PERFORMANCE APPRAISAL

Every organization runs with the effective deployment of human resource. Human

resource is pivotal in setting and realization of objectives. The performance of any

organization is functionally dependent upon the total performance of the deployed

workforce. Peter Drucker has aptly said that an organization is like a tune; it is not

constituted by individual sounds but by their synthesis. The success of an

organization will therefore depend on its ability to assess accurately the

performance of its human resource and use it objectively to optimize them.

In the successful organizations it is observed that the appraisal processes are

structured and formally obeyed in a systematic and planned manner. Organizations

which are not following systematic and planned measures of performance appraisal

of its workforce, they have to be unsuccessful in many counts. In recent times, the

employee appraisal system has paramount importance and enthusiasm among the

workers and the management. An appropriate employees’ performance appraisal

system has vital impact on the assessment of increment, reward/recognition, for

good work done for employees’ promotional development.

Concept of Performance Appraisal

Performance appraisal system refers to all those procedures that are applied to

evaluate the personality, the performance, and the potential of an deployed

individual and communicating the results of the evaluation to him for the purpose

of rewarding or developing the employee. Lexicographically, appraise means to

make a formal judgement about the value of an individual’s work, usually after a

discussion with him/her about it. Thus, most appraisal systems are appropriate

associated to reward systems as well as employee development systems.

Defining Performance Appraisal

Performance Appraisal (PA) connotes “Performance evaluation” a PA

performance review (PR), performance evaluation (PE), (career) development

discussion, or employee appraisal is a method by which the job performance of

an employee is documented and evaluated. Performance appraisals are a part

of career development and consist of regular reviews of employee performance

within organizations (Wikipedia). The simplest way to performance appraisal is

shown below.

Appraisal literally means to evaluate and performance in the words of common

man means efforts or work done. PA is a formal assessment and rating of

individuals by their managers at usually an annual review meeting (Michael

Armstrong). In today’s era majority of companies are using performance appraisal

as a tool to judge or evaluate performance of an individual. Performance Appraisal

is one of the major tool of human resource management which can be detailed by

following the features as noted below:

1. PA is the systematic description of an employee’s job relevant strengths and

weaknesses.

2. PA could be informal or formal. Informal PA is a continuous process of feeding

back information to the subordinates about how well they are doing their work

in the organization day-to-day basis. The formal performance appraisal occurs

usually on periodic basis and is based on scientific assessment.

3. Appraisal is a technique to evaluate performance which facilitates an individual

to know about the areas of improvement.

4. PA is not just a system of forms and procedures. It is about the actions which

people take to achieve the day-to-day delivery of results and manage

performance improvements in themselves and others.

5. Appraisal process is always consistent in the sense that it tries to evaluate

performances in the same manner using the same approach.

6. PA is an inevitable function and not an issue of choice. Hence, if there is any

choice it merely relates to the methods used in this programme.

7. PA is not job evaluation. It refers to how well someone is doing an assigned job,

while, job evaluation determines how much the job is worth to the organization

and, therefore, what range of pay should be assigned to the job.

8. PA is an agreed performance within an agreed framework of planned goals and

competence requirements.

9. PA is a continuous function. The supervisor has to determine continuously how

effectively his subordinates are performing different tasks, to identify and

correct their weak points and to recommend them on the basis of their

potentialities for promotion to higher positions in the organization.

10. It enhances job satisfaction as well morale of employees.

11. Employees are clear about expectations regarding job i.e. what needs to be

done, how it is to be done & moreover when it is to be done.

12. Performance Appraisal provides basis for promotion, hike in salary, reward &

various such related matters.

13. In all such way it strengthens relationship between superior and subordinate.

From the above description it is clear that performance appraisal is all about

enhancing performance which clearly states that “Don’t lower your expectations to

meet your performance. Raise your level of performance to meet your

expectations. Expect the best of yourself, and then do what is necessary to make it

a reality.

Need for Performance Appraisal

Performance appraisal is needed to:

(1) Know the level of achievement and behaviour of subordinate, rectify

performance deficiencies and to set new standards of work.

