Everything you need to know about the steps in the performance appraisal process. Performance appraisal is the process of evaluating a manager’s performance on the job in terms of the requirement of the job.
In other words, it is the systematic assessment of an employee in terms of the performance, aptitudes and other qualities necessary for successfully carrying out his job. It is often linked with the compensation and development plans of the organisation.
A systematic performance appraisal goes through different steps.
The steps are:- 1. Establishing Performance Standards 2. Communicating the Standards 3. Determining who will Conduct the Appraisal 4. Measuring the Actual Performance 5. Communicating the Results of Appraisal to the Concerned Employee 6. Taking Corrective Actions.
The design and implementation of performance appraisal system differs from organization to organization. However, the performance management system should be in line with the overall organizational objectives.
Performance Appraisal Process of Employees: Step by Step Process
Steps in Performance Appraisal Process – 6 Steps Process
Performance appraisal can be undertaken either on informal basis or on formal and systematic basis. In comparatively smaller organizations, appraisal, either based on traits or performance or a combination of both, is done informally through the observation of concerned employees.
In larger organizations, appraisal has to be more systematic and formal as it reveals various types of information which can be used for variety of purposes. A systematic performance appraisal goes through different steps.
Step # 1. Defining Objectives of Appraisal:
The first basic step in effective and systematic appraisal system is to define the objectives of the appraisal itself. Appraisal is used for different purposes ranging from motivating the appraisees to controlling their behaviour. In each case, the emphasis on different aspects of appraisal differs. For example, reward- providing appraisal such as salary revision or promotion differs from appraisal for training and development.
Step # 2. Defining Appraisal Norms:
When we evaluate anything in terms of good or bad, we always have some norms in our mind against which we say whether the thing is good or bad. In the same way, appraisal is done in the context of certain norms or standards. These may be in the form of various traits of the appraisees or their expected work performance results.
Since one of the basic long-term objectives is to improve performance, appraisal is more performance oriented. Therefore, performance norms are to be specified in the beginning of the period for which appraisal is concerned. As we shall see later, when performance is taken as the basis of appraisal, the performance standards should be determined jointly by appraiser and appraisee.
Further, since performance of an employee in the organization is affected by a number of factors, and many of these may not be within the control of the employee, there should be provisions of revision of performance norms mid-way to take into account the impact of uncontrollable factors. For example, Pepsi India evaluates performance norms for its various managers twice or thrice in a year to make these more meaningful.
Step # 3. Designing Appraisal Programme:
In designing performance appraisal programme, there are several issues which require attention- the types of personnel to be appraised, types of personnel to act as appraisers, appraisal methodology, and timing of appraisal. The first basic issue is the determination of personnel who will be included in the formal appraisal system. Ideally speaking, all personnel of the organization should be covered by the appraisal system.
However, various organizations keep lower-level employees out of the purview of formal appraisal system and adopt informal system for them. The second issue is the determination of personnel who will conduct performance appraisal. Most often, the superior concerned appraises his subordinates.
However, the present trend in appraisal suggests the concept of 360-degree appraisal which involves appraisal by the appraisee himself known as self-appraisal, appraisal by superior concerned, HR personnel, and outside personnel with whom the appraisee interacts in performing his jobs.
The next issue in designing appraisal programme is the methodology to be used in appraisal whether through structured forms and questionnaires or personal interview of appraisee or a combination of both.
Usually, a combination of both in preferable because structured forms may not give full relevant information. The last issue in designing of appraisal programme is the determination of time period and timing of appraisal. Most of the organizations which link appraisal with reward system follow annual system and undertake appraisal after the end of the year.
Others which link appraisal with promotion and identification of training needs do not follow annual system but devise the time period on the basis of appraisal needs.
Step # 4. Implementing Appraisal Programme:
In implementing appraisal programme, the appraisal is conducted by the appraisers and they may also conduct interview if it is provided in the appraisal system. The results of the appraisal are communicated to HR department for follow-up actions which should be oriented towards the objectives of the appraisal.
