Managing People and Organizations

Managing the Existing Workforce

Appraising and Managing Performance

BITS Pilani
Pilani | Dubai | Goa | Hyderabad
Dr. Shikha Sahai
Learning Objectives

• Discuss on the nature and objectives of performance appraisal

• Discuss the Various Approaches to Performance Appraisal
• Types of Assessors in Performance Evaluation
• Challenges of Performance Appraisal
– Errors
– Feedback
– Dealing with Poor Performance

• Creating a Winning Appraisal System

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 Performance Appraisal

• What are the words that come to your mind when you
hear Performance Appraisal Interview

– As a Manager

– As a Subordinate

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Job Analysis and Performance Appraisal

Relationship of Performance Appraisal and Job Analysis

Job Description
Job Specification

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Performance Appraisal – Why Do We Need Them

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 Primary Uses of Performance Appraisals
Small Organizations Large Organizations All Organizations

Compensation 80.2% 66.7% 74.9%

Performance improvement 46.3% 53.3% 48.4%
Feedback 40.3% 40.6% 40.4%
Documentation 29.0% 32.2% 30.2%
Promotion 26.1% 22.8% 24.8%
Training 5.1% 9.4% 7.3%
Transfer 8.1% 6.1% 7.3%
Discharge 4.9% 6.7% 5.6%
Layoff 2.1% 2.8% 2.4%
Personnel research 1.8% 2.8% 2.2%
Manpower planning 0.7% 2.8% 1.5%
Performance Appraisal - Process

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BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Performance Management

• Useful in the following areas of HRM:

– Remuneration administration

– Validation of selection programmes

– Employee training and development programmes

– Promotion, transfer and lay-off decisions

– Grievance and discipline programmes

– HR planning

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 Who Performs the Appraisal?
• Immediate Supervisor • Evaluation Teams
• Higher Management • Customers
• Self-Appraisals • 360° Appraisals
• Peers (Co-Workers)

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Supervisor Appraisal

• Performance appraisal done by an

employee’s manager and often
reviewed by a manager one level
higher.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Self-Appraisal

• Performance appraisal done by the

employee being evaluated, generally on
an appraisal form completed by the
employee prior to the performance review.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Subordinate Appraisal

• Performance appraisal of a
superior by an employee, which is
more appropriate for
developmental than for
administrative purposes.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Peer Appraisal

• Performance appraisal done by one’s

fellow employees, generally on forms that
are complied into a single profile for use in
the performance interview conducted by
the employee’s manager.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Team Appraisal

• Performance appraisal, based on

TQM concepts, that recognizes
team accomplishment rather than
individual performance.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

The 360º Appraisal Interview

Supervisor

Other Superiors Other Superiors

Individual Staff
Peers Customers
Self-Assessment

Teams Teams

Sub-Ordinates

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Errors in Rating

• Leniency/Strictness Error

• Central Tendency

• Recency Error

• Halo Error

• Similar to Me Error
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Leniency or Strictness Error

• Performance-rating error in which the

appraiser tends to give employees either
unusually high or unusually low ratings.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Error of Central Tendency

• Performance-rating error in which

all employees are rated as
average.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Recency Error

• Performance-rating error in which

the appraisal is based largely on
the employee’s most recent
behavior rather than on behavior
throughout the appraisal period.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Halo Error

• Performance-rating error in which

the appraisal is based largely on
subjective evaluation of one
attribute of the individual rather
than objectively examining various
performance dimensions

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Similar-To-Me Error

• Performance-rating error in which

an appraiser inflates the
evaluation of an employee
because of a mutual personal
connection.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Rating Errors Example
Job Rating Scale
Halo/ Similar to
EXCELLENT
Me on all factors

Job Rating Scale Job Rating Scale Job Rating Scale Job Rating Scale
Leniency Employee A Employee B Employee C Employee D
EXCELLENT EXCELLENT SUPERIOR EXCELLENT

Job Rating Scale Employee Job Rating Scale Job Rating Scale Job Rating Scale
Central
A Employee B Employee C Employee D
Tendency AVERAGE AVERAGE AVERAGE AVERAGE

Job rating scale behavior during the last month

Recency Bias has been POOR.
 Measures to Reduce Errors in Rating
• Leniency/Strictness Error
• Define Specific Dimensions
• Force a Bell Curve
• Central Tendency
• Reluctant to Give High/Low
• Explain the Need for Variability
• Recency Error
• Encourage Frequent Evaluation
• Halo Error
• Provide Specific Performance Dimensions for Evaluation like Cost, Quality etc.
• Similar to me Error
• Bring Awareness about The Concept
• Have Evaluation at More Than One Level
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Review

