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Performance Appraisal Process

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Everything you need to know about the performance appraisal process. The assessment of employee contribution to an organization can be defined as the process of performance appraisal.

Assessment of employee performance helps organisations determine whether the performance of employees is aligned with the goals of the organisation.

Performance appraisal can be defined as the process implemented by the managers to help employees perform better. This process involves three types of activities- strategic, administrative and developmental.

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On the strategic front, employee activities must be linked with the strategic goals of the organisation. Organisations should design appraisal systems that maximise the performance of the employees.

This also involves developing feedback systems that enable the employees to perform effectively. From an administrative point of view, performance appraisals are useful for taking decisions regarding salaries, promotions, retention/termination of employees.

The process of performance appraisal consists of various steps, stages and process. These are briefly explained as under-

1. The systematic steps involved in the process of performance appraisal are as follows:-

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a. Setting Criteria b. Setting Policies on who Evaluates, when, and how Often c. Methods/Techniques of Performance Appraisal and d. Appraisal Feedback.

2. Procedural stages usually adopted to examine the skill and qualities of employees are discussed as follows:-

a. Defining Objectives of Performance Appraisal b. Defining Performance Expectations c. Developing Relevancy and Uniformity d. Designing Performance Appraisal System e. Implementing Performance Appraisal System f. Performance Appraisal Interview and g. Desired Outcomes/Results.

3. The process of performance appraisal includes:-

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a. Establishing Standards of Performance b. Communication of the Standards to Employees c. Measuring the Actual Performance d. Comparison of Actual Performance with the Standards e. Discussing Reports with the Employees and f. Taking Corrective Action.


Process of Performance Appraisal – Steps, Stages and Process

Process of Performance Appraisal – Top 6 Systematic Steps: Setting Criteria, Policies on Who Evaluates, When, and How Often, Techniques and Feedback

The assessment of employee contribution to an organization can be defined as the process of performance appraisal. Assessment of employee performance helps organisations determine whether the performance of employees is aligned with the goals of the organisation.

Performance appraisal can be defined as the process implemented by the managers to help employees perform better. This process involves three types of activities- strategic, administrative and developmental. On the strategic front, employee activities must be linked with the strategic goals of the organisation.

Organisations should design appraisal systems that maximise the performance of the employees. This also involves developing feedback systems that enable the employees to perform effectively. From an administrative point of view, performance appraisals are useful for taking decisions regarding salaries, promotions, retention/termination of employees.

Unfair procedures used in PAs create job dissatisfaction. Performance appraisal should be fair and must provide accurate and reliable data. In order to provide these, a systematic process must be followed.

Step one of this process is completed when an organization conducts a job analysis.

Step # 1. Setting Criteria:

The dimensions of performance upon which an employee is evaluated are called the criteria of evaluation, for example quality of work, quantity of work, and cost of work etc.

An effective criterion should possess the following characteristics:

a) Reliability- A measure of performance must be consistent. The most important type of consistency for a performance measure is inter rater reliability. If different raters observe the same employee, they should arrive at similar conclusion about the quality of that employee’s output.

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b) Relevance- A measure of performance must be related to the actual output of an incumbent as logically as possible.

c) Sensitivity- Any criterion must be able to reflect the difference between high and low performers. That is, high and low performers must receive appraisal scores that accurately represent the difference in their performance.

d) Practicality- The criterion must be measurable.

Most studies reveal multiple criteria are necessary to measure performance completely. The multiple criteria are added together statistically or combined into a single multifaceted measure. The choice of criteria is not an easy process.

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One must be careful to evaluate both activities (for example, number of calls a salesperson makes) and results (for example, rupees of sales). A combination of criteria using activities and results is desirable. Management must weigh the importance of multiple criteria.

Step # 2. Setting Policies on who Evaluates, when, and how Often:

1. Who should do the appraising?

Performance evaluation is a HRM activity that involves cooperation between the line operating managers and HR specialists. The appraiser should be a person who has thorough knowledge about the job content, contents to be appraised and standards of contents.

The various appraisers are:

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a. Operating Manager (Immediate Supervisor):

Supervisor includes the immediate superior of the employees and other superiors having adequate knowledge about the work of the employee and head of the departments. Having the responsibility to manage their subordinates, supervisors observe, direct and control the subordinates continuously.

They are accountable for the successful performance of their subordinates. Other supervisors having close work contact with an employee also appraise employee’s performance in order to provide additional information. The general procedure followed is that the immediate superior appraises the performance of the employee which in turn is reviewed by the head of the department.

The drawback of immediate supervisor appraising the performance is that, very often he/she is biased and manipulates the performance of the employees.