Step # 5. Appraisal Feedback:
Perhaps appraisal feedback is the most crucial stage in appraisal process, specially when the superior’s rating is not as per the expectations of the appraisee, even though such expectations may be based on false premise. For example, Larry Cipolla has observed that most people want feedback as long, of course, as it mirrors their self perception.
When it does, they tend to like it. When it doesn’t, they don’t. There is an ethical consideration is giving feedback of performance if it is against the employees. Many managers feel that employees often experience a profound face-saving issue they hear that their actual performance is not as good as they had perceived it to be.
Upon hearing this, some become stoic and quiet, others cry, and a few become overtly angry, hostile, and verbally abusive. The managers put question- Is it ethical for them to share their honest perceptions of employee performance at the risk of hurting them? To some extent, this problem may be overcome by objective appraisal and feedback.
Step # 6. Post-Appraisal Actions:
Performance appraisal is not an end in itself, but it is a means for improving long-term performance of personnel by taking appropriate actions based on the information as revealed by the appraisal. These actions may be in the form of suitable rewards to outperformers, counselling and guiding underperformers and providing training to them for better performance, and identifying and removing those organizational factors which hinder effective performance.
In fact, in the systems approach, appraisal aims at improving performance, instead of merely assessing it. Towards this end, appraisal system seeks to evaluate opportunity factors. Opportunity factors include the physical environment and social processes at the work. These opportunity variables are more important than individual abilities in determining work performance.
Steps in Performance Appraisal Process – Definition and Stages of Performance Appraisal
Performance appraisal is the process of evaluating a manager’s performance on the job in terms of the requirement of the job. In other words, it is the systematic assessment of an employee in terms of the performance, aptitudes and other qualities necessary for successfully carrying out his job. It is often linked with the compensation and development plans of the organisation.
Performance appraisal has been a subject of criticism for many years. No doubt, it has not fallen apart in spite of the general apathy shown to it. The fact that it is still in vogue does not mean that all is well. Many noted authors and management experts speak highly of the importance of performance appraisal.
Harold Mayfield, in his paper In Defence at Performance Appraisal, states- “Now I believe the time has come for a word of reassurance from someone in business who has used these tools over a period of years and found the difficulties largely illusory”.
Robert Stolz, a noted management consultant, has this to say- “……………rarely, if even is a healthy relationship between a superior and subordinate destroyed”.
Yet others believe that the right kind of appraisal fills an industrial need.
The proponents of the performance appraisal system feel that the principle reason for the “uneasy” feeling about it may be due to the fact that judgement may not be particularly well-founded. Indeed, it is fair to say that most top executives consider the evidence on which the compensation based, to be inadequate with the minimum of objective facts and maximum of subjective opinions.
This however, is only one side of the story. Academic leaders like Douglas McGregor in his article. “An Uneasy Look at Performance Appraisal” have questioned the desirability of such a system. According to McGregor- “The conventional approach, unless handled with consummate skill and delicacy, constitutes something dangerously close to violation of the integrity of personality. Managers are uncomfortable when they are put in the position of a ‘Playing God’. The respect we hold for the inherent value of the individual leaves us distressed when we must take responsibility for judging the personal work of a fellowman.”
Arch Potton, the noted management consultant in his book- What is Executive Work, has also narrated an incident where a manager of 30 years’ experience wrote to him expressing resentment that forces him “to play God”. He must make decisions that discriminate between long-time friends and associates where it hurts most their pockets.
Again Rensis Likert, the famous social scientist, in his article “Motivational Approach to Management Development” is concerned about the impact of performance appraisal on the employees and the manager. “The fundamental flaw in the current review procedure is that they compel the superior to behave in a threatening, rejecting and ego-deflating manner with a sizable proportion of its staff. This pattern of relationship between the superior and the subordinate does not only affect the subordinate but also impairs the capacity of the superior to function effectively”.
According to the experience of GEC, “…There were indications of reluctance on the part of many managers to conduct appraisals.”
To sum up the argument, we can say that though performance appraisal has today become a necessary part of a manager’s work, it is yet to find “all-welcome” sign quarters of business.
Stages of Performance Appraisal:
In almost every company, every manager is subject to a periodic evaluation of his performance. This is regarded to be highly important if management development efforts are to be realised. Unless a manager’s strengths and weaknesses are known and the area of growth is specified, it is not easy to predict, that the executive development programme, no matter how scientifically designed, would be aimed at the right direction.
