Performance Management and Appraisal Unit 1

Unit 1 Introduction to Performance Management

Structure:
1.1 Introduction
Objectives
1.2 Definition of Performance Evaluation
1.3 Evolution of Performance Management
1.4 Definitions and Differentiation of Terms Related to Performance
Management
1.5 What a Performance Management System Should Do?
1.6 Importance of Performance Management
1.7 Linkage of Performance Management to Other HR Processes
1.8 Summary
1.9 Glossary
1.10 Terminal Questions
1.11 Answers

1.1 Introduction
The process of identifying, evaluating and developing the work performance
of employees in order to achieve the goals and objectives of an organisation
is called Performance Management (PM). Effective performance
management is designed to identify performance requirements, enhance
performance, provide feedback relevant to those requirements and assist
with career development. In this unit, we will learn about the evolution of PM
and understand various terms associated with it. We start with a general
definition of Performance Evaluation (PE) to set the context for discussion of
its evolution and then go on to see the subtle differences between
performance evaluation, appraisal and management. By understanding how
the concept of performance evaluation evolved into performance
management, we will in this section be able to differentiate between
Performance Evaluation or Performance Appraisal (PA) and Performance
Management. This understanding is important to manage work performance
in the modern context.
Objectives:
After studying this unit, you should be able to:
 define performance management

Sikkim Manipal University Page No. 1

 Performance Management and Appraisal Unit 1

  explain the evolution of performance management

  differentiate PE or PA and PM
  identify what a PM should contain
  describe the importance of PM
 explain the linkage between PM and various human resource (HR)
processes.

1.2 Definition of Performance Evaluation

According to the Merriam Webster dictionary, the term performance has
several meanings. Out of these what fits the best is “fulfilment of a claim,
promise or request”. In management, performance means fulfilment of a
task that meets the organisational goals. The task may be assigned to an
individual through a request, an instruction or it could be implicit in the job
description or agreement which could be formal or informal. Performance
evaluation is therefore an evaluation of the efficiency and effectiveness with
which an individual has fulfilled the tasks envisaged in the above. It can
apply to a team also. HR scientist Flippo defines performance evaluation as
“a systematic, periodic and impartial rating of an employee’s excellence in
matters pertaining to the present job and his potential for a better job”. The
term performance appraisal is often used interchangeably with performance
evaluation.

1.3 Evolution of Performance Management

Prior to the era of competition, performance management had little role in
organisations. But even then, some form of evaluation existed. In the
manufacturing industry, it is easy to evaluate performance since the output
of the work can be physically counted. However, in the service industry, it is
more difficult. For example, how do you measure the performance of a hotel
waiter? Do you measure it by the number of people whom he serves or
would you have to also consider the satisfaction the customer had? In the
information era, it is even more difficult because organisations create value
using knowledge. For example, an employee has excellent knowledge of
software and creates wonderful customer satisfaction with it, but does not
transfer it to anyone while another employee does all that the first one did
and also transfers it to others without any fuss though he does not create as
much customer satisfaction as the former one. Who is a better performer?

Sikkim Manipal University Page No. 2

Performance Management and Appraisal Unit 1

With these insights we can understand that PM has evolved and has to
evolve with the evolution of business. We can describe PM in separate
phases based on the general trend for convenience. However, please
remember that each company’s PM evolves depending on the life cycle of
the company.
Stage I: India was transitioning from an agrarian economy to a
manufacturing economy in the 1960s. During this period, a concept called
Employee Service Record (ESR) came into vogue. It was also called Annual
Confidential Report (ACR). True to the name ‘annual confidential report’, the
performance evaluation (PE) was done once a year. It is the legacy of
government bureaucracy such as the Indian Administrative Service,
Defence Services, etc., but private industry followed suit and adopted the
method. The document gave a lot of information about an employee’s
performance starting from his punctuality to productivity in general terms
and from social finesse to interaction with the manager. It was basically a
report of the employee’s behaviour and anything adverse in it affected the
employee’s career seriously. The most popular method was to draw up a list
of traits and comment on them or mark each of them out of ten. Knowledge,
sincerity to job, punctuality, dynamism, loyalty, leadership etc., were the
common traits used. The endorsement that the evaluating officer made on
these traits was never communicated to the employee (the confidentiality
was strict and only select members of the management had access to the
information). The employee had no knowledge of the content and could only
guess that he had favourable or unfavourable remarks in the ACR based on
whether he had got a promotion or missed it.