• What is the Evaluation Error in following Cases and how to reduce

them
– Jack is considered as a good boss by his subordinates, he always
praises his entire team and promises them a good rating
– Abhishek is surely going to get a good rating this year, his sales
for the month of March was highest ever in the history of the
company
– Biplab started participating in Marathon when he heard that his
Area Manager also participates in them. He hopes that spending
more time with his boss will positively influence his performance
rating
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 Appraisal Methods

• Rating Scales
• Checklist Method
• Forced Choice Method
• Forced Distribution Method
• Critical Incident Method
• Essay
• Management by Objectives
• Assessment Centres
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Rating Scales
• This is the simplest and most popular technique for appraising employee
performance.
• The typical rating-scale system consists of several numerical scales, each
representing a job-related performance criterion such as dependability,
initiative, output, attendance, attitude, co-operation, and the like.
• Each scale ranges from excellent to poor. The rater checks the appropriate
performance level on each criterion, then computes the employee’s total
numerical score.
• The number of points scored may be linked to salary increases, whereby
so many points equal a rise of some percentage.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Rating Scales
Advantages
• Adaptability, relatively easy use and low cost.
• Nearly every type of job can be evaluated with the rating scale, the only requirement
being that the job-performance criteria should be changed.
Disadvantages
• The rater’s biases are likely to influence evaluation.
• The biases are particularly pronounced on subjective criteria such as co-operation,
attitude and initiative.
• Numerical scoring gives an illusion of precision that is really unfounded.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Checklist Method
• A checklist of statements on the traits of the employee and his or
her job is prepared in two columns—viz., a ‘Yes’ column and a
‘No’ column. All that the rater (immediate superior) should do is
tick the ‘Yes’ column if the answer to the statement is positive
and in column ‘No’ if the answer is negative.
• The HR department assigns certain points to each ‘Yes’ ticked.
• Depending on the number of ‘Yes’ the total score is arrived at.
When points are allotted to the checklist, the technique becomes
a weighed checklist.

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Checklist Method

Checklist of operator

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Checklist Method
Advantages
• Ease of administration
• Limited training of rater
Disadvantages
• Susceptibility to rater’s biases
• Misinterpretation of checklist items
• Use of improper weights by the HR department
• Does not allow the rater to give up relative ratings

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Forced Choice Method

• Rater is given a series of statements about an employee.

• These statements are arranged in blocks of two or more, and the rater
indicates which statement is most or least descriptive of the employee.
• Typical statements are:
– 1. Learns fast______________works hard
– 2. Work is reliable__________________performance is a good
• As in the checklist method, the rater is simply expected to select the
statements that describe the ratee.
• Actual assessment is done by the HR department.
• This approach is known as the forced choice method because the rater is
forced to select statements which are readymade.
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Forced Choice Method

• Advantage
• Absence of personal bias in rating.
• Disadvantage
• Statements may not be properly framed—they may not be
precisely descriptive of the ratee’s traits.

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Forced Distribution Method

• The method operates under an assumption that the employee performance level
conforms to a normal statistical distribution.
• Generally, it is assumed that employee performance levels conform to a bell-shaped
curve.

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Forced Distribution Method
Advantage
• Overcome the weakness of central tendency
• Overcome weakness of leniency

Disadvantage
• Assumption that employee performance levels always conform to a normal (or some
other) distribution
• The rater resists from placing an employee in the lowest or in the highest group
• Difficulties to explain to the ratee why he or she has been placed in a particular group
• Difficulty in using the method in small groups or in high performing groups

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 Critical Incident Method
• This method focuses on certain critical behaviours of an employee that
make all the difference between effective and non-effective performance
of a job.
• Such incidents are recorded by the superiors as and when they occur.

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 Critical Incident Method
Advantages
• Evaluation is based on actual job behaviour.
• Descriptions in support of particular ratings of an employee.
• Giving job related feedback to the ratee is also easy.
• Reduces the recency bias, if raters record incidents throughout the rating period.
• Increase the chances that the subordinates will improve because they learn more precisely what is expected
of them.
Limitations
• Negative incidents are generally more noticeable than positive ones.
• The recording of incidents is a chore to the supervisor and may be put off and easily forgotten.
• Overly close supervision may result. End up into series of complaints
• The feedback may be too much at one time and thus appear as a punishment to the ratee.
• More appropriately, critical incidents should be used as opportunities for immediate training and counselling.

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Behaviorally Anchored Rating Scale

• Areas of performance to be evaluated are identified and defined by the people Who
will use the scales.
• The scales are anchored by descriptions of actual job behaviour that, supervisors
agree, represent specific levels of performance.
• The result is a set of rating scales in which both dimensions and anchors are
precisely defined.
• All dimensions of performance to be evaluated are based on observable behaviours
and are relevant to the job being evaluated since BARS are tailor-made for the job.

