PERFORMANCE APPRAISAL SYSTEM

Corporate Score Card

OUTLINE Definition Meaning Objective /Need/Purpose / Importance Company Strategies and PAS techniques Process of PA Essentials of Good PAS Methods of PAS Problems of PA

Definition & Meaning

It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development Performance refers to the accomplishment of tasks

A formal, structured system of measuring and evaluating an employee's job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that all the three cadres are benefited i.e. the employee, organization, & society
PA indicates the desired performance level, level of actual performance and the gap between these two

Definition & Meaning Performance Appraisal is always measured in terms of results and not efforts
A systematic presentation of an employees Strength s and Weaknesses on the job. It refers how well someone is doing the job
They are arranged periodically according to a definite plan

Other terms used for the PAS- Performance Rating, employee assessment, employee performance review, personnel appraisal, performance evaluation, employee evaluation & merit rating

Objective /Need/Purpose / Importance

It helps in rectifying performance deficiencies & to set new standards Eg.- Raymonds

Effective to take decisions regarding promotions and transfers, pay raise where regular pay scales have not been fixed Eg- Indian Rayon
To contribute to the employee growth & development through training and development Eg.-Tata Power

To provide information for making decision regarding lay off, retrenchment etc. Eg- Hyundai Engg
To prevent grievances and in disciplinary activities Eg Galxo

Repetition of above slide into 4 broad categories

Company Strategies and PAS techniques

Strategies Stability & Sustainable Growth Expansion, Diversification, M &A Retrenchment PA- Techniques Traditional Appraiser Superior

Modern

360 Degree Appraisal Superior

Traditional

Low Cost Modern Leadership, New Product Differentiation

360 Degree Appraisal

Types of Appraisal
Confirmation Appraisal This determines whether the assessment of the organization as regards the knowledge ,skills and experience of the employee has been proven during the testing period. Potential Appraisal People at the senior most levels in the organizations hierarchy generally carry out potential appraisals. It is more objective Periodic Appraisal Several organizations carry the practice of appraising their performance against targets as well as assessing the candidates traits. Eg aggressiveness v/s assertiveness

Degrees of Appraisals
90 degree appraisal 180 degree appraisal 280 degree appraisal 360 degree appraisal customers / clients 720 degree appraisal Boss & subordinate Boss ,subordinate, peer not applicable Boss, subordinate,peers, Under development

Formal /Informal
App Whose performance is app ? Who are raters When to evaluate How to evaluate

Process of PA
Objectives of Performance Appraisal

Individual

Systems

Establish Job Expectations

What methods to be used Design an Appraisal Programme

Appraise Performance

Performance Interview

Use Appraisal Data for Appropriate Purposes

Essentials of Good PAS Standardized PAS Uniformity of PAS Defined Performance Standards

Trained Raters
Usage of relevant rating tools or methods PAS should be based on job analysis

Consistent Documentation

Difference PA & PMS

Performance Appraisal
PA is just a mechanism of controlling employee performance through--salary administration, reward administration, promotion and taking disciplinary action. it focuses on the method of appraisal. PA the motive is to reward People at the end or in the midst of the year by means of incentives The main aim is to reward and not develop.

Performance Mgmt System

PM is about managing the performance of the employees by setting KRAs( key result areas) and KPAs ( key performance areas) so that people know that what targets they are expected to achieve and what activities will be required to accomplish your goals PM the motive is to manage the performance throughout the year and not just judging it at the end of the year. main aim is development of performance to make it reach to the level of excellence.

PA is just a systematic evaluation of the employee based on traits and performance.

PMs has 3 stages involved in it goal setting & motivation; encouraging process that is applied; rewards and consequences.