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b. Committee of Several Supervisors:

Very often a committee of several supervisors is chosen to conduct the appraisal. This approach has the advantages of reducing bias on the part of one superior and adding additional information to the evaluation, especially if it follows a group meeting format.

c. Employee’s Peers (Co-Workers):

In this approach, the peers/co-workers must know the level of performance of employee being evaluated. It is preferable for the evaluating peers to trust one another and not to compete with each other for pay hike or promotion. This approach can be successful if the work group is stable over a long period of time and performs tasks that require frequent working contacts and interaction among the peers.

d. Employee’s Subordinates:

Many organizations Exxon, IBM and Xerox use this system of appraisal. In many foreign and Indian universities students evaluate their professors. This system can be suitable in other organizational setting, provided there exist cordial relationships between the subordinates and supervisors and the supervisors have adequate knowledge about the superior’s jobs.

Managers are less likely to accept this system if the information is going to be used for administrative purposes like pay hike and promotion than if it is used for development.

e. Self Appraisal:

In this case the employee appraises himself/herself with the technique used by other evaluators. This system can be successful provided the individuals understand the objectives they are expected to achieve and the standards by which they are to be evaluated. Employees appraising their own performance are highly motivated. The negative aspect is sometimes the self-interest of the employees outweighs an objective evaluation.

f. Consultants:

Many organizations employ consultants to appraise the performance of the employees in order to get an unbiased appraisal. Consultants are being trained and observe the employees at work for a long period in order to do the best appraisal.

g. Combination of Approaches (360 Degree Feedback):

In human resources or industrial/organizational psychology, 360-degree feedback, also known as “multi-rater feedback,” “multi source feedback,” or “multi source assessment,” is feedback that comes from all around of an employee. “360” refers to the 360 degrees in a circle, with an individual figuratively in the center of the circle.

It is the systematic collection and feedback of performance data on an individual or group derived from a number of stakeholders on their performance. Feedback is provided by subordinates, peers, and supervisors. It also includes a self-assessment and, in some cases, feedback from external sources such as customers and suppliers or other interested stakeholders.

It may be contrasted with “upward feedback,” where managers are given feedback by their direct reports, or a “traditional performance appraisal,” where the employees are most often reviewed only by their managers. 360 degree feedback has emerged as one of the most used interventions of recent years for leadership development.

It drives an individual or organization towards desired objectives/goals by aligning individual performance with the organization’s strategy. The results from 360-degree feedback are often used by the person receiving the feedback to plan training and development. Results are also used by some organizations in making administrative decisions, such as pay or promotion.

It was originally developed by T.V Rao and others at Indian Institute of Management (IIM), Ahmadabad as a fact finding and self-correction technique. Many organizations like Bellcore International Ltd., Johnson and Johnson Ltd., Wipro Technologies Ltd. use 360 degree feedback system.

Merits and Demerits of 360 Degree Feedback:

Merits:

a. Multiple perspectives of a person’s performance.

b. Ratings can evaluate person based on actual contact and observation.

c. Feedback is provided from multiple directions-above, below, peer, and outsider. This leads to increased team interaction and increased focus on customer service.

d. Anonymous upward feedback results in full participation.

e. Learning about weaknesses and strengths is motivational. It helps in increased awareness and act as a catalyst for performance improvement.

Demerits:

a. Feedback from all can be overwhelming.

b. Individual rater can hide in a group of raters and provide harsh evaluations.

c. Conflicting ratings can be confusing and frustrating.

d. Linking findings to rewards can prove to be unfair.

e. Requires a plan and well-trained raters which is not typically found in organizations.

2. When should evaluation be done?

In United States a majority of the organizations continue to evaluate performance on an annual basis. In India many of the organizations conduct performance appraisal either annually or half- yearly. One study of some Indian corporates found that appraisals are most often conducted once a year. Some organization like Reliance Communications conducts performance appraisal quarterly.

There are two choices for when to actually conduct evaluations:

(a) Anniversary date (Hiring date of the person).

(b) A single calendar date when all the employees are being appraised.

The merit of using single day approach of conducting performance appraisal is convenient administratively. But the demerits are it requires the appraisers to spend lots of time conducting evaluation interviews and completing forms at one time, for which they may want to get it over with quickly. The single day may not be related to normal task cycle of the employee.

Hence the manager cannot evaluate performance effectively. In order to overcome this drawback evaluation should be scheduled at the completion of a task cycle. For many professors and teachers the academic year starts in the month of July and ends in June. For employees having no clear task cycle, the date can be set by setting the goals.

Goals can be set in by taking the consent of both manager and the employee on task cycle, which terminates with an evaluation of the employee’s performance during that cycle.