Stage II: This era perhaps started in the late 1960s and made the earlier
system semi-transparent. Here the employee came to know of his
performance, and if he had done badly he could improve himself. As a
guideline, if a trait had ten points and the employee scored less than four,
then he would be given a formal written communication about his
weaknesses so that he could better his performance. In addition to this, a
concept called Reviewing Officer (RO) was introduced. RO was an officer
superior to the one who initiates the ACR (one who initiates was called
reporting officer). The role of the RO was to moderate the adverse
comments made by the reporting officer. However, even now, an employee

Sikkim Manipal University Page No. 3

Performance Management and Appraisal Unit 1

who has performed well had no clue about his performance and hence
managers could mark him arbitrarily.
Stage III: This phase perhaps can be traced to the late ’70s and the ’80s,
when ACR was replaced by Performance Appraisal (PA). The most
important change was that the employee was given a voice and s/he could
record his/her accomplishments in the appraisal. In addition to the traits on
which the reporting officer continued to report, many new components which
could measure productivity were included, for example, targets achieved.
Some organisations dared to include the training needs of the employee
which was determined jointly by the employee and the reporting officer. But
the confidentiality element was still present and the process was control
oriented rather than development oriented.
Stage IV: While the third phase was in existence, sometime by the late
1970s, organisations such as Larsen & Toubro and State Bank of India
shifted towards a development oriented PA. It was target based,
participative, open and, most importantly, the issue of confidentiality
diminished. The focus was on performance planning through a systemic
approach. In this era, the ‘appraisee’ (or the employee) and the reporting
officer discussed and mutually decided on the objectives to be achieved
during the year and the Key Performance Indicators (KPI) which would
support the argument that a performance standard has been achieved.
Usually there was an interim review after six months or, at times, as often as
necessary. The training needs of the employee were always discussed and
often, new targets were set. This was a collaborative process in which the
employee had as much, if not, a bigger role than the reporting officer. These
standards shifted the PE into a PA process and laid the foundation for PM.
Concurrently, the HR departments also got strengthened and they were
directly held responsible for development of the employee.
Stage V: This cannot be strictly spoken of as a phase, but was the
continuation of Stage IV. Here the system became more mature and the
emphasis was on planning performance, organising training and other
development programmes in a systemic way to include on-the-job training,
job rotation, etc., so as to ensure the development of the employee. Teams
became the norm in many places and, therefore, team appraisal also crept
into companies. All these enhanced employee productivity.

Sikkim Manipal University Page No. 4

 Performance Management and Appraisal Unit 1

Self Assessment Questions

1. In the second stage of the evolution of PM, the system became
_________.
2. In India, the fourth stage of evolution of PM was driven by
organisations such as _____________ and ______________.
3. A truly collaborative process of PM came about in the _____________
stage of evolution of PM.

1.4 Definitions and Differentiation of Terms Related to

Performance Management
A) Performance evaluation and performance appraisal: In "Encyclopedia
of Business," second edition, the section titled "Employee Evaluation and
Performance Appraisals" groups both terms together, noting that in some
cases, evaluation is one step in a performance appraisal, which in turn is a
broader part of an organisation's Performance Management system.

 Performance evaluation: The assessment of performance of an

individual is called performance evaluation. This assessment can be
done by the individual himself/herself, by a superior or by anyone else
who knows about his/her performance. The evaluation is usually based
on comparison. It may be comparison to the performance of another
employee doing similar job, in comparison to some standards already
laid down by the superior or mutually accepted by the employee and the
superior, based on some formal contract or informal contract. In sum, PE
implies assessment of the job done. Assessment is therefore the
measuring process in the overall PM system and is only a subset of PM.
An evaluation can occur outside the context of determining an annual
pay increase. Ideally, informal employee evaluation is an on-going
process in which an employee receives routine feedback on how he's
doing although in reality, it takes place on some periodicity decided in
the company policy such as quarterly, twice a year, annually, etc.