Methods of PAS
Past Oriented Rating Scales Checklists Forced Choice Methods Forced Distribution Method Critical Incident Method Behaviorally Anchored Scales Field Review Method Performance Tests & Observations Future Oriented

Management By Objectives

360 Degree Appraisal

Psychological Appraisal

Annual Confidential reports

Essay Method Comparative Evaluation Approach

Assessment Centers

Traditional Techniques
Rating Scales Simplest and popular method Typical rating scale consisting of numerical scales each representing a job related performance criterion ( eg- attendance, punctuality cooperation etc rated from excellent to poor ) The rater calculates the no of score and links the incentives or salary depending upon the score. Checklists A check list of statements on the traits of the employee and his or her job is prepared in two columns Yes & No Once this list is checked then the total calculated Its easy, economical, ltd training required for the rater. But has halo effect as disadvantage

Checklist Appraisal Questions

Yes
1. Does the employee willingly cooperate with others in completing work assignments? 2. Does the employee have adequate job knowledge to perform duties in a satisfactory manner? 3. In terms of quality, is the employees work acceptable? 4. Does the employee meet deadlines for the completion of work assignments? 5. Does the employees record indicate unexcused absences? 6. Does the employee follow safety rules and regulations?
___ ___ ___ ___ ___ ___

No
___ ___ ___ ___ ___ ___

Graphic Rating Scale

Name_____________________________ Dept.___________________________ Date_______________
Outstanding Good Satisfactory Fair Unsatisfactory

Quantity of work

Volume of acceptable work under normal conditions Comments: Thoroughness, neatness, and accuracy of work Comments:

___

___

___

___

___

Quality of work

___

___

___

___

___

Knowledge Clear understanding of the facts of job or factors pertinent to the job Comments: Personal qualities

___

___

___

___

___

Personality, appearance, sociability, leadership, integrity Comments:

___

___

___

___

___

 Performance Tests & Observations

With a ltd no of jobs, employee assessment may be based upon a test of knowledge or skills. The test may be of paper and pencil variety or an actual demonstration of skills. These should be reliable and validated.

Annual Confidential reports

Confidential records are maintained mostly in govt depts. Though its application in the industry is not ruled out. For eg. ITI called this ACR and measured attendance, self expression, ability to work with others etc

Essay Method
Here we emphasize the overall performance based on Ss & Ws of employees performance rather than specific dimensions By asking supervisors to enumerate specific egs of employee behavior minimizes bias to some extent. Essays are not amenable for evaluation and analysis Quality of analysis depends upon the writing ability and not on employee performance

Cost Accounting approach

This method evaluates performance form the monetary returns the employee yields to his or her organization. A relationship is established between the cost included in keeping the employee and the benefit the organization derives from him or her.

Comparative Evaluation Approach These are collection of different methods that compare one workers performance with that of his or her coworkers. Generally conducted by supervisors. They are useful in deciding merit pay increases, promotions, and organizational rewards.

Ranking Method In the first one the supervisor ranks his or her subordinates in the order of their merit. The rater finds the employee with best performance and worst performance rates the former best and later worst.Eg- Bajaj Tempo &BASF Paired Comparison Method The appraiser appraises each employee with every other employee one at a time. Eg Godrej Soaps, NOCIL

 Forced Choice Methods

The rater is given statements about the employees. These statements have to be arranged in blocks of two or more. and the rater indicates which statement is most or least descriptive of the employee The rater is forced to select statements which are readymade. Absence of personal bias , Disadvantage- if statements not properly framed EgCeat , Modern threads follow this

Forced Distribution Method

This method prevents the rater from rating the employee too high or too low. The rater has to distribute his rating in a pattern to confirm normal frequency distribution It is assumed that the employee performance levels conform to a bell shaped curve.

Critical Incident Method

The approach focuses on certain critical behaviors of an employee that make all the difference between effective and no effective performance of a job. Such incidents are then recorded by the superiors. Evaluation is based on actual job behavior.

Modern Methods MBO Eg - L & T , HAL

It is a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individuals major areas of responsibility in terms of results expected of him and use these measures as guides for operating the unit and assessing the contributions of each of its members Defn 2 MBO A system approach to managing and organization where those accountable for directing the organization first determine where they want to take the organization A process requiring & encouraging all key management personnel to contribute their maximum to achieve overall objectives An effort to blend & balance all the goals of all key personnel

Objectives
To change behaviors and attitudes towards getting the job done. It is results oriented, it is performance that counts

It is management system and philosophy that stress goals rather than methods It provides responsibility and accountability and recognizes that employees have needs for achievement and self fulfillment

Process
Set Organizational Goals Joint Goal Setting Performance Reviews Set Check posts Feedback