(2) Select right people for effective performance in the organization.

(3) Diagnose deficiency in employee regarding skill, knowledge, determine

training and development needs and to prescribe the means for employee

growth and well being.

(4) Take decision regarding fixation of salary, promotion, transfer and demotion on

the basis of performance rank.

(5) Provide information which helps counseling the subordinate and to prevent

grievances and indisciplinary activities.

Objectives of Performance Appraisal

According to Rowland, “Appraisals are valuable in deciding on promotions and

raises, and even on occasion for deciding who will be dismissed… the primary

purpose of performance appraisal is to help each man handle his current job

better.”

(1) To assist the superiors in acquiring an increased understanding of their

subordinates’ work behaviour, the work itself and their individual strengths and

weaknesses and develop the team work among the participants in organizational

settings.

(2) To counsel the employees so as to correct their misconceptions, this might

result in work alienation.

(3) To identify and remove factors responsible for workers’ discontentment. This

would motivate them for better work performance and will help in creating a

positive and healthy climate in the organization.

(4) To provide the individuals with an improved understandings of their job

responsibilities, and obligations.

(5) To assess the employees’ training and development needs.

(6) To evaluate the employee performance so as to understand the strengths and

weakness of the employee. This evaluation helps to determine the achievement

of pre-set goals and targets.

(7) To make provision for the allocation of both extrinsic rewards (e.g.

performance related-pay) and intrinsic rewards (e.g. opportunity to enhance

one’s skills). Rewarding a good performer and punishing a bad one encourages

employees to perform better.

Performance appraisal should also aim at the mutual goals of the employees and

the organization. This is essential because employees can develop only when the

organization's interests are fulfilled. The organization's main resources are its

employees, and their interest cannot be neglected. Mutual goals simultaneously

provide for growth and development of the organization as well as of the human

resources. They increase harmony and enhance effectiveness of human resources

in the organization.

Uses of an appraisal system

Properly designed performance appraisal systems can (Rao, 1985):

→ help each employee understand more about their role and become clear about

their functions;

→ be instrumental in helping employees to better understand their strengths and

weaknesses with respect to their role and functions in the organization;

→ help in identifying the developmental needs of employees, given their role and

function;

→ increase mutuality between employees and their supervisors so that every

employee feels happy to work with their supervisor and thereby contributes their

maximum to the organization;

→ act as a mechanism for increasing communication between employees and their

supervisors. In this way, each employee gets to know the expectations of their

superior, and each superior also gets to know the difficulties of their subordinates

and can try to solve them. Together, they can thus better accomplish their tasks;

→ provide an opportunity to each employee for self-reflection and individual goal-

setting, so that individually planned and monitored development takes place;

→ help employees internalize the culture, norms and values of the organization,

thus developing an identity and commitment throughout the organization;

→ help prepare employees for higher responsibilities in the future by continuously

reinforcing the development of the behaviour and qualities required for higher-

level positions in the organization;

→ be instrumental in creating a positive and healthy climate in the organization

that drives employees to give their best while enjoying doing so; and

→ assist in a variety of personnel decisions by periodically generating data

regarding each employee.

Characteristics of an appraisal system

Performance appraisal cannot be implemented successfully unless it is accepted by

all concerned. There should be a common and clear understanding of the

distinction between evaluation and appraisal. As Patten (1982) argues, evaluation

aims at 'objective' measurement, while appraisal includes both objective and

subjective assessment of how well an employee has performed during the period

under review. Thus performance appraisal aims at 'feedback, development and

assessment.' The process of performance appraisal should concentrate on the job of

an employee, the environment of the organization, and the employee him- or

herself. These three factors are inter-related and inter-dependent. Therefore, in

order to be effective, the appraisal system should be individualized, subjective,

qualitative and oriented towards problem-solving. It should be based on clearly

specified and measurable standards and indicators of performance. Since what is

being appraised is performance and not personality, personality traits which are not

relevant to job performance should be excluded from the appraisal framework.