Besides ascertaining the growth potential of managers, the appraisal system is supposed to help determine the pay decisions and provide the organisation with a rational basis for deciding who should be promoted or receive higher compensation. An effective appraisal system reduces the “chance happening” and introduces rationality into management. A good appraisal system should be able to discriminate an effective manager from an ineffective one.
Appraisal activity is not something new to management. Infact, there is historical evidence to prove that as early as 221-265 AD, the Emperors of Wei Dynasty of China were aided by the “Imperial Rater” whose job was to appraise the performance of the members of the Royal Court. Since then, performance appraisal has passed through many stages of development.
The more clearly recognisable stages are:
(а) Informal Appraisal:
When the units were comparatively smaller and .was not separated from management, the managerial posts were manned by the kith and kin of the owner of the firm. As the strengths and weaknesses were very well known to each other, the need for a formal appraisal system was not felt.
(b) Trait Appraisal:
When in the post-war year’s management, developed, it was considered a profession and there was tremendous expansion in the size and complexity of functions of the organisation. Under this, a person’s performance was judged on the basis of the degree in which he possessed certain traits which were considered to be essential for a good manager.
(c) Mathematical Appraisal:
This was evolved to judge executive performance in terms of more realistic individual targets. This new approach set about developing individual targets and measuring performance against them.
Steps in Performance Appraisal Process – Step by Step Process of Performance Appraisal
Step # 1. Conducting Performance Appraisal:
The first step in the process of performance appraisal also involves the setting up of the performance standards which will be used to as the base to compare the actual performance of the employees. The regulatory requirements for planning an employee’s performance include establishing the elements and standards in their “Employee Performance Appraisal Plans” (EPAP).
An EPAP outlines the specific elements and standards that the employee is expected to accomplish during the rating cycle. Performance elements and standards should be measurable, understandable, verifiable, equitable and achievable. In addition, EPAPs should be flexible so that they can be adjusted for changing program objectives and work requirements.
When used effectively, these plans can be beneficial working documents that are discussed often, and not merely paperwork that is filed in a drawer and seen only when ratings of record are required. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives.
The standards set should be clear, easily understandable and in measurable terms. In case the performance of the employee cannot be measured, great care should be taken to describe the standards.
Step # 2. Establishing Job Expectations:
The next step in the appraisal process involves setting up of employee job expectations. Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization. The employees should be informed and the standards should be clearly explained to them.
This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators.
After communicating the KPAs, KRAs and job standards, care is taken in order to take employee opinions with respect to their job expectations and needs related to their performance. Supervisors and managers may use several documents and/or sources to assist them in determining the appropriate critical elements for their employees.
To develop specific measures, the rating official must determine which of the above general measure(s) are important for a given element, and then determine how to measure it.
When specific standards are developed in addition to, or in lieu of, the benchmark standards listed below, regulation requires description at the Fully Successful level, at a minimum. However, appraisers are strongly encouraged to develop standards at additional levels so employees clearly understand their performance expectations at various levels.
Step # 3. Designing the Appraisal Program:
This step involves a complete description and preparation of the performance evaluation schedule and developing a framework for rating employee performance. Within the context of formal performance appraisal requirements, rating means evaluating employee performance against the elements and standards in an employee’s performance appraisal plan and assigning a rating of record. The rating of record is based on work performed during the entire 12-month appraisal period, including temporary assignments over 120 days.
Step # 4. Appraise Performances:
The most difficult part of the performance appraisal process is measuring the actual performance of the employees that is the work done by the employees during the specified period of time. It is a continuous process which involves monitoring the performance throughout the year.
This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work. The actual performance is compared with the desired or the standard performance.
The comparison tells the deviations in the performance of the employees from the standards set. The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to the employees’ performance.
Step # 5. Performance Interviews/Discussions:
The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus.
The feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. The purpose of the meeting should be to solve the problems faced and motivate the employees to perform better. The rating official should discuss the completed EPAP with the employee after all required approvals are obtained.