 Performance appraisal: Why does one evaluate performance? The
obvious answer is ‘enhancing performance’. Enhancing performance
demands that the employee accepts the need to perform better and
overcome the hurdles in doing so. This implies that the employee should
be made aware of his performance level and then told to enhance it.

Sikkim Manipal University Page No. 5

 Performance Management and Appraisal Unit 1

Though the terms PE and PA are considered as separate by HR purists,

in general, these are used interchangeably. Some consider that
evaluation is one step in the process of appraisal. In evaluation, a
person who is aware of the employee’s work provides feedback on
measures such as quality of work, job skills, punctuality, etc. In other
words, PA attempts to assess the overall value an employee creates for
the organisation by contributing to the work. Performance also consists
of behaviours and results. The individual components of the appraisal
are based on some pre-determined factors such as conducting work
task, which gains more importance than organisational citizenship.
 The reason for confusion: Performance appraisals and evaluations are
time consuming and expensive. They are conducted by people (human
beings) and subjectivity is often the rule than an exception. As a result,
evaluation and appraisal look similar. If you look at HR World’s (a
leading online HR community), evaluation measures skills, quantity and
quality of work, communication, work habits, judgement, leadership, etc.
Often PE takes into account the goals set between the employee and
the supervisor and also the self evaluation of the employee. Some would
claim that this is PA.

 A modern view: Thus, although there is considerable overlap between
the terms PE and PA, we should consider that PE is a part of PA
system. PA includes communicating the PE to the employee with
examples.
B) Performance Management versus Performance Appraisal
Clark (2005) suggests that PM aims to “establish a framework in which
performance by human resources can be directed, monitored, motivated
and refined, and that the link in the cycle can be audited”.
Though managers have to appraise an employee, they often shy away from
this because while they are comfortable evaluating, they are not comfortable
appraising (which includes communicating). The possible reason for this is
their discomfort with giving examples. Also, because rewards are often
linked to it, it embarrasses the managers even more for after all in the
ensuing period, they have to take work out of these very employees.
Managers have to play the role of a judge in PA and a judge not only has to
take a view, but also communicate the judgement.

Sikkim Manipal University Page No. 6

 Performance Management and Appraisal Unit 1

Organisations often mix up PM and PA. The differences between PM and

PA are discussed below:
 PM is strategic in nature and intended to achieve the strategic objectives
of the firm, while PA is operational in nature and covers the year in
question.

 PM deals with long-term goals and is about managing an employee’s
performance over the next five to ten years, while PA is short-term.

 PM, therefore, is forward looking and sets the stage to create the
required performance, while PA is retrospective in nature. Thus, PM
ensures that managers are in constant touch with the individual and
modifies and clarifies the performance according to the business needs,
changes and mutual expectations. Because of this, managers play the
role of a coach and trust is built between the manager and the
employee.

 PM is a constant process and continues throughout the life of the
organisation while PA is ‘episodical’ in nature and lays down the
episodes and their consequences (for example, you failed to complete
three tasks given for the year and therefore, I grade you below average).
A direct consequence of PM is that the relationship between the
manager and employee improves and mutual respect, trust and
understanding develop. PA is based on top down approach and
therefore does not create trust and relationship.

 PM is a process while PA is a system and is well laid out and
documented with formats and the like.

 PM is more integrated to the business while PA is a snapshot of the
events and therefore more isolated and is not so integrated to the
business’s needs. Thus PM embraces a whole range of activities aiming
to improve the overall organisational performance; PA is only concerned
with an individual’s performance. Hence it represents a distinct system
rather than an integrated one.

 PM is management by mutual agreement and consensus between the
employee and the organisation while PA is more of a command
structure.

 PM is holistic in the sense that the goals of the individual and that of the
organisation are aligned while PA is more individualistic.

Sikkim Manipal University Page No. 7

 Performance Management and Appraisal Unit 1

 PM is owned and executed by the managers and especially line driven

 while PA is more HR driven.
 PM is flexible and adaptable while PA is more rigid in terms of
frequency, formats, ranking, etc.