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Behaviorally Anchored Rating Scale

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BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Essay Method

• A trait approach to performance appraisal that requires the

rater to compose a statement describing employee behavior
on broad categories such as :
(i) the rater’s overall impression of the employee’s performance
(ii) the promotability of the employee
(iii) the jobs that the employee is now able or qualified to perform
(iv) the strengths and weaknesses of the employee
(v) the training and the development assistance required by the
employee.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Essay Method

• Advantages
– Detailed information about performance

• Disadvantages
– Time consuming
– Rater must collect the information necessary to develop the
essay and then he or she must write it.
– The essay method also depends on the memory power of the
rater.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Management By Objective (MBO)

• Philosophy of management that rates performance on the

basis of employee achievement of goals set by mutual
agreement of employee and manager.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Management by Objectives
(Peter Drucker)
• Integrates performance and goal setting
– Cascading of goals
• Frequent intervals
• Record maintenance
• Objective review jointly
• Mutual buy-in

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Advantages of MBO

• Employees Can Measure Performance

• Quantifiable Goals
• Joint Effort
• Employee Satisfaction in Participation

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Disadvantages of MBO

• Success Not Validated by Research Studies

• Difficult to Define Some Goals
• Hard to Get Full Commitment to Process

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Assessment Center

• Mainly used for executive hiring, assessment centres are now being
used for evaluating executive or supervisory potential.
• An assessment centre is a central location where managers may come
together to have their participation in job-related .
• The principal idea is to evaluate managers over a period of time, say
one to three days, by observing (and later evaluating) their behaviour
across a series of select exercises or work samples.
• Assessees are requested to participate in in-basket exercises, work
groups (without leaders), computer simulations, role paying, and other
similar activities which require the same attributes for successful
performance, as in the actual job 45
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Common Performance Appraisal Problems

• Errors in giving Feedback

• Issues in Dealing with Poor Performers

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Errors in Giving and Taking Feedback

• Negative Feedback Can be Very Draining for the

Employee
• Understanding Cycle of Change
• Planning an Effective Feedback Session

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Understanding the Cycle of Change

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Planning an Effective Feedback Session

1. Scheduling the Performance Appraisal

2. Preparing for Review of the
Performance
• Employee
• Subordinate
3. Appraisal Interview Plan and Approach
4. Appraisal Interview Skills

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Scheduling the Performance Appraisal

1. Schedule the review and notify the employee prior to the

meeting (ten days or two weeks in advance).
2. Ask the employee to prepare for the session by
reviewing his or her performance, job objectives, and
development goals.
3. Clearly state that this will be the formal annual
performance appraisal.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Preparing for the Review for the Performance Appraisal

1. Review the performance documentation collected throughout the year.

Concentrate on work patterns that have developed.
2. Be prepared to give specific examples of above- or below-average
performance.
3. When performance falls short of expectations, determine what
changes need to be made. If performance meets or exceeds
expectations, discuss this and plan how to reinforce it.
4. After the appraisal is written, set it aside for a few days and then
review it again.
5. Follow whatever steps are required by your organization’s
performance appraisal system.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Appraisal Interviews

• Schedule the interview 10 to 14 days in advance.

• Provide subordinates with a “guide” to follow in planning
for the interview.
• Consider which of the following approaches to use:
– Tell-and-sell method
– Tell-and-listen method
– Problem-solving method

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Tell-and-Sell Interviews

1. Supervisor persuades employee to change in a

prescribed way.
2. Employees sees how changed behavior will be of great
benefit.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Tell-and-Listen Interviews

1. Supervisor covers strengths/weaknesses for first half

2. Solicits employee’s feelings about comments
3. Deal with disagreement, non-defensively
4. Negotiate future concrete objectives

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 The Problem Solving Interview

1. Discuss strengths and weaknesses since last review

2. Explore feelings of subordinate
3. Listening, accepting, and responding are essential elements
4. Discuss problems, needs, innovations, satisfactions and
dissatisfactions since last review
5. Listen and respond with goal of helping person and productivity
6. Objective is to improve the performance

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Reflection

Which Performance Interview Method Have you

Experienced
– Tell-and-sell method
– Tell-and-listen method
– Problem-solving method

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Guidelines for Appraisal Interview

• Guidelines for Effective Appraisal Interview

– Select a good time
– Minimize interruptions
– Welcome, set at ease
– Start with something positive
– Ask open-ended questions to encourage discussion
– Listen
– Manage eye contact and body language
– Be specific
– Rate behaviour, not personality
– Complete form
– Set mutually agreeable goals for improvement
– End in a positive, encouraging note
– Set time for any follow-up meetings
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Typical Consequences of Job Previews
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Pause and Ponder

• Which is the most crucial part of the Feedback and Why?