Step # 3 and 4. Methods/Techniques of Performance Appraisal:

The various methods of performance appraisal can be basically divided into individual evaluation methods and multi-person evaluation methods.

Methods of Performance Appraisal:

A. Individual Evaluation Methods:

Evaluating employees individually. There is no comparison with other employees. The standards of performance are defined without reference to other employees.

B. Multi-Person Evaluation Methods:

Direct/indirect comparison of performance of one employee with that of other employees. Thus the standard of performance are relative- an employee’s performance is defined as good or bad as compared with the performance of other employees.

A. Individual Evaluation Methods:

1. Graphic Rating Scale:

It is the oldest and most common method of performance evaluation. Graphic rating scales require an evaluator to indicate on a scale the degree to which an employee demonstrates a particular trait, behaviour, or performance result.

Rating forms are composed of a number of scales, each relating to a certain job or performance-related dimension, such as job knowledge, responsibility, quality of work, quantity of work, personal qualities, dependability, cooperation, and initiative etc. The rating can be in a series of boxes or they can be on a continuous scale (0-4 or 1 -5 or the like).

Each scale is a continuum of scale points, or anchors, which range from high to low, from good to poor, from most to least effective, and so forth. In case of continuous scale, the rater places a check above descriptive words ranging from none to maximum. These ratings are then the assigned points.

For example, outstanding may be assigned a score of 5 and unsatisfactory a score of 1. Total scores are then computed. In some plans, greater weight may be given to traits that are regarded as more important. Raters are often asked to explain each rating with a sentence or two.

Acceptable rating scales should have the following characteristics:

a. Performance dimensions should be clearly defined.

b. Scales should be behaviourally based so that a rater is able to support all ratings with objective and observable evidence.

c. Abstract trait names such as “loyalty,” “honesty,” and “integrity” should be avoided unless they can be defined in terms of observable behaviours.

d. Points, or anchors, on each scaled dimension should be brief, unambiguous, and relevant to the dimension being rated. For example, in rating a person’s flow of words, it is preferable to use anchors such as “fluent,” “easy,” “unimpeded,” “hesitant,” and “laboured” rather than “excellent,” “very good,” “average,” “below average,” and “poor.”

Carefully constructed graphic rating scales have a number of advantages such as:

a. Standardization of content permit comparison of employees.

b. Ease of development use and relatively low development and usage cost, and

c. Reasonably high rater and rate acceptance.

A disadvantage of such rating scales is that they are susceptible to rating errors which result in inaccurate appraisals. Possible rating errors include halo effect, central tendency, severity, and leniency. Another disadvantage is the rating scale may be arbitrary and the rating may be subjective.

2. Forced Choice:

To overcome several potential problems of graphic rating scales led to the development of alternate rating methods. One of the major pitfalls of graphic rating scales is they let the rater to rate every employee consistently high or low, resulting in no remarkable difference between good and bad performers. Forced-choice method is a solution to overcome the above pitfall.

In this method the rater is required to choose from a set of descriptive statements about an employee. Forced-choice items are generally prepared by an HR specialist. Then supervisors or others familiar with the employees’ performance evaluate the statements describing effective or ineffective behaviour. Sometimes neutral statements are also included in forced-choice items.

When the supervisors evaluate their employees, they check the statements that describe the employee and rank the items from most to least descriptive. The HR department then adds up the number of statements in each category and they are summed into an effectiveness index.

The advantages of this method are this can be used by superiors, subordinates, peers, or a combination of these in evaluating employees and the overall objectivity of the evaluation process is being increased by using this method, since the rater does not know how high or low he/she is evaluating the individual as he/she has no access to the scoring key. This method has various limitations.

Trained specialists are required to prepare the sets of phrases, which demands huge cost. The results of forced-choice method may not be useful for training employees because the rater himself/herself does not know how he/she is evaluating the worker.

3. Essay Evaluation:

In essay evaluation method, the evaluator is asked to express strong and weak aspects of employee’s performance usually in terms of job behaviours and/or results. Essay evaluation is non-quantitative in nature. This technique is normally used with a combination of the graphic rating scale because the rater can elaborately present the scale by substantiating an explanation for his/her rating.

The rater considers the various factors while preparing the essay on employee, which are:

a. Job knowledge and potential of the employee.

b. Employee’s understanding of the company’s programmes, policies, objectives etc.

c. Employee’s relations with co-workers and superiors.

d. Employee’s general planning, organizing, leading and controlling ability.

e. Attitudes and perceptions of the employee in general.