Some of the important considerations in designing a performance appraisal system

are:

→Goal: The job description and the performance goals should be structured,

mutually decided and accepted by both management and employees.

→Reliable and consistent: Appraisal should include both objective and subjective

ratings to produce reliable and consistent measurement of performance.

→Practical and simple format: The appraisal format should be practical, simple

and aim at fulfilling its basic functions. Long and complicated formats are time

consuming, difficult to understand, and do not elicit much useful information.

→ Regular and routine: While an appraisal system is expected to be formal in a

structured manner, informal contacts and interactions can also be used for

providing feedback to employees.

→ Participatory and open: An effective appraisal system should necessarily

involve the employee's participation, usually through an appraisal interview with

the supervisor, for feedback and future planning. During this interview, past

performance should be discussed frankly and future goals established. A strategy

for accomplishing these goals as well as for improving future performance should

be evolved jointly by the supervisor and the employee being appraised. Such

participation imparts a feeling of involvement and creates a sense of belonging.

→ Rewards: - both positive and negative - should be part of the performance

appraisal system. Otherwise, the process lacks impact.

→ Feedback should be timely: Unless feedback is timely, it loses its utility and

may have only limited influence on performance.

→ Impersonal feedback: Feedback must be impersonal if it is to have the desired

effect. Personal feedback is usually rejected with contempt, and eventually de-

motivates the employee.

→ Feedback must be noticeable: The staff member being appraised must be made

aware of the information used in the appraisal process. An open appraisal process

creates credibility.

→ Relevance and responsiveness: Planning and appraisal of performance and

consequent rewards or punishments should be oriented towards the objectives of

the programme in which the employee has been assigned a role. For example, if

the objectives of a programme are directed towards a particular client group, then

the appraisal system has to be designed with that orientation.

→ Commitment: Responsibility for the appraisal system should be located at a

senior level in the organization so as to ensure commitment and involvement

throughout the management hierarchy.

Performance appraisal system: The process

Performance appraisal involves an evaluation of actual against desired

performance. It also helps in reviewing various factors which influence

performance. Managers should plan performance development strategies in a

structured manner for each employee. In doing so, they should keep the goals of

the organization in mind and aim at optimal utilization of all available resources,

including financial. Performance appraisal is a multistage process in which

communication plays an important role.

Craig, Beatty and Baird (1986) suggested an eight-stage performance appraisal

process:

(i) Establishing standards and measures

The first step is to identify and establish measures which would differentiate

between successful and unsuccessful performances. These measures should be

under the control of the employees being appraised. The methods for assessing

performance should be decided next. Basically, management wants to:

· know the behaviour and personal characteristics of each employee; and

· assess their performance and achievement in the job.

There are various methods available for assessing results, behaviour and personal

characteristics of an employee. These methods can be used according to the

particular circumstances and requirements.

(ii) Communicating job expectations

The second step in the appraisal process is communicating to employees the

measures and standards which will be used in the appraisal process. Such

communication should clarify expectations and create a feeling of involvement.

(iii) Planning

In this stage, the manager plans for the realization of performance expectations,

arranging for the resources to be available which are required for attaining the

goals set. This is an enabling role.

(iv) Monitoring performance

Performance appraisal is a continuous process, involving ongoing feedback. Even

though performance is appraised annually, it has to be managed 'each day, all year

long.' Monitoring is a key part of the performance appraisal process. It should

involve providing assistance as necessary and removing obstacles rather than

interfering. The best way to effectively monitor is to walk around, thus creating

continuous contacts, providing first-hand information, and identifying problems,

which can then be solved promptly.

(v) Appraising

This stage involves documenting performance through observing, recalling,

evaluating, written communication, judgment and analysis of data. This is like

putting together an appraisal record.

(vi) Feedback

After the formal appraisal stage, a feedback session is desirable. This session

should involve verbal communication, listening, problem solving, negotiating,

compromising, conflict resolution and reaching consensus.