 PM is developmental in nature and focuses on the growth of the
individual while PA is more ‘past mistake’ oriented.

 PM is not only practical but also effective for organisational growth while
PA is more bureaucratic.

 PM focuses on qualitative aspects with examples and some quantitative
aspects to support the qualitative component, but PA is more
quantitative in nature.

 PM can be easily linked to total reward while PA can be linked to
financial reward only.
While PA is considered to be an essential component of PM, the two are
distinct. PA is often used to link a person to pay but PM is used to link a
person to overall development and growth in addition to pay. If there is an
effective PM, an employee should be able to negotiate his compensation
including the risk pay in relation to a contribution to the strategic goal of the
organisation. Thus we see that though PM and PA are interchangeably
used, they are fairly distinct.
Self Assessment Questions
4. PM is more episodical in nature. (True/False)
5. PA is a component of PM. (True/False)
6. PE and PA looks like the same because of the subjectivity inherent in
the processes. (True/False)
7. PM, PA and PE are different names given by people and is one and the
same. (True/False)

1.5 What a Performance Management System Should Do?

The following are some of the points which mention what a performance
management system should do:
 Develop clear job descriptions and employee performance plans which
include the Key Result Areas (KRA) and performance indicators.

 Select the right set of people by implementing an appropriate selection
process.
Sikkim Manipal University Page No. 8
 Performance Management and Appraisal Unit 1

 Negotiate requirements and performance standards for measuring the

outcome and overall productivity against the pre-defined benchmarks.

 Provide continuous coaching and feedback during the period of delivery
of performance.

 Identify the training and development needs by measuring the outcomes
achieved against the set standards and implementing effective
development programmes for improvement.

 Hold quarterly performance development discussions and evaluate
employee performance on the basis of performance plans.

 Design effective compensation and reward systems for recognising
those employees who excel in their jobs by achieving the set standards
in accordance with the performance plans or exceed the performance
benchmarks.

 Provide promotional/career development support and guidance to the
employees.

 Perform exit interviews for understanding the cause of employee
discontentment which has led the employee to quit the organisation.
Self Assessment Questions
8. PM implies giving continuous __________ and ____________ during
the period of delivery of performance.
9. To ensure a good PM process, there should be clear job descriptions
and employee performance plans which include the ____________.

1.6 Importance of Performance Management

Armstrong and Baron (1998) defined Performance Management as “a
process which contributes to the effective management of individuals and
teams in order to achieve high levels of organisational performance. As
such, it establishes shared understanding about what is to be achieved and
an approach to leading and developing people which will ensure that it is
achieved”.
The importance of Performance Management lies in that it ensures that the
managers manage the people they are responsible for in an effective
manner so that the strategic goals of the organisation are achieved.
According to the Chartered Institute of Personnel and Development (CIPD),
it is the primary means by which they ensure that employees:

Sikkim Manipal University Page No. 9

 Performance Management and Appraisal Unit 1

  Know and understand what is expected of them;

  Have the skills and ability to deliver on these expectations;
 Are supported by the organisation to develop the capacity to meet these
 expectations;
  Are given feedback on their performance;
 Have the opportunity to discuss and contribute to individual and team
aims and objectives.
Performance Management is important because:
  It ensures that people have the knowledge and ability to perform.
 It enables orchestrating the competencies and human resources
required for strategic implementation. In other words, it enables
managers to take into account broader issues and longer-term goals
thus linking various aspects of the business, people management and
individuals and their teams.

 Employee performance management includes planning work and setting
expectations, monitoring performance, developing the capacity to
perform, rating and rewarding good performance. Therefore, it
encompasses the entire gamut of activities that motivate people towards
improving their performance.