1. Scheduling the Performance Appraisal
2. Preparing for Review of the
Performance
• Employee
• Subordinate
3. Appraisal Interview Plan and Approach
4. Appraisal Interview Skills
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Creating a Wining Performance Appraisal System

• Create a culture of excellence that inspires every employee to improve and

lend himself or herself to be assessed
• Align organisational objectives to individual aspirations
• Provide new challenges to rejuvenate careers that have reached the plateau
stage
• Forge a partnership with people for managing their careers
• Embed teamwork in all operational processes 59
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 Dealing with Poor Performers

• Formulating a Policy for Poor Performers

• Developing a Personal Individual Plan (PIP)
• Coaching and Mentoring employees under PIP
• Providing Periodic Feedback on the Performance
• Taking the Difficult Decision
– Legally Defensible Decision
– Morally Appropriate Decision

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Legally defensible performance appraisal

• Legally Defensible Appraisal Procedures

– All personnel decisions should be based on a formal standardised performance appraisal system
– Any performance appraisal process should be uniform for all employees within a job group, and
decisions based on those performance appraisals should be monitored for differences according to
race, sex, national origin, religion, or age of the employees
– All specific performance standards should be formally communicated to employees
– All employees should be able to review their appraisal results
– There should be a formal appeal process for the ratee to rebut rater judgements
– All raters should be provided with written instructions and training on how to conduct appraisals
properly to facilitate systematic, unbiased appraisals
– All personnel decision-makers should be well-informed of anti-discrimination laws
– They should be made aware of the fine distinctions between legal and illegal activities regarding
decisions based on appraisals

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Legally defensible performance appraisal

• Legally Defensible Documentation of Appraisal Results

– A thoroughly written record of evidence leading to termination decisions should be
maintained
– Written documentation for extreme ratings should be required and they must be
consistent with the numerical ratings
– Documentation requirements should be consistent among the raters

• Legally Defensible Raters

– The raters should be trained in ‘how to use an appraisal system’
– The raters must have the opportunity to observe the ratee first-hand or to review
important ratee performance products
– Use of more than one rater is desirable in order to lessen the amount of influence of any
one rater and to reduce the effects of biases
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 Pause and Ponder
• What do you think is the most crucial part of dealing with
poor performers and why?
– Formulating a Policy for Poor Performers
– Developing a Personal Individual Plan (PIP)
– Coaching and Mentoring employees under PIP
– Providing Periodic Feedback on the Performance
– Taking the Difficult Decision
• Morally Appropriate Decision
• Legally Defensible Decision

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Designing Appraisal Programme

• Design Appraisal Programme

Personnel/Human Resource Management, p. 226

– Formal vs Informal Appraisal

Source: Herbert G. Heneman III, et. al.,

– Whose Performance Should be Rated?
– Who are the Raters?
• Immediate supervisor
• Subordinates
• Customers
– Problems of Rating
Recruitment Process

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Solving raters problem

• The best way to overcome the problems is to provide training to the raters.
Factors that help improve accuracy:
– The rater has observed and is familiar with behaviours to be appraised
– The rater has documented behaviours to improve the recall
– The rater has a checklist to obtain and review job-related information
– The rater is aware of personal biases and is willing to take action to minimise their effect
– Rating scores by raters of one group or organisation are summarised and compared with those by other raters
– The rater focuses attention on performance-related behaviours over which the rater has better control than in
other aspects of evaluation
– Higher levels of management are held accountable for reviewing all ratings
– The rater’s own performance ratings are related to the quality of rating given and the performance of units
– Performance factors are properly defined

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Factors that may lower accuracy

Factors that may lower accuracy:

– The rater rates ratees only when administrative actions are contemplated
– The rater tends to inflate ratings when the ratees receive scores and results of appraisals
– The rater tends to recall more behaviours known to be of particular interest to higher-level
managers
– The rater is unable to express himself or herself honestly and unambiguously
– Appraisal systems, processes and instruments fail to support the rater
– The rater is unaware of causes of rating errors
– The rater has to rate employees on factors that are poorly defined
– Finally, the supervisor/rater must be trained to conduct the appraisal interview

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Appraise the performance

Utility of Different Performance Measurement Systems for Different Objectives

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Appraisals Failure

Top 10 Reasons for Appraisal Failure

Ten Tips to Make Appraisal Highly Effective

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Pause and Ponder

1. In most family owned businesses, sons or daughters join father’s

business. In such scenarios, how should bosses rate performance of their
subordinates? What errors can occur?

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Thank You

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BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956