In preparation for the discussion, the rating official should ensure the following:
i. All necessary approvals of the rating of record have been completed.
ii. Employee performance on each critical element during the rating period has been reviewed and noted, including tasks that were completed well and any areas needing improvement. Specific examples should be noted when possible.
iii. A private location and adequate time has been put aside to meet with the employee, including time for employee input (As a general rule, 30 minutes to one hour per employee).
iv. Future expectations and goals of the organization have been considered.
During the meeting, the appraiser should do the following:
i. Be professional, calm and focused on performance issues.
ii. Begin with positive feedback on tasks the employee has done well regardless of what the final rating is.
iii. Go through each element and discuss items of note, both positive and negative as appropriate and assign a rating.
iv. Provide specific examples when possible
v. Describe any changes in performance required and ensure the employee understands
vi. Allow for employee questions and input throughout
vii. Summarize the performance and assign the rating of record
viii. Have the employee sign and date the “Employee/Appraisee” block on the EPAP
ix. Sign and date the “Appraiser” block on the EPAP.
Step # 6. Decision-Making-Using the Appraisal Data for Appropriate Purposes:
After the previous steps, appraisers should document employee performance, both good and when improvement is needed, throughout the year. Doing this will allow the rating official to provide specific examples to the employee during progress reviews, during the rating of record, or at other times throughout the year. The next step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotions, demotions, transfers etc.
Steps in Performance Appraisal Process – Steps in Setting Performance Appraisal Objectives and Standards
Managing employee performance is an integral part of the work that all managers and rating officials perform throughout the year. It is as important as managing financial resources and program outcomes because employee performance or the lack thereof, has a profound effect on both the financial and program components of any organization.
Setting Performance Appraisal Objectives and Standards:
This step involves setting the objectives or targets of performance, and determining performance standards. The managers and supervisors may sit with their employees in a collaborative approach to set the performance criteria, and identify the “Key Performance Areas (KPAs)”, “Key Result Areas (KRAs)” and “Key Performance Indicators (KPIs)”.
1. Key Performance Areas (KPAs):
Key performance areas (KPAs) are those important work activities engaged in on a daily or weekly basis with a meaningful group of people in the organization. They are the things that, if employees focus on them and do them well, will produce the best results and give them the greatest success in their tasks/roles.
What are the Ways to Identify KPAs?
To determine employee key performance areas, employees must stand back and look at the totality of what they do in work or their tasks. This can easily be understood by taking an average week and thinking of the general categories of things on which they spend their time and the people with whom (or for whom) they are involved with during the tasks. These big activities can be considered or included as key performance areas.
2. Key Result Areas (KRAs):
“Key Result Areas” or KRAs refer to general areas of outcomes or outputs for which a role is responsible. A typical role targets three to five KRA. KRAs are also known as key work outputs (KWOs).
Value of KRAs:
Identifying KRAs helps individuals:
1. Clarify their roles
2. Align their roles to the organization’s business or strategic plan
3. Focus on results rather than activities
4. Communicate their role’s purposes to others
5. Set goals and objectives
6. Prioritize their activities, and therefore improve their time/work management
7. Make value-added decisions
Key result areas (KRAs) capture about 80% of a work role. The remainder of the role is usually devoted to areas of shared responsibility (e.g., helping team members, participating in activities for the good of the organization). For example, “image of the organization” is usually a very senior official’s key result area, but hopefully all employees contribute to this outcome.
Most roles include 3 to 5 key result areas. If individuals are accountable for more than this, they may be overloaded, or they may not be delegating effectively. Key result areas are worded using as few terms as possible with no verbs (i.e., these are about results, not action) and no direction/measurement (e.g., words such as “good,” “increased” or “decreased”). They simply describe the areas for which one is responsible for results.
Individuals undertake the following steps to determine the KRAs for their roles:
I. They list their main day-to-day responsibilities/activities.
II. For each activity, they ask “Why do I do this?”
III. They review the answers to their “why” questions, looking for common themes or areas.
IV. They identify their KRAs from these themes.
V. They share their KRAs, preferably with those they report to, those they work along with, and those who report to them.