The advantages of this method are this can be used by superiors, subordinates, peers, or a combination of these in evaluating employees. Essay evaluation offers flexibility to discuss employee’s behaviour in relation to what the organization is attempting to accomplish and provides a good deal of information about the employee.

Since essay appraisals are to a large extent unstructured and open-ended, lack of standardization is a major problem. The open-ended, unstructured nature of the essay appraisal makes it highly susceptible to evaluator bias, which may in some cases be discriminatory.

By not having to report on all job-related behaviours or results, an evaluator may simply comment on those that reflect favourably and unfavourably on an employee. This does not usually represent a true picture of the employee or the job, and content validity of the method suffers.

4. Critical Incident Technique:

The studies of Sir Francis Galton are said to have laid the foundation for the Critical Incident Technique (CIT), but it is the work of Colonel John C. Flanagan, that resulted in the present form of CIT. Flanagan carried out his research as part of the Aviation Psychology Programme of the United States Army Air Forces during World War II, where he conducted a series of studies focused on differentiating effective and ineffective work behaviours.

In critical incident technique the supervisor maintains a log of behavioural incidents on each employee that represent either effective or ineffective performance of the employee being rated. At the end of the evaluation period, these recorded critical incidents are used in the evaluation of the workers’ performance.

These incidents may not be directly comparable for different rates. Hence list of standardized incidents are prepared by an HR specialist in consultation with the operating managers.

An example of a good critical incident for a customer relationship manager is the following:

June 8- Shourya listens to the lady’s complaints patiently, informs to the sales department about the complaints and follows up the things till the lady gets the full credit for the returned product. He is polite, gentle, prompt and sincere in solving the lady’s problem.

On the other hand, a bad critical incident is:

August 8- Shourya stays fifteen minutes over on his break during the busiest part of the day. He fails to answer four customers’ calls. He is lazy, negligent, stubborn and less interested in work.

Factors responsible for the success of critical incident technique are:

a. The supervisor has to be given adequate time to observe each subordinate during the evaluation period.

b. It is not fair to expect a supervisor to remember all of the incidents that were observed. Hence the supervisor must be willing to take time to record all the incidents that are seen in the log for each employee. Otherwise, the supervisor may forget many of the incidents.

Advantages of critical incident technique are:

a. This method provides an objective basis for conducting a thorough discussion of an employee’s performance,

b. Identifies even rare events that might be missed by other methods which only focus on common and everyday events,

c. Inexpensive and provides rich information, and

d. Emphasizes the features that will make a system particularly vulnerable and can bring major benefits (e.g. safety).

Disadvantages of critical incident technique are:

a. A first problem comes from the type of the reported incidents. The Critical Incident Technique relies on events being remembered by users and also requires the accurate and truthful reporting of them. Since critical incidents often rely on memory, incidents may be imprecise or may even go unreported.

b. The method has a built-in bias towards incidents that happened recently, since these are easier to recall.

c. Respondents may not be accustomed to or willing to take the time to tell (or write) a complete story when describing a critical incident.

d. Critical incidents technique of evaluation is applied to evaluate the performance of superiors rather than of peers or subordinates.

5. Check List and Weighted Check List:

A check list represents a set of objectives or descriptive statements about the employee and his/her behaviour. If the rater believes that the employee possesses a trait listed, the rater checks the item; otherwise, he leaves the item blank. A rating score from the checklist equals the number of checks.

A variation of the checklist is the “weighted checklist”. The supervisors and the HR specialists familiar with the jobs to be evaluated prepare a long list of descriptive statements about the effective and ineffective behaviour on the job. Judges who have observed behaviour on the job sort the statements into piles, describing behaviour that is scaled from excellent to poor.

When there is reasonable agreement on an item (for example when the standard deviation is small), it is included in the weighted checklist. The weight is the average score of the rater prior to use of the checklist.

The supervisors or other raters receive the checklist without the scores and check the items that apply, as with an un-weighted checklist. The employee’s evaluation is the sum of the scores or weights on the items checked.

Checklists and weighted checklists can be used by evaluators who are superiors, peers, or subordinates. Disadvantages of this method are- biased weights may be assigned to the statements, more time consuming, and sometimes expensive.

6. Behaviourally Anchored Rating Scale (BARS):

BARS refers to Behaviourally Anchored Rating Scales. It was developed by Smith and Kendall to provide a better method of rating employees.

It differs from “standard” rating scales in one central aspect, in that it focuses on behaviours that are determined to be important for completing a job task or doing the job properly, rather than looking at more general employee characteristics (e.g. personality, vague work habits). It is otherwise called as Behavioural Expectation Scale (BES).

A BARS rating form usually contains 8 to 10 specifically defined performance dimensions, each with five or six critical incident “anchors”.

