Performance Appraisal

Performance Appraisal

• During the first world war, Walter Dill Scott of

US Army adopted the “Man-to-Man” rating
system for evaluating military personnel.
 Performance Appraisal

• Performance Appraisal means evaluating an

employee’s current or past performance
relative to the person’s performance
standards.
• PA is a process of obtaining, analysing and
recording information about the relative
worth of an employee. It has following
characteristics -
– It is a systematic examination of an employee’s
strengths and weakness in terms of the job
– PA is a scientific and objective process
– It is continuous process
– The main purpose of it is to secure information
necessary for making objective and correct
decisions on employees
 Importance and Purpose of PA
• It unifies the appraisal procedure

• It provides information which is useful in

making and enforcing important decisions

• It provides information in the form of records

about ratings
 Importance and Purpose of PA

• It serves to stimulate and guide employee

development. (pressure on employees)

• Helps in improving firm’s performance

• Helps in finding out inefficient employees

 Importance and Purpose of PA
• It makes for better employer-employee relations

• It prevents grievances and indisciplinary

activities

• Evaluator is bound to be alert

• Appraisal is the part of firm’s career planning

 The Evaluation Process
• Establish performance standards
• Communicate performance expectations to
employees
• Measure actual performance
• Compare actual performance with standards
• Discuss the appraisal with the employee
• If necessary, initiate corrective action
Methods of Performance
Appraisal
 Methods of Performance Appraisal
Traditional Methods
• Straight Ranking Method
• Man-to-Man comparison Method
• Rating Scale Method
• Grading
• Graphic Rating Scales
• Forced Choice Description Method
• Check lists
 Methods of Performance Appraisal
Traditional Methods
• Free Form Essay Method
• Critical Incidents
• Group Appraisal
• Field Review Method
• Forced Distribution Method
 Straight Ranking Method
• Manager compares an employer to other similar
employees rather than to a standard measurement.

• The employees are ranked from the highest to the

lowest or from the best to the worst

• The scale of measuring in this method is excellent,

above average, average, below average and poor.
 Paired Comparison

• This method compares each employee with all

others in the group one at a time.

• Man to man Comparison

 Rating Scale Method
• Rating Scale Method is used to evaluate the
performance of the employees depending on
the certain traits like attitude, performance,
regularity, accountability and sincerity.

• Many big companies like Airtel and Dell

Corporation are using this method.
 Graphic Rating Scale
•  Employee’s quality and quantity of work is
assessed in a graphic scale indicating different
degrees of a particular trait.

• The factors taken into consideration include

both the personal characteristics and
characteristics related to the on the job
performance of the employees.
• Generally it follows five points scale. The rater
rates each appraisee by computing the score
and a graph is formed that best describes his
or her performance.
 Essay Appraisal Method
• Managers/ supervisors are asked to express
the strong and weak points of employees in
the form of an essay.

• This method is a non-quantitative technique.

This traditional form of appraisal, also known
as “Free Form method”.
 Critical Incident Method
•  The evaluator rates the employee on the
basis of critical events and how the employee
behaved during those incidents.

• It includes both negative and positive points.

 Checklist Method
• The rater is given a checklist of the
descriptions of the behaviour of the
employees on job.

• The checklist contains a list of statements on

the basis of which the rater describes the on
the job performance of the employees.
 Field Review Method
• The review process is usually conducted by
the personnel officer in the HR department
who discusses the appraisal system with the
personnel outside the HR dept.
 Group Method
• Employees are rated by the group comprising
of immediate supervisor of the employee and
other supervisors who have knowledge about
the employee along with Head of department
and personnel expert
 Forced Distribution Method
• Diiscovered by Carl Fredrich.
• This method is also known as Bell Curve
Method.
• Under this method employees are put into
three categories based on their performance.
E.G.
• Top performers
• Average performers
• Worst performers
 Forced-Choice Method
• Here the rater is forced to make objective-
type choice.