Individuals who identify their KRAs typically-
I. Work with those they report to, those they work along with, and those who report to them to identify their KRAs so all on a team have clarity regarding outputs.
II. Develop specific goals and objectives, and plans to reach t\hem.
III. Take control of their time/work management strategies
3. Key Performance Indicators (KPIs):
Key performance indicators (KPIs) are high-level snapshots of a business or organization based on specific predefined measures. KPIs typically consist of any combination of reports; spreadsheets, or charts. KPIs can be defined as a set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals. KPIs vary between companies and industries, depending on their priorities or performance criteria. They are also referred to as “key success indicators (KSI)” in many organizations.
KPIs may include global or regional sales figures and trends over time, personnel stats and trends, real-time supply chain information, or anything else that is deemed critical to a corporation’s success. A comply must establish its strategic and operational goals and then choose the KPIs which best reflect those goals.
For example, if a software Company’s goal is to have the fastest growth in its industry, its main performance indicator may be the measure of revenue growth year on year. A company’s KPIs will be stated in its annual report. Also, KPIs will often be industry-wide standards, like “same store sales”, in the retail sector.
KPIs allow goals to be observed, met and perhaps exceeded. Relatively generally formulated goal descriptions are made more concrete through the use of measurable quantities. The measurable quantities can then be allocated to the strategic goals in the perspectives and organizational units.
KPIs are used by companies to better evaluate their current level of business success and to help plan for the future. KPIs add value to aspects of business operation that are-difficult to quantify, like employee satisfaction or development, and are a critical piece of long-term business intelligence strategy. When establishing KPI it is important to identify metrics that are achievable.
Steps in Performance Appraisal Process – Important Steps and Pitfalls of Performance Appraisal
1. The first step in the appraisal process is the determination of standards of performance based on the organisational objectives and the job description. The performance standards and objectives have to be determined by the employee and the supervisor together. These have to be communicated in a simple and lucid manner to the employee. It is easier to evaluate performance, if the goals and standards are specific and quantifiable. Abstract and qualitative goals are difficult to measure and have an element of subjectivity.
2. The next step in the process of performance appraisal is the measurement of employee performance against the pre-determined goals and standards. This determines what components of the performance are to be measured. At this stage, the process of measurement, namely, how the performance components are to be measured, has to be determined.
3. The next step is the actual process of measurement. Performance appraisal has to be a continuous process and the feedback should be given to the employee at regular intervals. Making a note of the critical incidents, either positive or negative, helps the manager keep a track of the employee performance.
Feedback has to be given once in 2-3 months, depending on the need to do so, which would help the employee in meeting his objectives. Jindal Iron & Steel Company for example, has quarterly reviews based on the goals, the skills employed and the potential of the employee. This helps the employees track their performance and grooms them for higher responsibilities.
4. The next step is a very critical step and involves communicating the results of appraisal to the employee concerned. It is the responsibility of the manager to make the employee feel comfortable with the whole process. Continuous feedback and orientation would ensure a simple final appraisal discussion, with very few differences of opinion.
5. Once the appraisal is finalised after discussing it with the employee, it has to be put to effective use. Though most organisations link it to the rewards system, some prefer to restrict it to the development of the employees. Whatever might be the organisational policy, the document of appraisal has to be effectively and immediately put to use to ensure a better performance during the next appraisal period.
The ideal way to ensure maximum utility of performance appraisal is to link the performance standards to rewards – system and the competency standards to training and development. The gaps in competency levels can be identified and necessary training is imparted to the employee.
Many organisations fail to receive acceptance and support from their employees for their performance appraisal system. The main reason for this is the lack of commitment of the top management. The exercise is a cursory and routine one in some companies, and the results are filed away and forgotten.
This is when the employees get disenchanted with the exercise and lose interests in their jobs as well. The management has to ensure that the whole business of appraisal is taken seriously and the results put to effective use.
The performance appraisal system in any organisation has to face some major challenges. These lead to potential errors in individual appraisals. It is the responsibility of the management in general and the human resource function, in particular to take corrective actions and avoid these pitfalls.