Construction of BARS- Development of BARS requires combination of techniques used in critical incident method and weighted checklist rating scales.

The following steps are followed:

Step-1- Collection of Critical Incidents:

People with knowledge of the job to be evaluated, such as job incumbents and supervisors, describe specific examples of effective and ineffective behaviour related to job performance.

Step-2- Identification of Performance Dimensions:

People assigned the task of developing the instrument; cluster the incidents into a small set of key performance dimensions such as relationship with coworkers, handling the customer grievances, meeting the daily deadlines and the like. Generally five to ten dimensions account for most of the performance.

Step-3- Reclassification of Incidents:

Another group of subject matter experts having knowledge about the job are asked to reclassify the critical incidents generated in step 2.They are given the definition of job dimensions and are told to assign each critical incident to the dimension that it best describes. Incidents having lower than 75 per cent agreement are discarded.

Step-4- Assigning Scale Values to the Incidents:

Each incident is then rated on a one-to-seven or one-to-nine point Likert type scale with respect of how well it represents performance on the appropriate dimension. A rating of 1 represents ineffective performance and a rating of 7 represents effective performance. The second group usually assigns the scale values and calculates the means and standard deviations of scale values.

On a 7-point scale, incidents having standard deviations of 1.5 or less are retained.

Step-5- Producing the Final Instrument:

About six or seven incidents for each performance dimension-all having met both the reclassification and standard deviation criteria are used as behavioural anchors. The final BARS instrument consists of a series of vertical scales (one for each dimension) anchored (or measured) by the final incidents. Each incident is positioned on the scale according to its mean value.

Advantages of BARS are:

i. Acceptance by superiors and subordinates is greater.

ii. Since it is job specific and identifies observable and measurable behaviour, it is more reliable and valid method for performance appraisal.

iii. It helps in achieving the goals of the organization in an effective and efficient manner.

Disadvantages are:

i. This method is time consuming.

ii. It is more expensive than other methods.

iii. This method demands several appraisal forms to accommodate different types of jobs in an organization.

7. Management by Objectives:

Peter F. Drucker is often considered to be the originator of management by objectives. The concept continued to take hold in the management vocabulary in the 1960’s and 1970’s. Management by objectives can be applied both by higher-level managers to managers beneath them and by these lower-level managers to the employees that they manage.

According to Peter Drucker, Management by objectives is based upon communication taking place between manager and employee. The manager and employee engage in a process of jointly crafting the goals that will direct the employee’s efforts and serve as the basis for evaluation.

MBO focuses attention on what must be accomplished rather than how it is to be accomplished. Employees are evaluated on their performance results. Hence the other name of MBO is Result-Based performance appraisal system. MBO is a kind of goal setting and appraisal programme involving six steps.

Step-1- Setting the Organizational Goals:

Establish an organization wide plan for next year and set the goal(s). Basically the top level personnel are responsible for this.

Step-2- Setting the Departmental Goals:

Head of the departments take the broader company goals (such as increasing production by 40 percent, market share by 20 percent, improving profit by 30 percent, launching a new product etc.) and with their superiors, jointly set goals for their department.

Step-3- Defining Expected Results:

The head of the departments and their subordinates agree on a set of combined set short-term and individual performance targets.

Step-4- Reviewing the Performance:

Departmental heads compare each employee’s actual and targeted performance either periodically or annually. Periodic review is intended to identify and solve specific performance problems. The annual review is conducted to assess and reward one’s overall contribution to the organization.

Step-5- Providing Feedback:

Both parties discuss and evaluate the actual progress made in achieving the goals, where they have committed mistakes, the ways to rectify them, and how efficiently the employee can meet the target next time.

Advantages of MBO method are:

a. Both the superiors and the subordinates jointly set the goals.

b. It involves employees in the whole process of goal setting and increased employee empowerment increases employee job satisfaction and commitment.

c. The focus is on future rather than on past. Goals and standards are set for the performance for the future with periodic reviews and feedback.

Disadvantages of MBO method are:

a. MBO demands a great deal of time to set verifiable goals at all levels of the organization.

b. Too many goals are set and there by confusion occurs.

c. In the process of defining everything rigidly, some of the qualitative aspects such as employee attitudes, job satisfaction, emotion etc. might be ignored.

d. There is too much emphasis on short-term.

e. It involves too much paperwork.

f. Very often the superiors are not properly trained on the MBO process and the mechanics involved.

g. MBO is used as a rigid control mechanism that intimidates rather than motivates.

The way to overcome the above pitfall and make MBO a success is to allow managers at all levels to explain, coordinate and guide the programme in a persuasive and democratic way. The jointly set target must be specific, measurable, achievable, and realistic and time bound.