 Performance management provides an excellent opportunity to identify
developmental needs. During planning and monitoring of work,
deficiencies in performance become apparent and can be assessed.
Areas for improving good performance become evident and action can
be taken to help successful employees improve even further.
Armstrong and Baron in their book ‘Managing Performance’ highlights that
performance management adds value by:
 Communicating a shared vision of the purpose and values of the

organisation;
 Defining expectations of what must be delivered and how it should be


delivered;
 Ensuring that employees are aware of what contributes to high

performance and how they need to behave to achieve it;
 Enhancing motivation, engagement and commitment by providing a
means of recognising effort and achievement through feedback;

Sikkim Manipal University Page No. 10

 Performance Management and Appraisal Unit 1

 Providing the basis for formulating personal development and


improvement plans;
 Enabling people to monitor their own performance as well as those

reporting to them against agreed objectives and standards;
 Encouraging dialogue about what needs to be done to improve
performance and achieving this by mutual agreement rather than
direction from above.
Self Assessment Questions
10. According to CIPD, PM is the primary means by which organisations
ensure that employees __________ what is expected of them.
11. One of the important value adders of PM is enabling people to monitor
their own performance as well as those reporting to them against
_______________.
12. According to Armstrong and Baron, ____________ a shared vision of
the purpose and values of the organisation is an important value add of
PM.

1.7 Linkage of Performance Management to Other HR Processes

PM is also important for managing other HR functions. Let us have a look at
these.
 Recruiting. Recruiting is the first step in getting human resources to the
firm. While recruiting, we use job descriptions or competencies. Both, in
the ultimate analysis, are a definition of the performance requirements.
 You must have observed that during an interview, the interviewers ask
‘whether you can do this job or that’, ‘how well you can do it’, ‘whether
you have any experience of doing it?’ and so on. PM is important
because it enables one to identify the type of candidates in relation to
the performance required by clearly defining what performance is and
evaluating the capability of the candidate. Thus, during recruitment, one
is able to match the abilities, personality, intelligence and emotional
quotients of the individual to the performance requirement. This would
be impossible if we do not understand what PM is. We can summarise
by stating that recruitment is a way of collecting competencies for
performance in an organisation and hence PM affects recruiting directly.
For example, if a firm is planning to go for expansion into high-end
consulting five years from now, the need for recruiting highly efficient
Sikkim Manipal University Page No. 11
 Performance Management and Appraisal Unit 1

consultants at a huge cost to the company is less urgent than if the firm
was to get into consulting in six months. In the former case, we may plan
to train some people internally to come up to the expected performance
level in the next five years.
 On-boarding. PM is important in the on-boarding process. Through PM,
we are able to clearly express the needs of the organisation, its norms
and such other parameters which are required for performance so that
the candidates come mentally tuned for the job. Using the PM
knowledge, it becomes easy for an HR manager and the candidate to
match his/her competencies to the appropriate job which in turn
enhances not only efficiency but also trust, job satisfaction, motivation
and so on. This scientific match-making further enables the career
progression of the employee because s/he is able to perform well, the
job being one that matches his/her ability and aptitude.

 Organisational performance. PM is the process by which we define
what portion of the organisational goal a person should deliver. Hence
PM traces the individual competencies and deliverables to the
organisational strategy. In the earlier sections, we had seen how PM is
more holistic and integrated. What this means is that PM enables an
organisation to extract meaningful work from an individual. The
importance of PM in doing this in a manufacturing, service and
Information economy vary. In a traditional manufacturing context, it
would be possible to lay down the exact performance requirements in
terms of productivity in a defined time. In the modern manufacturing
system where a lot of customisation is done, it is a little more difficult,
since the employee has to be innovative in addition to being productive.
Let us say take the case of a mason who joins bricks and also makes
some intricate work in the lobby of your house. It is possible to lay down
that you should lay 1000 bricks a day and so on, but it is not possible to
make such a performance target when it comes to making some artistic
work out of cement and concrete in the lobby. This analogy illustrates
how the work place has changed even in manufacturing, thus creating
newer challenges for PM. In the case of services, there is a concept
called co-creation, which you may have studied in marketing. By co-
creation, we mean that the service provider and the customer create the
value together. For example, you go to book a hotel room for an