• It contains two statements- both positive and

negative. The final rating is done on the basis
of all sets of statements.
 Methods of Performance Appraisal
Modern Methods
• Assessment center
• Appraisal by Results or Management by
Objectives
• Human Asset Accounting Method
• Behaviorally Anchored Rating Scales
• Self appraisal
• 360-Degree appraisal
 Assessment center
• This method was first used in 1930 by the
German army and then in 1960s by British
army.

• In this method, the managers perform job

exercise
• The assesse is requested to participate in in-
basket exercise, role playing, discussions,
computer simulations, etc.
 Assessment center
• They are evaluated on the basis of their
pervasive ability, communication skills,
confidence, mental alertness, administrative
ability, etc.

• This entire exercise is done under the trainer

who observes the employee behavior and then
discusses it with the rates who finally evaluates
the employee’s performance.
 Management by Objectives
• Peter Drucker in 1954 in his book "The
Practice of Management”
 Human Asset Accounting Method
• It a method to measure the effectiveness of
personnel management activities and the use
of people in an organization.

• It is the process of Assigning, budgeting and

reporting the cost of human resources
incurred in an organization, including wages
and salaries and training expenses.
 Human Asset Accounting Method
• to find the relative worth of human assets in
the terms of money.
• In this method the PA of the employees is
judged in terms of cost and contribution of the
employees include all the expenses incurred on
them like their compensation, recruitment and
selection costs, induction and training costs etc
whereas their contribution includes the total
value added (in monetary terms).
 Human Asset Accounting Method
• The difference between the cost and the
contribution will be the performance of the
employees.
• Ideally, the contribution of the employees
should be greater than the cost incurred on
them.
 Human Asset Accounting Method
• It deals with a major limitation that it
measures the cost to the organization but fails
to measure exact contribution or value of the
employee to the organization in monetary
terms.
Behaviorally Anchored Rating Scales
• This method combines the graphic rating scale
and the critical incident method.

• It determines in advance the critical areas of

the performance and the most effective
behavior to achieve the results.

• Then the actual job behavior of an employee is

evaluated against the predetermined behavior.
 BARS – Steps
• 1. Generating Critical Incidents

– Critical incidents are those which are essential for

the performance of the job effectively Ask
Jobholders or supervisors to describe behavior
(critical incidents) that have a significant impact
on the performance.
 BARS – Steps
• 2. Develop performance dimensions: It
involves grouping the behaviors in different
dimension sets, then define each dimension.

• 3. Recheck: It refers to verifying these

groupings by a different group of jobholders
and supervisors.
 BARS – Steps
• 4. Scale the critical incidents: This second
group then rates how effective or ineffectively
these behaviors affect the performance on a
scale.

• 5.Develop a final BARS instrument: About 7-8

of these dimensions are chosen as behavioral
anchors.
Self appraisal
360-Degree appraisal
 Problems of Appraisal
• The Halo Effect
• Leniency or Strictness Errors
• The Central Tendency Problem
• Similarity Error
• Miscellaneous Biases
• Dual and conflicting role of supervisor
• Poor communication
• Recency effect
 Problems of Appraisal
• Difference of opinions
• Feedback on appraisal is generally unpleasant
• Too many objectives often cause confusion
• Inappropriate reward system
• Time gap between two appraisal prog.
• Subjectivity
 Effective appraisal depends on-
• An atmosphere of confidence and trust
• Reliability and validity
• Job relatedness
• Standardization
• Practical viability
• Analysis of strength and weakness
• Appraisal prog. - less time consuming and less
costly
 Effective appraisal depends on-
• Open communication
• A post appraisal interview should be arranged
• Training of the evaluators
• Selection of right appraisal tool
• The supervisor must very thoroughly evaluate
the employee’s performance
 Potential Appraisal
• Potential appraisal is carried- to determine an
employee’s likelihood to succeed in the new
job.
Potential appraisal at Philips India

Problem Stars
High

Children
Potential

?
Solid
Low

Planned Citizens
Separation
Low High
Performance
Performance Management System
• Performance Management is the system
through Organizations set work goals,
determine performance standards, assign and
evaluate work, provide performance
feedback, determine training and
development needs and distribute rewards.