Multi-Person Evaluation Methods:

1. Ranking:

Ranking method compares one employee to another, resulting in an ordering of employees in relation to one another. Rankings often result in overall assessments of employees, rather than in specific judgments about a number of job components. Straight ranking requires an evaluator to order a group of employees from best to worst overall or from most effective to least effective in terms of a certain criterion.

This is difficult and time consuming, if the supervisor is required to rank a large number of employees. It is easier for the supervisor to rank the best and the worst employee in a reliable way than it is to rank the average ones. Hence another method known as alternative ranking is used to overcome the above problems.

Alternative ranking makes the same demand, but the ranking process must be done in a specified manner (for example, by first selecting the best employee in a group, then the worst, then the second-best, then the second-worst, etc. till all the persons have been ranked).

Though the ranking method is simple and easier to use, it has many drawbacks like:

a. The whole man is compared with the whole man. Practically it is difficult to compare individuals possessing varied behavioural traits.

b. The method only tells about the position where an employee stands in a group. It does not tell anything about how much better or worse an employee is when compared to another employee.

c. In case of a large number of employees, ranking is a tedious task.

2. Paired Comparison:

Paired comparison is used to overcome the problems faced in case of the ranking method. This method makes the ranking process easier for the supervisor, especially when there are large numbers of employees to be ranked.

In paired comparison method each employee is compared with all other employees in the group; for every trait. For example, when there are five employees (A,B,C,D, and E) to be compared, then A’s performance is compared with that of B’s performance and decision is taken regarding whose performance is better or worse. B is compared with all other employees.

Since A is already compared with B, this time B is compared with C, D and E. Following this procedure when there are five employees, fifteen comparisons are made. The number of comparisons or decisions to be made can be determined with the help of the formula n (n-2) where n is the number of employees.

For several individual traits, paired comparisons are made, tabulated and then rank is assigned to each worker.

This method is very simple. But the major limitation is that the method cannot be applied when there are large number employees to be evaluated.

3. Forced Distribution:

The forced distribution method of performance evaluation derives its name from the fact that those responsible for providing evaluations, the raters, are “forced” to distribute ratings for the individuals being evaluated into an organizationally determined, “pre-specified” performance distribution.

Typically, the performance distribution is chosen to reflect the normal curve, so that a relatively small percentage of rates are required to be placed in the extremes (best and worst performers) and larger percentages of rates are placed in the categories towards the middle of the performance distribution.

For example, an evaluator rating 25 individuals might be instructed to place three individuals in the category labelled “outstanding” and three individuals in the category labeled “poor”. The evaluator might further be asked to place five individuals in the category described as “above average” and five more individuals in the category described as “below average.”

Finally, the evaluator would place nine individuals in the category labelled “average.” In this way the evaluator has forced the distribution of rate performance into a predetermined set of ratings.

Another example may be in human resource management paper, the professor may decide that in the class test, top 10 percent of the students receive A grade, next 20 percent receive B grade, the middle 40 percent receive C grade, the next 20 percent receive D grade and the bottom 10 percent receive F grade.

The main factor in this method is that the predetermined distribution must be followed by a rater, regardless of how well the students or the employees performed. So if the whole class performs extremely well, as per the above example many of the students will be disappointed, since 20 percent receive B grade, in spite of their well performance in the test.

Similarly, if the whole class performs extremely poor, 10 percent of students still receive A grade, in spite of their bad performance in the test. The same thing is also applicable to organizations.

In the above examples several issues emerge. First, the criterion on which the performance judgment is made must be defined. It is possible to ask raters to make their judgments based on the “overall performance” or on each of a series of performance dimensions.

The advantage of forced distribution method is that by forcing the distribution according to predetermined percentages, the problem of making use of different raters with different scales is avoided. The pitfall of this method is that it may lead to low productivity. The employees who feel that they are productive, but find themselves placed in a grade lower than expected feel frustrated and become demoralized.

Many organizations like HSBC, Ford Motor etc. using forced distribution method have found it to be a failure.

Step # 5 and 6. Appraisal Feedback:

The appraisal process is considered as a continuous process and a two-way communication system between the appraiser and the appraisee. To make the process effective and efficient, the supervisor should hold an evaluation interview or feedback interview with each subordinate in order to discuss his/her appraisal and to set objectives for upcoming appraisal period.

One of the primary purposes of formal performance appraisals is to provide clear, performance-based feedback to employees. Almost 45 years ago, Maier (1958) highlighted the crucial role of appraisal feedback in the performance appraisal process. Indeed, the significance of feedback to the appraisal process as well as to the broader management process has been widely acknowledged.