Sikkim Manipal University Page No. 12

 Performance Management and Appraisal Unit 1

important client from abroad. You then ask for the food to be included,
the office support to be included, a city tour and a cultural activity to be
included and so on. Here, the employee (say front office manager or the
sales executive) and you are involved in creating this value, and this
would differ very much from providing only a room. The performance
definition in the former case is more complex. This is true for several
services such as insurance, a bank deposit which has to be customised,
an airline booking and so on. Come to the information economy and
performance becomes even more tacit and complex. In information
economy, the value is created by the knowledge transfer of an
employee. Take, for example, a professor or a doctor who has to impart
knowledge to a student or a junior doctor. How do we define
performance in their case? And how do we manage this anyway? This is
true for a scientist who can transfer knowledge to a team and have a
successful innovation also. This underscores the importance of
performance management in defining the performance required once
the on-boarding is completed.
 Learning and Development (L&D). If we join a company and are not
able to perform to the required standards, then we need to learn the
same. This is done through training. We should also develop some new
skills so that we can do a job of higher value. If not, we stagnate in the
same job. This is done through development. This automatically leads
us to the question “what should one learn?” and “what skills should one
develop?” Of course, this is defined by what the organisation would
require one to do in future. Take the example of a young manager who
joins a retail company like ‘MORE’. They may be planning to open
several branches in the city and other states. He may be required to
head one such branch in next three years. Then, the organisation would
lay down his/her performance requirement as the ability to administer a
branch under supervision and support the manager in achieving sales
target of, say, ` 2 lakh per day, learning basic accounting methods,

learning about the supply chain and merchandising and learning to run a
sales promotion campaign. This implies not only on-the-job training but
also sending him for a course on ‘accounting for non-finance managers’,
a short course on supply chain management, on-the-job training in the
supply chain network for two to three months, some training on sales
Sikkim Manipal University Page No. 13
Performance Management and Appraisal Unit 1

promotion and so on. Some of these are on-the-job and some off- the-
job. Armed with this, he will be able to create a branch with high
productivity. Now this learning and development is the function of the
organisational performance need ‘to head a branch independently’
defined by the company. Therefore, both training and development are
for the purpose of performance and hence the linkage of PM and L&D is
intimate.
 Reward and motivation. Here we cover both intrinsic and extrinsic
rewards. Let us go back to the case of our young manager. Imagine he
does all these and he does not get any reward and is waiting for that
wonderful day when he will become the manager and earn a lot.
Chances are that he will get so de-motivated that he may resign and go
away before that. While he may have learnt and gained, the organisation
would lose. Therefore PM links this performance (usually counted on an
annual basis) and rewards him with an extrinsic reward, i.e., money.
There may be other extrinsic rewards such as appreciation, awards, etc.
The true intrinsic motivation runs through these three years, i.e., to
become a branch manager in his own right. Now if we do not give him
that as the performance target he should achieve in three years, but
merely give him targets and financial rewards every year, though he
gets extrinsic rewards, he will not get any intrinsic reward and therefore
motivation of a higher level will not be possible. Let us say that we
promise him the job of a manager, but do not facilitate the learning, he
will find himself unable to handle the job of a manager independently
and hence his intrinsic motivation will also be low, because he will feel
that he will fail in the higher job. Of course there will always be some
people with high internal locus on control and self confidence that they
will take up the job and do well without any L&D that the organisation
provides; but we are not talking of such exceptional cases here. Let us
also consider a situation where a person is given all the L&D facilities
but since the company is not expanding, he will never be an
independent manager in the near future (say 10 years or so). Though
you may be providing him with extrinsic rewards and L&D which should
increase his intrinsic motivation, since there is no real reward at the end
of a reasonable period, he may not show any keen interest in L&D
(unless of course he plans to use it for getting a better job elsewhere).

