employees to know how well he/she is doing
on the job, it tells what he / she can do improve their present performance and go up the
organisation ladder.
9 Personal development : Performance appraisal can help reveal the causes of good and poor
employee performance. Through discussions with individual employees, a line manager can
find out why they perform as they do and what steps can be initiated to improve their
Every organization has to decide upon the content to be appraised before the programme is
approved. Generally, the content to be appraised is determined on the basis of job analysis. The
content to be appraised may be in the form of contribution to orgnisational objectives (measures)
like production, savings in terms of cost, return on capital, etc., Other measures are based on :
9 Behaviours which measure observable physical actions, movements.
9 Objectives which measure job related results like amount of deposits mobilized, and
9 Traits which are measured in terms of personal characteristics observable in employees
job activities.
The content to be appraised may vary with the purpose of appraisal and type and level of



The appraiser may be any person who has thorough knowledge about the job content, contents to be
appraised, standards of contents and who observes the employee while performing a job. The appraiser should
be capable of determining what is more important and what is relatively less important. He should prepare
reposts and make judgments without bias. Typical appraisers are : Supervisors, Peers, Subordinates,
Employees themselves and users of services and consultants.
9 Supervisors : Supervisors include superiors of the employee, other superiors having knowledge about
the work of the employee and departmental head or manager. In general it is that immediate superiors
appraise the performance, which in turn, is reviewed by the departmental head / manager.
9 Peers : Peer appraisal may be reliable if the work group is stable over a reasonable long period of time
and performs tasks that require interaction.
9 Subordinates : The concept of having superiors rated by subordinates is being used in most
orgnanisations today, especially in developed countries.
9 Self-appraisal : if individuals understand the objectives they are expected to achieve and the standards
by which they are to be evaluated, they are to a great extent, in the best position to appraise their own
performance. Also since employee development means self-development, employees who appraise
their own performance may become highly motivated.
9 Users of services : Employees performance in service organizations relating to behaviours,
promptness, speed in doing the job and accuracy can be better judged by the customers or users of
9 Consultants : Sometimes , consultants may be engaged for appraisal when employees or employers do
not trust the supervisory appraisal and management does not trust the self-appraisals or peer
appraisals or subordinate appraisals. In this situation, consultants are trained and they observe the
employee at work for sufficiently long periods for the purpose of appraisal.
Informal appraisals are conducted whenever the supervisor or Personnel Managers feel it is necessary.
However, systematic appraisals are conducted on a regular basis, say, for example, every six months or
Performance appraisal is planned, developed and implemented through a series of steps.

Establish performance standards : Appraisal systems require performance standards, which serve as
benchmarks against which performance is measured. To be useful, standards should relate to the
desired results of each job.
Communicate the standards : Performance appraisal involves at least two parties, the appraiser who
does the appraisal and the appraisee whose performance is being evaluated. Both are expected to do
certain things. The appraiser should prepare job descriptions clearely; help the appraises set his goals
and targets; analyse results objectively; ofter coaching and guidance to the appraisee whenever
required and reward good results. The appraise should be very clear about what he is doing and why
he doing it. For this purpose, performance standards must be communicated to appraises and their
reactions should be noted down right way.

Measure actual performance : After the performance standards are set and accepted, the next step is to
measure actual performance. This requires the use of dependable performance measures, the ratings
used to evaluate performance. Performance measures to be helpful must be easy to use, reliable ,
and report on the critical behaviours determine performance. Performance measures may be objective
or subjective. Objective performance measures are indications of job performance that can be verified
by others and are usually quantitative. Objective criteria include quality of production, degree of
training needed and accidents in a given period, absenteeism, length of service, etc.
Compare actual performance with standards and discuss the appraisal : Actual performance may be
better than expected and sometimes it may go off the track. Whatever be the consequences, there is a
way to communicate and discuss the final outcome.
Taking corrective action, if necessary : Corrective action is of two types; one puts out the fires
immediately, while the other destroys the root of the problem permanently. Immediate action sets
things right and get things back on track whereas the basic corrective action gets to the source of
deviations and seeks to adjust the difference permanently.


The performance appraisal methods may be classified into three categories:

1. Confidential report
2. Essay evaluation
3. Critical incidents
4. Checklists
5. Graphic rating scale
6. Behaviourally anchored
Rating scales
7. Forced choice method
8. MBO


9. Ranking
10. Paired comparison
11. Forced distribution


Group Appraisal
Assessment centre
Field review


Under the individual evaluation methods of merit rating, employees are evaluated one at a time without
comparing them with other employees in the organisation.
1. Confidential report : It is mostly used in government organization. It is a descriptive report prepared,
generally at the end of every year, by the employees immediate superior. The report highlights the
strengths and weaknesses of the subordinate.
2. Essay evaluation : Under this method, the rater is asked to express the strong as well as weak points of
the employees behaviour. This technique is normally used with a combination of the graphic rating
scale because the rater can elaborately present the scale by substantiating an explanation for his rating,
while preparing the essay on the employee, the rater considers the following factors: (i) Job
knowledge, (ii) Employees understanding about the company, (iii) The employees relations with coworkers and superiors, (iv) The employees general planning, organizing and controlling ability and
(v) The attitudes and perceptions of the employee.
3. Critical incident technique : Under this method, the manager prepares lists of statements of every
effective and ineffective behaviour of an employee. These critical incidents or events represent the
outstanding or poor behaviour of employees on the job.

