Chapter 9

Performance Measurement
Meaning:
Performance Appraisals is the assessment of individual’s performance in a systematic way. It is a
developmental tool used for all round development of the employee and the organization. The
performance is measured against such factors as job knowledge, quality and quantity of output,
initiative, leadership abilities, supervision, dependability, co-operation, judgment, versatility and
health. Assessment should be confined to past as well as potential performance also.

Objectives

The main objective of performance appraisals is to measure and improve the performance
of employees and increase their future potential and value to the company. Other
objectives include providing feedback, improving communication, understanding training
needs, clarifying roles and responsibilities and determining how to allocate rewards.
 Performance Standards
 Performance Standards and specific goals are needed to be set at the beginning of the
appraisal period which helps the employees to perform better.
 Evaluating Employee Performance
 Evaluation of employee performance is necessary in order to understand strengths and
weaknesses of the employee and also to determine the achievement of pre-set goals
and targets.
 Identify T&D Needs
 By evaluating the performance of employees the employer or the manager comes to
know their areas of weakness and also the areas of improvement and development and
accordingly plan T&D activities.
 Rewarding Performance
 By rewarding the good performer and punishing the bad one encourages the employees
to work effectively and in proper manner. As behavior is a function of its result.
 Improving Performance
 After identifying their strengths and weaknesses the employees can be encouraged to
overcome their weaknesses and to leverage on their strengths to optimize their
performance.
Process of Performance Appraisal
 Establishing Performance Standards
 The first step in the process of performance appraisal is the setting up of the standards
which will be used to as the base to compare the actual performance of the employees.
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. Standards should not be expressed in an articulated or vague manner
such as “a good job” or “a full day’s work” as these vague phrases tells nothing.

 Communicating Performance Standards

 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 the employees. 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.

 Measure Actual performance

 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 actual performance of the employee on the basis
of information available from various sources such as personal observation, statistical reports,
oral reports, and written reports. 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.

 Compare Actual Performance with Standard

 In this stage, the actual performance is compared with the predetermined standards.
Such a comparison may reveal the deviation between standard performance and actual
performance and will enable the evaluator to proceed to the fifth step in the process,
i.e., the discussion of the appraisal with the concerned employees.
 Discuss the Appraisal with the Employee
 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. Performance appraisal feedback by managers should be in such
way helpful to correct mistakes done by the employees and help them to motivate for better
performance but not to demotivate. Performance feedback task should be handled very carefully
as it may lead to emotional outburst if it is not handing properly. Sometimes employees should
be prepared before giving them feedback as it may be received positively or negatively
depending upon the nature and attitude of employees.
 Initiate Corrective Actions
 The purpose of conducting employee performance appraisal is for making decisions about
employees without any bias by the HR manager. Decision-making by HR managers about
employees rewarding, promotions, demotions, transfers and sometimes suspensions/dismissal of
employees are depended upon the employee performance appraisal. The decision taken by HR
manager should match exactly with performance appraisal results of employees to avoid
grievance or disturbances in between them, as they affect overall performance of the
organisation.

Methods Of Performance Appraisal

I. Traditional Methods

1. GRAPHIC RATING SCALE:

The graphic rating scale is one of the most popular and simplest techniques
for appraising performance. It is also known as linear rating scale. In this
method, the printed appraisal form is used to appraise each employee.
The form lists traits (such as quality and reliability) and a range of job
performance characteristics (from unsatisfactory to outstanding) for each
trait. The rating is done on the basis of points on the continuum. The
common practice is to follow five points scale.
 The rater rates each appraisee by checking the score that best describes his
or her performance for each trait all assigned values for the traits are then
totaled. Figure 28-3 shows a typical graphic rating scale.

This method is good for measuring various job behaviours of an employee.

However, it is also subjected to rater’s bias while rating employee’s
behaviour at job. Occurrence of ambiguity in design- mg the graphic scale
results in bias in appraising employee’s performance.