The feedback interview is designed to accomplish goals such as-recognizing and encouraging superior performance so that it will continue, sustaining acceptable behaviours, and changing the behaviour of rates whose performance is not meeting organizational standards.

Roberts (2002) highlights the importance of the appraisal/evaluation interview for employee satisfaction. It is one of the crucial attributes of an effective performance appraisal system. According to him only the interview can give insight into the employee’s voice and provide valuable information.

Gabris and Ihrke (2001) demonstrate a close relationship between employee burnout and employee perceptions of the performance appraisal interview. Nathan, Mohrman, and Millman (1991) and Poon (2004) address the importance of the supervisor’s role in the appraisal interview for job satisfaction.

Nathan et al. (1991) document the role of interpersonal relations between the supervisor and the employee with regard to the effects of appraisal interviews on performance and job satisfaction.

In case of new employees, the HR manager must ensure that constructive feedback derived from the assessment, whether positive or negative, must be communicated to them, thereby instilling a sense of transparency between the employer and fresher. This is the period where an HR manager need to handhold the employees dealing with this phase for first time and be articulate about his/her areas of concern and improvement.

Since the new employee is not aware of the organizational situations, HR manager should identify his/her concerning areas, offer solutions and discuss their future plan in the organization.

Feedback has the following positive aspects:

a. From the organization’s point of view, feedback keeps both its members’ behaviour directed toward desired goals and stimulates and maintains high levels of effort.

b. From the individual’s point of view, feedback satisfies a need for information about the extent to which personal goals are met as well as a need for social comparison information about one’s relative performance.

c. Appraisal Feedback must be provided to employees to enhance their self-perception. Self-perception is the process of understanding oneself i.e. where he/she stands in terms of his/ her efficiency, what his/her strengths and weaknesses are, to what extent he/she is able to use his/her capabilities, and how he/she can improve himself/herself further.

d. Feedbacks potentially can influence future performance.

e. It is believed to play a significant role in the development of job and organizational attitudes.

Whether these benefits actually accrue, well depend on how feedback recipients react to the feedback. Reactions to feedback are presumed to indicate overall system viability and to influence future job performance as well as job and organizational attitudes.

Handling Negative Feedback:

A negative appraisal adversely affects the employee’s morale and performance. Hence this situation must be carefully handled by both the employer and employee.

On receiving a negative review the employee may adopt the following strategy:

a. Firstly it is the duty of the employee to accept the appraisal with a positive attitude by understanding that bad review is an opportunity for improvement and development. The employee must not be defensive about the negative feedback.

b. The employee must try to set clear development goals with the manager by focusing on building areas where the employee’s skills and knowledge have come out as deficient, and making the strengths even stronger. The goals should be SMART, i.e. Specific, Measurable, Achievable, Relevant, and Time-bound.

c. The employee must meet with the manager at least once in a month to review the progress made against the goals.

From the organization side, the employer must make it ensure that objective and meaningful feedback along with a supportive and an encouraging culture should be provided to the employee in order to reduce the feeling of resentment and de-motivation.

Before declaring an employee to be a non-performer and implementing disciplinary actions, the organization should first find out if there is something that they need to change in the employee’s current scenario, which will make him/her perform better. This may include changing the employee’s team, manager, role and so on.

Checking the performance on a continuous basis helps in making the employees more productive. Laying-off the non performing employee is the direct and easy way of solving a performance problem. But it has many repercussions, it leads to disruption of normal work flow, severance pay, and time lost in training the employee.


Process of Performance Appraisal – 7 Main Procedural Stages Usually Adopted to Examine the Skill and Qualities of Employees

In order to examine the skill and qualities of employees, there is need to make a sequential stage for making a process of performance appraisal.

In any organisation, the procedural stages may be described here:

Stage # 1. Defining Objectives of Performance Appraisal:

The first step in effective performance appraisal involves defining the objectives of it. Performance appraisals are used for different purposes ranging to evaluate the skill and efficiency of employees, to evaluate their behaviour to raise their work performance and to fulfil different job requirements. It also aims at improving the performance, instead of being a more tool of reward distribution.

Stage # 2. Defining Performance Expectations:

It is an important part to define and establish the standards and norms of performance expectations. It includes informing the employee what is expected to him on the job. An employee should not be expected to begin the job until they understand what is expected of them. Generally, the expectations may be the level of products’ quality, productivity, resource utilisation, quantity of production, better behaviour, devotion and work attitudes etc.