4. Checklist and weighted checklists : Another simple type of individual evaluation method is the
checklist. A checklist represents, in its simplest form, a set of objectives or descriptive statements
about the employee and his behaviour.
5. Graphic rating scale : Under this method, a printed forms will be used and evaluate the performance
of an employee. A variety of traits may be used in these types of rating devices, the most common
being the quality of work. The rating scales can also be adapted by including traits that the company
considers important for effectiveness on the job.
6. Behaviourally anchored rating scales (BARS): Also known as the behavioural expectations scale, this
method represents the latest innovation in performance appraisal. It is a combination of the rating
scale and critical incident techniques of employee performance evaluation.
7. Forced choice method : This method was developed to eliminate bias and the preponderance of high
ratings that might occur in some organisations. The primary purpose of the forced choice method is to
correct the tendency of rater to give consistently high or low ratings to all the employees.
8. Management by objectives (MBO) : MBO requires the management to set specific, measurable goals
with each employee and then periodically discuss the latters progress towards these goals. This
technique emphasises participatively set goals (that are agreed upon by the superior and the
employee) that are tangible, verifiable and measurable. MBO focuses attention on what must be
accomplished (goals rather than how it is to be accomplished. It is, thus, a kind of goals setting and
appraisal programme involving six steps: (i) set the organisation goals, (ii) set departmental goals,
(iii) discuss departmental goals, (iv) define expected results, (v) performance reviews and (vi) provide






Ranking method : This is a relatively easy method of performance evaluation. Under this method, the
ranking of an employee in a work group is done against that of another employee. The relative
position of each employee is expressed in terms of his numerical rank.
Paired comparison method : Ranking becomes more reliable and easier under the paired comparison
method. Each worker is compared with all other employees in the group, or every trait, the worker is
compared with all other employees.
Forced distribution method : Under this system, the rater is asked to appraise the employee according
to a predetermined distribution scale. The raters bias is sought to be eliminated here because workers
are not placed at a higher or lower end of the scale.
Group appraisal : In this method, an employee is appraised by a group of appraisers. This group
consists of the immediate supervisor of the employee, other supervisors who have close contact with
the employees work, manager or head of the department and consultants. The head of the department
or manager may be the Chairman of the group and the immediate supervisor may act as the
coordinator for the group activities.
Human Resource Accounting (HRA): HRA is a sophisticated way to measure (in financial terms) the
effectiveness of personnel management activities and the use of people in an organization. It is the
process of accounting for people as an organizational resource. It tries to place a value on
organisational human resources as assets and not an expense. The HRA process shows the investment
the organization makes in its people and how the value of these people changes over time. The
acquisition cost of employees is compared to the replacement cost from time to time.
Assessment centre: This method of appraising was first applied in German Army in 1930. Later
business and industrial houses started using this method. This is not a technique of performance
appraisal by itself. In fact it is a system or organization, where assessment of several individuals is
done by various experts using various techniques. These techniques include the methods discussed
before in addition to in basket, role playing case studies, simulation exercises, structured in sight,
transactional analysis, etc.


15. Field review method : Where subjective performance measures are used, there is scope for raters
biases influencing the evaluation process. To avoid this, some employees use the field review method.
In this method, a trained, skilled representative of the HR department goes into the fieldand assists
line supervisors with their ratings of their respective subordinates. The HR specialist requests from the
immediate supervisor specific information about the employees performance. Based on this
information, the expert prepares a report which is sent to the supervisor for review, changes, approval
and discussion with the employee who is being rated. The ratings are done on standardized forms.
A 360-degree feedback, system collects performance information from multiple parties, including ones
subordinates peers, supervisor and customers. The 360-degree feedback is also currently used to design
promotion and reward. A major advantage of this system is that the feedback comes from multiple sources. If
a manager has six subordinates, the manager does not know which subordinate said what, as the results are
summarized and average. For example, one may criticise the boss for standing too close to people, another
may comment on the bosss aggressive tone, the third may take objection to the bosss naughty ways of
attending telephone calls and shuffling papers while a meeting is on. Since such feedback is offered
anonymously, the subordinates may unburden themselves of negative ratings somewhat freely.
The post appraisal interview is an essential part of the performance appraisal system. The employee gets
useful feedback information about how effectively and efficiently he is able to discharge the assigned duties.
It also gives the opportunity to the employee to explain his views about the ratings, standards, rating methods,
internal and external causes for low level of performance. The appraiser gets a chance to explain the employee
his rating, the traits and behaviours he has taken into account for appraisal, etc.
The problems inherent in performance appraisal may be listed thus;

Judgement errors.
Poor appraisal forms.
Lack of rater preparedness.
Manager lacks information concerning an employees actual performance
Standards to evaluate an employees performance are not clear.
Manager does not take appraisal seriously.
Manager is not prepared for the appraisal review with the employee.
Manager is not honest / sincere during the evaluation.
Manager lacks appraisal skills.
Employee does not receive ongoing performance feedback.
Insufficient resources offered to reward performance.
There is ineffective discussion of employee development.
Manager uses unclear / ambiguous language in the evaluation process.