2. CRITICAL INCIDENT METHOD

In this method, the rater focuses his or her attention on those key or critical behaviours that
make the difference between performing a job in a noteworthy manner (effectively or
ineffectively). There are three steps involved in appraising employees using this method.
First, a list of noteworthy (good or bad) on-the-job behaviour of specific incidents is
prepared. Second, a group of experts then assigns weightage or score to these incidents,
depending upon their degree of desirability to perform a job. Third, finally a check-list
indicating incidents that describe workers as “good” or “bad” is constructed. Then, the
check-list is given to the rater for evaluating the workers.
The basic idea behind this rating is to apprise the workers who can perform their jobs
effectively in critical situations. This is so because most people work alike in normal
situation. The strength of critical incident method is that it focuses on behaviours and, thus,
judge’s performance rather than personalities.

3. POINT ALLOCATION METHOD

In this method of appraisal, the appraiser has to allocate points to different
members in his team. He has at disposal, a specific number of points which he has to
distribute among his team members, based on their performance during the
appraisal period the best performance gets highest points and those who didn’t
performed good will get low points.

4. RANKINNG METHOD
There are three methods of ranking namely alternation, paired comparison & forced
distribution. The first two methods are used when there are only a few employees to be
ranked, whereas forced distribution method is used in large companies which have
thousands of employees.
 Alternation Ranking Method
 Ranking employees from best to worst based on a trait or traits. This method is used
to indicate the employee who is highest on the trait being measured and also the
one who is lowest, alternating between highest and lowest until all employees to be
rated have been addressed.
 Paired Comparison Method
 Every subordinate to be rated is paired with and compared to every other
subordinate on each trait. Then for each trait, the supervisor indicates (with plus or
minus) who is better employee of the pair. Next, the number of times an employee
is rated better is added up.
 Forced Distribution Method
  Here, the employees are categorized as “Top”, “Standard” and “Bottom” and placed
under a forced distribution curve. A certain percentage of employees have to be placed
under each category.

5. CHECK-LIST METHOD:
The basic purpose of utilizing check-list method is to ease the evaluation
burden upon the rater. In this method, a series of statements, i.e.,
questions with their answers in ‘yes’ or ‘no’ are prepared by the HR
department. The check-list is, then, presented to the rater to tick
appropriate answers relevant to the appraisee. Each question carries a
weight-age in relationship to their importance.
When the check-list is completed, it is sent to the HR department to
prepare the final scores for all appraises based on all questions.

6. ESSAY METHOD:
Essay method is the simplest one among various appraisal methods available.
In this method, the rater writes a narrative description on an employee’s
strengths, weaknesses, past performance, potential and suggestions for
improvement. Its positive point is that it is simple in use. It does not require
complex formats and extensive/specific training to complete it.
However, essay method, like other methods, is not free from drawbacks. In
the absence of any prescribed structure, the essays are likely to vary widely in
terms of length and content. And, of course, the quality of appraisal depends
more upon rater’s writing skill than the appraiser’s actual level of
performance.
Moreover, because the essays are descriptive, the method provides only quali-
tative information about the employee. In the absence of quantitative data,
the evaluation suffers from subjectivity problem. Nonetheless, the essay
method is a good start and is beneficial also if used in conjunction with other
appraisal methods.
7. WORK STANDARD APPROACH
This method of appraisal is more suitable in a manufacturing scenario, where the
goals are pre-determined work standard. These work standards can be set based on
the average output of a typical employee
8. FORCED CHOICE RATING METHOD
In this method the appraiser is required to assign ranks to different attributes which
are all seemingly positive, but have different weights which are unknown to the
appraiser. Once the employees‟ attributes are ranked the human resource
department applies the weight.
 Modern Method
 BALANCED SCORECARD
 The balanced scorecard as a method of measuring performance channelizes the efforts
of people to achieve organizational goals. The implementation of balanced scorecard
involves formulating a strategy & deciding what each employee needs to do to achieve
the objectives based on strategy.
 Team Appraisal
 In this method, the individual team members, evaluate their colleagues in the team and
give feedback. This helps in synergizing individual efforts and taking the group
performance to higher levels.
 Management by Objectives
 MBO was coined by Peter Drucker. It is a process where employees and superiors come
together and form goals. The emphasis is given not on activities but on the results
achieved. The basic nature of MBO is participative selecting goals and then taking
decisions. It is the outcome oriented method.
 Behaviorally Anchored Rating Scales
 This method is a combination of the rating scale and critical incident method. It consist
of preset critical areas of job performance qualities as good or bad. In this a rater is
expected to indicate which behaviour on each scale best describes an employee’s
performance.
 360 degree performance appraisal
 It is also known as multi rater feedback. Performance appraisal is done by peers,
managers, subordinates, team members, customers, suppliers and self appraisal. This
method is highly useful in terms of broader perspective, greater self development and
multi source feedback is useful. It is useful to measure inter personal skills, customer
satisfaction and team building skills.