(vii) Decision making

On the basis of appraisal and feedback results, various decisions can be made

about giving rewards (e.g., promotion, incentives, etc.) and punishments (e.g.,

demotion). The outcome of an appraisal system should also be used for career

development.

(viii) Development of performance

The last stage of performance appraisal is 'development of performance,' or

professional development, by providing opportunities for upgrading skills and

professional interactions. This can be done by supporting participation in

professional conferences or by providing opportunities for further study. Such

opportunities can also act as incentives or rewards to employees.

Communication

It is obvious that communication is at the core of an appraisal system.

Communication can be either upward or downward. Downward communication is

from upper management levels to lower levels, and passes on a judgement of how

the employees are doing and how they might do even better. As the information

flows downward, it becomes more individualized and detailed. Upward

communication is from lower to higher levels. Through this process, employees

communicate their needs, aspirations and goals. As information flows upward, it

has to become brief and precise because of the channels through which it has to

pass.

Approaches and techniques in performance appraisal

Performance appraisal is a multistage process involving several activities, which

can be administered using a variety of approaches. Some of these approaches are

considered below, based on Einstein and LeMere-Labonte, 1989; and Monga,

1983:

· Intuitive approach: In this approach, a supervisor or manager judges the

employee based on their perception of the employee's behaviour.

· Self-appraisal approach: Employees evaluate their own performance using a

common format.

· Group approach: The employee is evaluated by a group of persons.

· Trait approach: This is the conventional approach. The manager or supervisor

evaluates the employee on the basis of observable dimensions of personality, such

as integrity, honesty, dependability, punctuality, etc.

· Appraisal based on achieved results: In this type of approach, appraisal is based

on concrete, measurable, work achievements judged against fixed targets or goals

set mutually by the subject and the assessor.

· Behaviourial method: This method focuses on observed behaviour and

observable critical incidents.

Appraisal techniques

There are several techniques of performance appraisal, each with some strong

points as well as limitations. Oberg (1972) has summarized some of the commonly

used performance appraisal techniques.

(i) Essay appraisal method

The assessor writes a brief essay providing an assessment of the strengths,

weaknesses and potential of the subject. In order to do so objectively, it is

necessary that the assessor knows the subject well and should have interacted with

them. Since the length and contents of the essay vary between assessors, essay

ratings are difficult to compare.

(ii) Graphic rating scale

A graphic scale 'assesses a person on the quality of his or her work (average; above

average; outstanding; or unsatisfactory).' Assessment could also be trait centred

and cover observable traits, such as reliability, adaptability, communication skills,

etc. Although graphic scales seem simplistic in construction, they have application

in a wide variety of job responsibilities and are more consistent and reliable in

comparison with essay appraisal. The utility of this technique can be enhanced by

using it in conjunction with the essay appraisal technique.

(iii) Field review method

Since individual assessors differ in their standards, they inadvertently introduce

bias in their ratings. To overcome this assessor-related bias, essay and graphic

rating techniques can be combined in a systematic review process. In the field

review method, 'a member of the HRM staff meets a small group of assessors from

the supervisory units to discuss each rating, systematically identifying areas of

inter-assessor disagreement.' It can then be a mechanism to help each assessor to

perceive the standards uniformly and thus match the other assessors. Although

field review assessment is considered valid and reliable, it is very time consuming.

(iv) Forced-choice rating method

Unlike the field review method, the forced-choice rating method does not involve

discussion with supervisors. Although this technique has several variations, the

most common method is to force the assessor to choose the best and worst fit

statements from a group of statements. These statements are weighted or scored in

advance to assess the employee. The scores or weights assigned to the individual

statements are not revealed to the assessor so that she or he cannot favour any

individual. In this way, the assessor bias is largely eliminated and comparable

standards of performance evolved for an objective. However, this technique is of

little value wherever performance appraisal interviews are conducted.

(v) Critical incident appraisal method

In this method, a supervisor describes critical incidents, giving details of both

positive and negative behaviour of the employee. These are then discussed with the

employee. The discussion focuses on actual behaviour rather than on traits. While

this technique is well suited for performance review interviews, it has the

drawback that the supervisor has to note down the critical incidents as and when

they occur. That may be impractical, and may delay feedback to employees. It

makes little sense to wait six months or a year to discuss a misdeed, a mistake or

good display of initiative.