In most of the Indian organizations, people earn promotions on the basis of their past performance. The past
performance is considered a good indicator of future job success. This could be true, if the job to be performed
by the promote is similar. However, in actual practice, the roles that a person played in the past may not be the
same as the one(s) he / she is expected to play if he is assigned a different job after his transfer or promotion to
a new position. Past performance, therefore, may not be a good indicator of the suitable for a higher role.

The potential appraisals are required to :


Inform employees about their future prospects;

Help the organization chalk out a suitable succession plan;
Update training efforts from time to time;
Advise employees about what they must do to improve their career prospects.


) Role Descriptions : Organistional roles and functions must be defined clearly. To this end, job
descriptions must be prepared for each job.

) Qualities needed to perform the roles : Based on job descriptions, the roles to be played by people must be
prepared (i.e. technical, managerial jobs and behavioural dimensions).

) Rating mechanisms : Besides listing the function and qualities, the potential appraisal system must list
mechanisms of judging the qualities of employees such as : i. Rating by others, ii. Tests, iii. Games and
iv. Records.

) Organising the system : After covering the above preliminaries, the HR manager must set up a system that
will allow the introduction the scheme smoothly incorporating answers to some complex questions such
i. How much weightage to accord to merit in place of seniority in promotions?
ii. How much weightage to accord to each of the performance dimensions technical, managerial,
behavioural qualities ?
iii. What are the mechanisms of assessing the individual on different indicators of his potential, and with what
degree of reliability ?
In present day organizations, the twin principles of motivating employees are common at all levels:
acknowledge unique contributions and alleviate personal concerns that impact professional performances. To
get the best out of people, the CEOs should;

Create a culture of excellence that motivates employees at all levels.

Match orgnisational objectives with individual aspirations.
Equip people with requisite skills to discharge their duties well.
Clear growth paths for talented employees.
Provide new challenges to rejuvenate flattening corners.
Empower employees to take decisions without fear of failing.
Encourage teamwork and team spirit and open communication.



Name of the Institution:_______________________________________________________

Name of the Student / Employee / Trainer :________________________________________ (Male / Female)
$ Multiple Choice Questions Select ; the most appropriate one
1. The basis for performance standards is
HR Plans
Compensation plan
Job analysis
2. One of the following is a future oriented appraisal technique
Rating scale
Field review method
3. Performance appraisals serve as building blocks of
Career Planning
Manpower Planning
Job Analysis
4. Which of the following techniques is least susceptible to personal bias ?
Forced choice
Critical incidents
Rating scales
5. A disadvantage of rating scales is
Time involved
Quantification of scores
Little training needed


% Put True (T) / False (F) in the blank space given below
Subjective measures in performance appraisal are most desirable.
Performance appraisals can reduce bias.

Employee self appraisals are a good way to decide promotions.

Using multiple raters improves evaluations.
Assessment centre technique is costly and time consuming.

Rating scales are particularly subject to bias.

Evaluation interviews require careful preparation.

Behavioural techniques focus attention on ratings rather than on observation.

Objective appraisal measures are always popular with employees.

Job analysis is the basis for performance standards.

& . Key Terms Exercise

Match the term below with its appropriate definition. Place the letter of the correct definition in the space
to the left of the term.
1. Narrative essay.

a. Comparing rates to one another.

2. 360-degree appraisal

b. Order of ranking from best to worst.

3. Assessment centers

c. Rating in beharioural terms.

4. Graphic rating scale

d. Evaluation based on key incidents.

5. Central tendency

e. Evaluation by boss, peers and subordinates.

6. Self appraisal

f. A candid statement from a rater.

7. Paired comparison

g. Assessment based on response to a battery of tests.

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9. Critical incident
10. Simple ranking

h. A scale that lists a number of traits and a range of

performance for each.
i. Evaluation by rates.
j. When raters rate practically all employees above average.

'. Activity Exercise (If the space is insufficient please attach some more papers)
You are heading a 250 member medium sized company that has just, had a fantastic year. Everyone
pulled together and worked hard to give a big boost to company profits. Unfortunately, due to raise in
input cost, you are forced to offer only a per cent rise in salaries across the board. At appraisal time, how
would you communicate praise for a job well done coupled with your limited ability to reward such
outstanding performance ? Now assume you can afford to hand out some handsome bonuses or raises.
What would be the best way to evaluate employees when everyone has done exceptionally well ?

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KEY FOR OBJECTIVE QUESTIONS (The Lecturer should keep this confidentially)

A. Multiple Choice Questions

1-e, 2. A, 3. B, 4.e, 5. b
B. True / Flase
1-f, 2-t, 3.-f, 4-t, 5-t, 6-t, 7-t, 8-f, 9-f, 10-t

C. Key Term Exercise

1-f, 2-e, 3-g, 4-h, 5-j, 6-i, 7-a, 8-e, 9-d, 10-b

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