Some of the factors that affect the appraisal process at an individual level are:
1. Halo Effect:
The appraiser allows a single characteristic of the appraisee to dominate his judgment of the employee performance. This can result in either a positive report or a negative report on the performance of the employee. For example, an appraiser holds the appraisee in high regard for his communication skills.
This might influence the appraiser to rate the employee high on other, unrelated factors such as job knowledge or leadership skills. Or, an employee who is disliked by his appraiser for his shoddy dressing may be rated poor on other factors like attendance and reliability.
2. Leniency Effect:
This refers to the situation where the appraiser tends to give high ratings and only positive feedback to the appraisee, irrespective of his actual performance. The main reason for leniency could be the appraiser’s desire to maintain a cordial relationship with the appraisee. Subconsciously, he might feel that any low rating or negative feedback would create unpleasantness, which he tries to avoid. Such leniency is the most common reason for most of the appraisal errors.
3. Stringency Effect:
This is just the opposite of the leniency effect. An appraiser who feels that the rules and standards of the organisation are not strict enough, tries to be very strict in rating his appraisees. This might lead to dissatisfaction among his appraisees, as they would feel that the evaluation is biased and unfair.
4. Regency Effect:
This occurs when the recent performance of the appraisee dominates the appraisal. The appraiser tends to get influenced by the performance of the employee over the last 2-3 months of the appraisal period as it is still fresh in his memory.
An employee who has performed well for the preceding nine months but failed to maintain the same level of performance in the last three months preceding the appraisal, might get the same rating as, or an inferior one than, someone who performed well only in the last 2-3 months of the appraisal period. This is due to the regency effect.
5. Primacy Effect:
The performance of the appraisee at the beginning of the appraisal period dominates the evaluation. The appraiser tends to be influenced by the behaviour or outcomes exhibited in the early stages of the appraisal period and this leads to a distorted evaluation.
6. Central Tendency Effect:
Central tendency is the tendency of the appraiser to rate most of the appraisees in the middle of the performance scale. The appraiser gives neither high nor low ratings and tends to give ratings in the middle of the scale to all the appraisees. This is one of the most common errors in employee performance rating.
In some cases, the culture of the organisation or the country can influence the appraiser to rate the appraisee in a particular way. For example, in the Indian context, a young appraiser who has to evaluate the performance of his elder colleague, may tend to give him higher ratings than his performance warrants. In this case, the Indian culture which advocates respect for elders subconsciously influences the young appraiser.
Stereotyping is a potential error in personality analysis that can distort performance appraisal. It involves judging someone based on the group he belongs to and the appraiser’s perception of the group. For example, an appraiser who believes that women make good managers would tend to rate his female appraisees better than his male appraisees.
9. Perceptual Set:
This is the tendency of the appraisers to have an expectation of the performance level, which might distort the perception and judgement of actual performance. For example, when a perceived low performer exceeds the expectations of his appraiser, his performance is judged higher than it deserves to be.
The opposite will be true for a perceived high performer disappointing his appraiser. He could be rated lower than he should have been.
10. Fundamental Attribution Error:
An employee’s performance might have been affected due to some external factors outside his control. The appraiser might however, underestimate the influence of external factors and overestimate the influence of internal factors while judging the behaviour/performance of the employee.
Many other behavioural and perception errors distort the appraisal system and reduce its effectiveness. If these errors are taken care of in a suitable and well-executed appraisal system, it can add immense value to the organization.
Steps in Performance Appraisal Process – 6 Step Process
The design and implementation of performance appraisal system differs from organization to organization. However, the performance management system should be in line with the overall organizational objectives.
The different steps can be explained as follows:
Step # 1. Establishing Performance Standards:
Involves identifying different dimensions of job performance and setting up performance standards based on these dimensions. Before conducting any appraisal, it is important to identify the important elements in a given job; that is, the job criteria. Different organizations use different basis for evaluating the performance of employees.
For example, Pepsi Co uses volume growth and market share to calculate the incentives for senior level employees. Performance evaluation criteria should be related and relevant to the job. A job criterion should be identified based on the job description of the employee. For example, volume of sales may be a relevant evaluation criterion for a sales executive.