PITTFALS IN PERFORMANCE APPRISAL

1) HALLO EFFECT - In this case the rater gives entire appraisal on the basis of one particular
quality or trait of the appraisee.
For ex- if a person is evaluated on one trait “emotional ability” and if he scores very high in the
case of emotional ability than the rater may also give him high score in respect of the other
traits such as intelligence, creativity and so on.
2) STEREOTYPING- it means forming a mental picture of people on the basis of the group to
which they belong it might be based on his age, gender, cast , religion, etc.
 Example- girls are not good at sports
 Students who are from science background are intelligent
 All teachers are boring

3) RECENCY EFFECT- Recency effect is the tendency to assess people based on recent
behaviour activities and failing to consider activities and behaviour that are several month
or more in past.
For example - if an employee performance is not good in last month than the appraisal is given
on that basis, the rater may not consider the past performance of the employees
4) LENIENCY EFFECT- If the rater is too lenient in their rating. High score may be given to all
employees regardless of merit.
 For Example- even though an employee is not performing well the rater gives him high rating as
to maintain cordial relationship with the employee.
5) STINGENCY EFFECT- in this case, the appraiser tries to be very strict in rating appraises,
since he/she feels that the rules and standards of the organisation are not strict enough.
This might result in dissatisfaction among appraises, as they feel that the evaluation is
biased on unfair.
6) PRIMACY EFFECT- in this case, the appraiser tend to be influenced by the behaviour or
outcomes displayed at the beginning of the appraisal period and this leads to a distorted
evaluation.
7) CENTRAL TENDENCY EFFECT– in this the rater assigns mostly middle range scores or value
to all individuals being apprised the extremely high and low evolution are avoided. It is
caused by lack of information.
8) CULTURAL - in some cases, the culture of the organisation or the country, can influence the
appraiser to rate appraise in a particular manner.

9) PERCEPTUAL SET – In this the appraisal is given on the basis of expectation of the manager.
The performance accepted by the manger from its employees might hamper the
judgement.
Example-
10) FUNDAMENTAL ATTRIBUTION ERROR - apart from internal factors, an employee’s
performance may be affected due to some external factors, which are beyond his/her
control. However, the appraiser may underestimate the influence of external factors and
overestimate the influence of internal factors, while judging the behaviour/ performance of
the employee.

Ethics involved in Performance appraisals

Ethics is a social science that deals with what is good and right, and with moral duties and obligations.
Ethics in appraisal guides the action of the appraiser as well as appraise. Ethical performance appraisal involves
an objective evaluation of employee performance and the joint development of an employee development plan. It
means giving employees an honest assessment of where they stand within the organization. A properly
conducted appraisal can help organizational members improve their performance by enabling them to bridge the
gap between their personal objectives and organizational goals.

Ethics on the part of appraiser-

 Rewards, punishments should be used in a positive way. If they are negatively used, it can affect the
morale of the employee
 The appraiser must collect complete and relevant information about the ratee to conduct effective
performance appraisal. The appraiser must know the performance based information and behaviour
based information of the ratee.
 Providing training for the appraisers will help familiarize them with the different rating errors which
can improve the rater performance. If they are unaware, they may make these unethical errors during
the appraisal
Ethics on the part of appraise-
 Appraise must provide correct and adequate information to appraiser for proper conduct of
performance appraisal.
 The employee should have positive attitude towards the ratings as assigned to him by the rater.
He should not criticize the rater’s remarks but should have the spirit of correcting his
weaknesses. He should focus on improving his performance.