Benefits It increases employee motivation Managers are more likely to compete with themselves It reduces role conflicting and ambiguity It forces & aids in planning

It identifies problems at an early stage

It helps individual manager to develop interpersonal skills, leadership skills , listening, planning, counseling, motivating and evaluating

Assessment Centers
First developed in the US & UK 1943 Used for evaluating executive or supervisory potential. A central location where mgrs come together have their participation in job related exercises evaluated by trained observers To observe the participants over the period of time by observing their behavior through various exercises like in basket, work groups, role playing etc. Characteristics such as assertiveness, persuasive ability, planning and organization ability self confidence creativity etc is checked. Eg -Crompton Greaves,Eicher, HLL, Modi Xerox, ICICI Bank, Tatas, Birla Group

Psychological appraisal
They consist of in-depth interviews, psychological tests, consultations and discussions with the supervisors, employees etc An evaluation of the employees intellectual, emotional, motivational and other related characteristics that suggest individual potential and may predict future performance. From these evaluations placement and development decisions may be made to shape the person career.

Behaviorally Anchored Scales

Sometimes called behavioral expectation scale are rating scales whose scale points are determined by statements of effective and ineffective behavior. They are said to be behaviourally anchored in that the scales represent a range of descriptive statements of behaviour varying from the least to the most effective

Behaviorally Anchored Rating Scale (BARS)

Engineers Name: _________________________ 9 ___ This engineer applies a full range of technical skills and can be expected to perform all assignments in an excellent manner. 8 ___ 7 ___ This engineer is able to apply in most situations a good range of technical skills and can be expected to perform most assignments well. 6 ___ 5 ___ This engineer is able to apply some technical skills and can be expected to complete most assignments adequately.

Problems of PA
1. Rating Biases age, color, sex, favoritism etc
2. Halo Effect the tendency of raters to excessively depend on the rating of one trait or behavioral considerations. To minimize this one should rate the employees on one trait and then the next. Egemployee working late be rated high on productivity. 3. Error of Central Tendency Raters follow a play safe policy wherein they rate the employees near the central point and avoid them rating towards the ends. 4. Leniency & Strictness this crops up when some raters have a tendency to be liberal in their rating. 5. Personal Prejudice if the rater dislikes an employee he may rate them at the lower end, which distorts the rating purpose. 6. Recency Effect Raters generally remember the recent actions of the employees and rate them 7. Failure of Superiors 8. Negative Ratings 9. Horns effect the appraiser bases his report on negative trait not giving any weight age to positive traits

Tackling the Challenges in PA

Open Meeting Encouraging Employees Appraiser Telling Facts Counseling Meetings

Immediate Supervisors

Peers / Subordinates

360 Degree Appraisal

Users of the services / Consultan ts

Self Appraisals

Eg- Ponds, Grasim, Hewlett Packard, Colgate - Palmolive

The Concept

For example, subordinate assessments of a supervisors performance can provide valuable developmental guidance, peer feedback can be the heart of excellence in teamwork, and customer service feedback focuses on the quality of the teams or agencys results.

The Process

Companies using 360 degree performance appraisals

Bell Atlantic (1980) Bellcore International Ltd(1998) IBM (1980)

Johnson & Johnson Ltd(1980s)

Xerox (1980s)

Wipro Technologies Ltd (Dec17th 2002)

Co examples of Performance Appraisal System

Co Name
Xerox

PA System
Provide a core set of metrics for use across the organization

Toyota

Focus performance reviews on goals rather than numbers to ensure employee alignment

Fedex

Design a balance scorecard performance mgmt system.

Modern performance review

Goal Setting Progress Review Performance Review
720 Feedback provides a comparison of a participant's results over a period of time, often 12-18 months. This comparison informs participants of their developmental progress and gives them an opportunity to update and change their action plan.

Bell shaped appraisal in BPO

A B+ B+

Performance appraisal at TCS

Balance score card on four parameters on 1-5 scale Financial Internal Customers Growth

Five scale = superstar One scale = underperformer

Performance appraisal at Sun micro system

Forced ranking - rank and yank Employees are ranked in three groups top 20% - superior next 70% - standard remaining 10% - underperformers Forced ranking - rank and yank in Enron corporation produced hotbed of achievers" -