Performance evaluation criteria can be of three types – trait based, behavior based, and performance based. Trait-based criteria identify employees’ potentials in terms of attitude, creativity, initiative, and drive to learn. Behavior-based criteria measure the behavioral patterns and soft skills of the employees as desired by an organization. For example, an employee may be soft- spoken, regular, punctual, and always ready to help others.
For example, a faculty’s performance may be evaluated based on their regularity and punctuality in taking classes, timely submission of results, regularity of conducting quizzes, and frequency of assignments for students. Performance-based criteria are normally used where the output is tangible or measurable and the focus of employees is toward maximization of results.
In performance-based evaluation, large tasks are divided into small projects and individuals are rated based on their performance on each project. For example, in HCL Technologies, employees are rated on their performance on each project. Sometimes, a combination of two or three criterion may be used to evaluate an employee’s performance.
Step # 2. Communicating the Standards:
Refers to the second step of the performance appraisal process that occurs after the identification of the expected level of performance in each job evaluation criterion. Performance standards determine the expected level of performance, goals, or targets. The performance standard with respect to a salesperson could be maximizing the sales volume; a specific performance standard would be selling 12000 units of a particular product by the end of the year.
These standards should be determined and communicated to the employees beforehand. These performance targets should be SMART; that is, Specific, Measurable, Achievable, Realistic, and Time bound. The performance standards clearly inform employees what is expected out of them, which is necessary to ensure that an employee delivers the desired outcomes according to the expectations.
Step # 3. Determining who will Conduct the Appraisal:
Involves selecting the appraiser who will conduct the performance appraisal of the employee. Usually, the immediate superior of employees, who is most familiar with the employees’ work, is considered the most appropriate person to appraise them. Employees, during their period of work in any organization, have to interact with their seniors, subordinates, colleagues, customers, and other individuals associated with the organization directly or indirectly. Therefore, the appraiser can also be any one or more than one of these individuals.
Information about an employee’s performance can be obtained from any of these mentioned sources. Each of these sources can provide valuable information about the performance of an employee.
Appraisal carried out by the superior is the traditional approach of evaluating employees’ performance on their job. In this approach, the immediate boss or reporting manager has the responsibility to evaluate the performance of their subordinate and further discuss and communicate the performance with the concerned employee.
In some organizations, self-appraisal system is used to assess an employee’s performance. Employees are required to fill a performance appraisal form mentioning their strengths, weaknesses, initiatives, and any other area where they have made positive contribution towards their organization. This method of appraisal gives the employees a chance to express themselves and present their achievements to the appraisers.
After filling the performance appraisal form, employees appear for a performance appraisal interview and discuss the points with their superior. Self-appraisal is one of the best methods used for employees’ developmental purposes because employees can accurately identify their areas of improvement.
Some organizations have the system of taking feedback from employees’ subordinates, because the subordinates might be the best source of appraisal for such employees. For example, feedback taken from students about their concerned faculty produces important information about the faculty.
In such a case, the performance dimension may include level of understanding of the students, ability to communicate properly, fairness in the evaluation of exam sheets and quizzes, regularity, and punctuality in taking classes. This is also known as upward appraisal. Faculty rated as unsatisfactory by their students are given a notice, if actually proved unsatisfactory, and expected to improve their performance within a specific time; failing with which they may be terminated.
Peer appraisal is an appraisal done by an employee’s colleagues. Peers are employees who work at the same level of organizational hierarchy. In such a case, the performance dimensions may include areas such as leadership skills, interpersonal skills, and attitude. The demerit of Peer appraisal is that it can negatively impact the relationship between fellow workers, thus, leading to rivalry and jealousy.
Sometimes, organizations may ask important customers to evaluate the employees. Organizations such as Maruti Udyog Ltd. and AT & T take feedback from customers about their employees. Managers establish performance measures and goals related to customer service for the employee. The feedback obtained from customers is based on parameters such as effective resolution of customer’s complaint and the approach towards attending customers.
When organizations use a combination of all the above sources to evaluate an employee’s performance, the appraisal is known as 360-degree appraisal.