Sikkim Manipal University Page No. 14

Performance Management and Appraisal Unit 1

Thus the performance needs of the organisation leads to identifying

down the reward. Some of those rewards must be extrinsic such as pay
hike and bonuses and some intrinsic such as opportunity to grow to a
higher job profile. This complex gamut of planning and execution of the
individual reward is done on the basis of PM and becomes part of PM.
 Exit management. There is an old adage popular in government
organisations: “You can be a ticketless passenger, but do not pull the
chain”. In a business set-up, you cannot even be a ticketless passenger.
PM clearly defines the performance requirements and enables an
organisation to get rid of people who do not contribute to the
performance of the company. Hence it is an important tool in managing
the exit of people. There are modern organisations that rank employees
category-wise and ask the last 10% to leave the company. Though often
criticised, it is an excellent method of eliminating the low performers from
the system. The US military follows a system called ‘up or out’ which
means that if you do not get promotion, you need to retire from the
military (after giving you sufficient time to find another job). This is
another way to use PM to keep the organisation vibrant.
Self Assessment Questions
13. Although PM is not so important for intrinsic motivation, one cannot
handle extrinsic motivation without it. (True/False)
14. HR processes except Exit Management are facilitated strongly through
PM. (True/False)
15. The link between PM and training (or learning) is more intimate than
the link between PM and development. (True/False)

1.8 Summary
In this unit, we saw how PM evolved through roughly five stages. From
confidentiality driven, one-way method of assessing a person, the
organisations have not only embraced transparency but also collaborative
spirit by jointly setting up objectives and jointly executing them. We also saw
how the terms such as PE, PA and PM is often interchangeably used but
how they are clearly distinct. We also saw how PM is a more holistic
concept and connects the other HR processes and that PA is a sub-
component of PM and further that PE is a sub-component of PA. This unit

Sikkim Manipal University Page No. 15

Performance Management and Appraisal Unit 1

thus puts us on solid ground to understand the concept and method of PM.
In the units that lie ahead, we will also discuss how PA, feedback, etc., are
to be done so that it leads to an effective PM. We also had a glimpse of how
strategy is executed in an organisation through performance of the
individuals. This unit would have convinced you of the centrality of PM in
creating sustained competitive advantage and in organisational success.

1.9 Glossary
Performance Evaluation: A method of awarding a numerical figure or
qualitative comment to traits or levels of achievement, usually as perceived
by the superior.
Performance Appraisal: A method of jointly identifying the performance
requirement and whether these have been achieved in a given period of
time usually known as PA period.
Performance Management: A method of using performance appraisal to
enhance the individual and organisational potential by taking a long-term
view, relevance to the organisational goals and potential of the employee or
subordinate. Though there is a PM period, it becomes a roll-on process with
a long-term perspective.
On-boarding: The method of joining a job in a company by assigning the
right job, team, induction into the organisational culture, etc.

1.10 Terminal Questions

1. Discuss the evolution of performance management.
2. Differentiate between PE, PA and PM giving five important differences.
3. Elucidate four things that a PM should do?
4. What, according to Armstrong and Baron, are the value additions of
PM?
5. Is there a link between PM and recruitment? Justify.

1.11 Answers
Answers to Self Assessment Questions
1. Semi-transparent
2. Larsen & Toubro and State Bank of India
3. Fifth

Sikkim Manipal University Page No. 16

 Performance Management and Appraisal Unit 1

4. False
5. True
6. True
7. False
8. Coaching, feedback
9. Key result areas
10. Know and understand
11. Agreed objectives and standards
12. Communicating
13. False
14. False
15. False

Answers to Terminal Questions

1. Each company’s PM evolves depending on the life cycle of the
company. But based on general trend, PM is described in separate
phases (five stages). For more details refer section 1.3.
2. The assessment of performance of an individual is called PE which is a
part of PA system. PM is strategic in nature and intended to achieve the
strategic objectives of the firm, while PA is operational in nature. For
more details refer section 1.4.
3. Developing clear job descriptions, selecting right people, negotiating
requirements, providing continuous coaching are some of the things PM
should do. For more details refer section 1.5.
4. The value additions of PM include communicating shared vision,
defining expectations, enhancing motivation, etc. For more details refer
section 1.6.
5. There is a link and PM affects recruiting. For more details refer section
1.7.
References:
 Poladino, B. (2007). Five Key Principles of Corporate
 Performance Management. John Wiley and Sons.
 Armstrong M. (2000). Strategic Human Resource Management: A
Guide to Action. Kogan Page Limited.

 Rao, T. V. (2004). Performance Management and Appraisal System.
Sage Publications Limited.
Sikkim Manipal University Page No. 17