(vi) Management by objectives

The employees are asked to set or help set their own performance goals. This

avoids the feeling among employees that they are being judged by unfairly high

standards. This method is currently widely used, but not always in its true spirit.

Even though the employees are consulted, in many cases management ends up by

imposing its standards and objectives. In some cases employees may not like 'self-

direction or authority.' To avoid such problems, the work standard approach is

used.

(vii) Work standard approach

In this technique, management establishes the goals openly and sets targets against

realistic output standards. These standards are incorporated into the organizational

performance appraisal system. Thus each employee has a clear understanding of

their duties and knows well what is expected of them. Performance appraisal and

interview comments are related to these duties. This makes the appraisal process

objective and more accurate. However, it is difficult to compare individual ratings

because standards for work may differ from job to job and from employee to

employee. This limitation can be overcome by some form of ranking using pooled

judgment.

(viii) Ranking methods

Some of the important forms of ranking for performance appraisal are given below,

based on Oberg, 1972; and Monga, 1983:

(a) Alteration ranking method: The individual with the best performance is chosen

as the ideal employee. Other employees are then ranked against this employee in

descending order of comparative performance on a scale of best to worst

performance. The alteration ranking method usually involves rating by more than

one assessor. The ranks assigned by each assessor are then averaged and a relative

ranking of each member in the group is determined. While this is a simple method,

it is impractical for large groups. In addition, there may be wide variations in

ability between ranks for different positions.

(b) Paired comparison: The paired comparison method systematizes ranking and

enables better comparison among individuals to be rated. Every individual in the

group is compared with all others in the group. The evaluations received by each

person in the group are counted and turned into percentage scores. The scores

provide a fair idea as to how each individual in the group is judged by the assessor.

(c) Person-to-person rating: In the person-to-person rating scales, the names of the

actual individuals known to all the assessors are used as a series of standards.

These standards may be defined as lowest, low, middle, high and highest

performers. Individual employees in the group are then compared with the

individuals used as the standards, and rated for a standard where they match the

best. The advantage of this rating scale is that the standards are concrete and are in

terms of real individuals. The disadvantage is that the standards set by different

assessors may not be consistent. Each assessor constructs their own person-to-

person scale which makes comparison of different ratings difficult.

(d) Checklist method: The assessor is furnished with a checklist of pre-scaled

descriptions of behaviour, which are then used to evaluate the personnel being

rated (Monga, 1983). The scale values of the behaviour items are unknown to the

assessor, who has to check as many items as she or he believes describe the worker

being assessed. A final rating is obtained by averaging the scale values of the items

that have been marked.

(e) Behaviourally anchored rating scales (BARS): This is a relatively new

technique. It consists of sets of behaviourial statements describing good or bad

performance with respect to important qualities. These qualities may refer to inter-

personal relationships, planning and organizing abilities, adaptability and

reliability. These statements are developed from critical incidents collected both

from the assessor and the subject.

(f) Assessment centres: This technique is used to predict future performance of

employees were they to be promoted. The individual whose potential is to be

assessed has to work on individual as well as group assignments similar to those

they would be required to handle were they promoted. The judgment of observers

is pooled and paired comparison or alteration ranking is sometimes used to arrive

at a final assessment. The final assessment helps in making an order-of-merit

ranking for each employee. It also involves subjective judgment by observers.

A performance appraisal system could be designed based on intuition, self-

analysis, personality traits, behaviourial methods and result-based techniques.

Different approaches and techniques could be blended, depending on the goals of

performance appraisal in the organization and the type of review. For example,

management by objectives, goal-setting and work standard methods are effective

for objective coaching, counselling and motivational purposes. Critical incident

appraisal is best suited when supervisor's personal assessment and criticism are

essential. A carefully developed and validated forced-choice rating can provide

valuable analysis of the individual when considering possible promotion to

supervisory positions. Combined graphic and essay form is simple, effective in

identifying training and development needs, and facilitates other management

decisions.