In this appraisal, an employee’s performance is evaluated by taking feedback from all sources, such as employees, customers, colleagues, superiors, team, and self. It is also known as multi source feedback. Wipro, Infosys, and Reliance Industries use this method for appraising its employees.
Step # 4. Measuring the Actual Performance:
Lays down the foundation for the appraisal of an employee after the end of a specific period. This helps in judging the actual performance of an employee against the pre-established standards. This comparison between the set standards and actual performance helps the organization in revealing gaps in the employee’s performance.
If the performance is not as per the set standards, the employee may be offered further training, counselling, and coaching, or may be instructed to improve upon the weak areas. If the performance exceeds the standards, the employee may be awarded, promoted, or motivated with the help of financial as well as non-financial incentives.
Step # 5. Communicating the Results of Appraisal to the Concerned Employee:
Allows the employees to participate in their own appraisal to make it effective. It is the responsibility of the reporting authority to communicate the results of the appraisal to the concerned employee. The reporting authority also needs to discuss the employees’ appraisal record, provide positive feedback on their accomplishments, specify areas where they lack, assist them in career management and personal development, as well as explore their areas of possible growth. This helps the employees to know their positive areas of contribution as well as their chances of improvement.
Step # 6. Taking Corrective Actions:
Forms the last step of the performance appraisal process, in which an employer discusses the shortcomings and accomplishments of employees. It also helps employees in overcoming their shortcomings. The performance of employees can be improved by using various methods, such as coaching, guiding, counselling, and training.
Steps in Performance Appraisal Process
The performance appraisal process generally involves the following steps:
1. Establish performance standards.
2. Communicate performance expectations to the employees.
3. Measure actual performance.
4. Compare actual performance with standards.
5. Discuss the appraisal with employee.
6. If necessary, initiate corrective action.
The appraisal process begins with the establishment of performance standards. At the time of designing a job and formulating a job description, performance standard are usually developed for the positions. These standards should be clear and not vague and objective enough to be understood and measured.
Once performance standards are established, it is necessary to communicate these expectations. It should not be the part of the employees’ job to guess that what is expected of them. Unfortunately, too many jobs have vague standards. The problem is compounded when these standards are not communicated to the employees. It is important to note that communication is a two-way street.
Mere transfer of information from manager to the subordinate regarding expectations is not communication. Communication only takes place when the transfer of information has taken place and has been received and understood by the subordinate. Therefore, feedback is necessary from the subordinate to the manager. Satisfactory feedback ensures that the information communicated by manager has been received and understood in the way it was desired.
The third step in the appraisal process is the measurement of performance. To determine what actual performance is, it is necessary to acquire information about it. We should be concerned with how we measure and what we measure. To measure actual performance frequently, managers use four common source of information – personal observations, statistical reports, oral reports and written reports. Each has its own strengths and weaknesses. However, a combination of them increases both the number of input sources and possibility of receiving reliable information.
The fourth step in the appraisal process is the comparison of actual performance with standards. The attempt in this step is to note deviations between standard performance and actual performance so that we can proceed to the next phase of the appraisal process the discussion of the appraisal with the employee.
One of the most challenging tasks facing managers is to present an accurate appraisal to the subordinate and then have the subordinate accept the appraisal in the right spirit. Appraising performance touches on one of the most emotionally charged activities-the assessment of another individual’s contribution and ability.
The impression that subordinates receive about their assessment has a strong impact on their self-esteem and very important, on their subsequent performance. Of course conveying good news is considerably less difficult for both the manager and the subordinates than conveying the bad news that performance has been below expectations.
In this context, the discussion of the appraisal can have negative as well as positive motivational consequences. This is reinforced, For example, when we recognize that statistically speaking, half of all employees are below average.
The final step in the appraisal is the initiation of corrective action when necessary. Corrective action can be of two types. One is immediate and deals predominately with symptoms. The other is basic and deals with causes. Immediate correction action is often described as “putting out fires”, whereas basic corrective action gets to the source of deviation and seek to adjust the difference permanently.
Coaching and counselling may be done or person may be deputed for formal training courses and decision-making responsibilities and authority may be delegated to the subordinates. Attempt may also be needed to recommend for salary increased or promotions, if these decisions become plausible in light of the appraisal.