Stage # 3. Developing Relevancy and Uniformity:

Performance appraisal should also be viewed as a system to make the job expectations relevant with job performance. The required job skill, qualifications and experience must be relevant with the nature and process of job performance. Besides, at this stage, it is needful to make some uniformity of job expectation and job standards should be maintained the uniformly at different organisational level.

Stage # 4. Designing Performance Appraisal System:

Before going to implement the appraisal system, there is need to manage and organise a system approach. The overall appraisal includes both objective and subjective assessment of how well an employee has performed during the period under review. It may be designed to involve all the relevant factors concerning of employee, the environment of organisation and the job specifications etc.

These three factors are interrelated and interdependent for making a systems design for appraisal process. The appraisal system may be based on individualised, subjective, qualitative and oriented towards problem solving.

The considerable aspects, while designing an appraisal system might be given here:

i. The appraisal process must be congruent with work environment and management styles etc.;

ii. The reliable, simple and fair methodologies can be followed;

iii. Somehow the employees may be involved in determining the appraisal criteria and standards;

iv. The job description should be based on job analysis;

v. The positive and negative rewards system should be part of the performance appraisal system;

vi. More emphasise to be given to the job expectations;

vii. The appraisal system can be developed on structural manner and the informal contacts and interactions can also be used;

viii. The relevance, responsiveness and commitments should be oriented towards the objectives of the programme in which the employees have been assigned a role.

Stage # 5. Implementing Performance Appraisal System:

There are some stages under that the performance appraisal system can be implemented properly. The stages may be as to study the job analysis, document performance, implement or regularise the appraisal method, appraisal interview and sometime the post appraisal interviews also conduct to discuss the terms and job expectations with suitable reward etc., with employees are involved here.

Stage # 6. Performance Appraisal Interview:

Besides the appraisal system as follows by managers, they can also conduct an interview, a traditional method to get some sophisticated and informal information concerning of employees. A manager can ask the employee, being appraised, to bring the information within the part of interview as –

i. To fill up the self-evaluation form to fulfil employees’ achievements and contribution;

ii. To provide individual views, feelings and opinions about job and its performance;

iii. To show their desired work area in that they are most comfortable to complete their assignments;

iv. To review the job descriptions and job specification with the viewpoints of employees etc.;

v. To make strength and weaknesses of the employees.

As such, performance appraisal interview makes the most visible contribution to review the issues that will be an excellences in this regard.

Stage # 7. Desired Outcomes/Results:

The final step in the performance appraisal process is the use of appraisal data for making different HR strength and weaknesses as well as for making strategic HR decisions. The appraisal data and information are much useful to different HR decisions.

For it the areas may be given here:

i. Proper Induction programme;

ii. Fair and appropriate selection and recruitment of employees;

iii. Proper reward system;

iv. Assessment of training and development;

v. Designing the training programme;

vi. Handling grievance and problem solving;

vii. Promotion, transfer and termination;

viii. Career development; and

ix. Review post performance against agreed goals etc.


Process of Performance Appraisal

The performance appraisal system should provide accurate and reliable data if this information has to be used to achieve organisational goals. Therefore, a systematic process has to be followed for performance appraisal.

This process includes:

1. Establishing Standards of Performance:

Job descriptions may be used to set up goals and targets and standards of performance. While evaluating performance it should be ensured that the standards are reliable, sensitive, relevant and practical. These standards are set because there should be some base on which the performance of the employees is said to be good, average, bad, etc. These standards work as yardsticks for evaluating the performance of the employees.

2. Communication of the Standards to Employees:

The performance standards set in the first step should be communicated to the employees, so that the employees know what is expected from them. These standards will remove the confusion in the minds of the employees in relation to the targets to be achieved by them. Further, when the standards are communicated to the employees, they put their best efforts in increasing their performance equal to or above the set standards.

3. Measuring the Actual Performance:

The next step in the process of performance appraisal is to measure the actual performance of the employees at work. This measurement of performance can be done through statistical reports, personal observations, written reports, oral reports, etc.

4. Comparison of Actual Performance with the Standards:

The actual performance of the employees is compared with the fixed standards for the purpose of finding the stand of the employees. Deviations in the performance of the employees are also noted at this stage. The evaluation of the employees is done on the basis of their potential for growth and advancement.

5. Discussing Reports with the Employees:

Periodically, the assessment reports are discussed with the concerned employees. For helping the employees to improve their performance, their weak points, good points and difficulties are indicated. In this way, their attitude and performance are influenced for the achievement of the organisational goals.

6. Taking Corrective Action:

Performance appraisal process is useful only if corrective action is taken on the basis of the reports. This corrective action can be in the form of advice, counsel, warning, refresher course, training, assignments, coaching, etc.


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