Components of the appraisal format

Key performance areas, self-appraisal, performance analysis, performance ratings

and counselling are the important components of a performance appraisal system

oriented to development of human resources in an organization. The appraisal

format should be designed in consonance with the objectives of the performance

appraisal system, and generate information on a number of important aspects,

including (Rao, 1985):

· Identification of key performance areas: The first step in an appraisal process is

identifying key performance areas and setting targets for the next appraisal period.

This may be done either through periodic discussions or at the beginning of the

year, as in research institutions.

· Self-appraisal by the subject: At the end of the appraisal period, employees

appraise their own performance against the key performance areas, targets and pre-

identified behaviour. Information on these issues is provided in an appraisal

format. The employees also write their self-evaluation reports and hand them to

their supervisors.

· Analysis: The supervisor reflects on the performance of the employee, and

identifies the factors which facilitated or hindered the employee's performance.

The manager then calls the employee for a discussion to better understand his or

her performance and provide counselling on further improvements. During this

discussion, appraisal records (such as notes, observations, comments, etc.) are

exchanged. The manager then gives a final rating and recommendations regarding

the developmental needs of the individual. These are shown to the subject and his

or her comments are recorded on the appraisal form. The appraisal form is then

transmitted to the personnel department for the necessary administrative action.

The personnel or human resource development department uses these forms for

identifying and allocating training, rewards and other activities.

· Identification of training needs: The use of a development-oriented performance

appraisal system is based on a good understanding of the concept of human

resources development. The need for developing employee capabilities, the nature

of capabilities to be developed, and the conditions under which these capabilities

can be developed have to be appreciated. During the discussion between the

supervisor and the employee, the development needs of the subject are identified

and goals set for the next period.

· Identification of qualities: The supervisor may also identify the qualities required

for current as well as future tasks, and assess the employee's potential and

capabilities to perform jobs at higher responsibility levels in the organization.

Attributes considered in evaluating performance

There are many personality traits which could be considered when evaluating

performance, and methods to facilitate such consideration include scaling methods

that differentiate employees on a series of given traits. The important personality

traits fall into two categories: personal qualities and demonstrated qualities (Table

1).

Table 1 Personal and demonstrated personality traits

Personal Qualities

Adaptability: Adjustment with new or changing situations or people.

Appearance and bearing: Having good bearing and appearance.

Decisiveness: Ability to arrive at conclusions promptly and to decide on a definite

course of action.

Dependability: Ability to consistently accomplish allocated jobs without

supervision.

Drive and determination: Ability to execute job vigorously and resolutely, and

induce others to do so.

Ingenuity: Resourcefulness and ability to creatively devise means to solve

unforeseen problems.

Initiative: Ability to take necessary and appropriate action independently.

Integrity: Ability to maintain an honest approach in all dealings.

Loyalty: Ability to faithfully, willingly and loyally support superiors, equals and

subordinates.

Maturity: Understanding and balance commensurate with age and service.

Stamina: Ability to withstand and perform successfully under protracted physical

strain.

Tenacity: Ability to preserve in face of odds and difficulties.

Verbal expression: Ability to express oneself clearly and concisely.

Written expression: Ability to express oneself clearly and concisely in writing.

Demonstrated Performance Qualities

Professional knowledge: Ability to apply professional knowledge to assigned

duties so as to achieve a high standard of performance.

Administrative ability: Having administrative ability to use resources

economically and judiciously.

Responsibility for staff development: Ability to fulfil responsibilities in the

development and training of staff.

Foresight: Ability to display foresight and plan beyond immediate needs.

Delegation: Ability to delegate responsibilities and exercise required degree of

guidance and supervision.

Motivation: Ability to motivate subordinates effectively to produce desired results.

Morale: Ability to maintain morale and look after the management of staff.

Control: Ability to exercise control over subordinates and gain their confidence.

Source: Adapted from an appraisal form of an organization illustrated in Monga,

1983.