Human Resource Management Unit 9

Unit 9 Performance Appraisal

Structure:
9.1 Introduction
Objectives
9.2 Concept of Performance Appraisal
Purpose of performance appraisal
Process of performance appraisal
9.3 Methods of Performance Appraisal
9.4 Major Issues in Performance Appraisal
9.5 Summary
9.6 Glossary
9.7 Terminal Questions
9.8 Answers

9.1 Introduction
In the previous unit, we learnt about different training programmes for
employees and its necessity in organisations. Having a training policy in
place enables us to plug any skills shortages in our workplace. In order to
identify the areas in which employees lack skill or knowledge, their
performance must be assessed against the job standards and organisation’s
performance criteria. This assessment is called as performance appraisal.
Performance appraisal systems are generally seen as a principle way of
identifying training needs in organisations. Also, performance appraisal
system help in evaluating if the training given to the employee has actually
resulted in increased productivity or better job knowledge, which is primarily
the focus of any training program.
The history of performance appraisal is quite short. As a distinct and formal
management procedure used in the evaluation of work performance,
appraisals date from the time of the Second World War - not more than 60
years ago. Yet in a broader sense, the practice of appraisal is a very ancient
art. There is, says Dulewicz (1989), "... a basic human tendency to make
judgments about those one is working with, as well as about oneself."
Appraisal, it seems, is both inevitable and universal. In the absence of a
carefully structured system of appraisal, people tend to judge the work
performance of others, including subordinates, naturally, informally and

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arbitrarily. The human inclination to judge can create serious motivational,

ethical and legal problems in the workplace. Without a structured appraisal
system, there is little chance of ensuring that the judgments made will be
lawful, fair, defensible and accurate.
Performance appraisal systems began as simple methods of income
justification. That is, appraisal was used to decide whether or not the salary
or wage of an individual employee was justified. The process was firmly
linked to material outcomes. If an employee's performance was found to be
less than ideal, a cut in pay would follow. On the other hand, if their
performance was better than the supervisor expected, a pay rise was in
order. Little consideration, if any, was given to the developmental
possibilities of appraisal.
It was felt that a cut in pay or a rise, should provide the only required
impetus for an employee to either improve or continue to perform well. But it
was soon found through empirical studies that this basic system was not
enough in getting the results that were intended. Pay rates were important,
yes; but they were not the only element that had an impact on employee
performance. It was found that other issues, such as morale and self-
esteem, could also have a major influence.
As a result, the traditional emphasis on reward outcomes was progressively
rejected. In the 1950s in the United States, the potential usefulness of
appraisal as tool for motivation and development was gradually recognised.
The general model of performance appraisal, as it is known today, began
from that time.
Objectives:
After studying this unit, you should be able to:
 explain the concept of performance appraisal
 list the methods of performance appraisal
 discuss the major issues in performance appraisal

9.2 Concept of Performance Appraisal

Performance appraisal is the process of obtaining, analysing and recording
information about the relative worth of an employee. The focus of the
performance appraisal is measuring and improving the actual performance

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and also the future potential of the employee. Its aim is to measure what an
employee does.
According to E. B. Flippo, "performance appraisal is the systematic, periodic
and an impartial rating of an employee’s excellence in the matters pertaining
to his present job and his potential for a better job." Performance appraisal
is a systematic way of reviewing and assessing the performance of an
employee during a given period of time and planning for the future as well.
It is a method of evaluating the behaviour of employees in a work place in
both quantitative and qualitative aspects of job performance. It is a process
which involves determining and communicating to an employee how their
performance has been and ideally, establishing a plan for further
improvement. In other words, you can say that performance appraisal
means evaluating the current or past performance of an employee relating
to their potential and performance standard.
The data related to performance assessment is recorded and used for
promotion, confirmation, training and development etc. It is also used for
determining the effectiveness of HR functions.
Here, you may ask, who will appraise the performance of the employees?
Anybody who observes the performance of employees is aware of the
content of the job and standard of the contents can appraise the
performance. The appraiser should be capable of understanding the most
important and least important work. The appraiser should be free from all
biases. Generally the supervisor, peer, subordinate or even the employee
can be the appraiser.
Informally appraisal can be done any time, according to the requirement. In
a systematic manner, appraisal is conducted on a regular basis. In most of
the organisations it is done on an annual basis and it is a continuous
process.
9.2.1 Purpose of Performance Appraisal
The purposes of performance appraisal are as follows:
 Providing feedback to employees about their performance
 Determining who gets promoted
 Facilitating layoff or downsizing decisions
 Encouraging performance improvement

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 Motivating superior performance

 Setting and measuring goals
 Counseling poor performers
 Determining compensation changes
 Encouraging mentoring and coaching
 Supporting manpower planning or succession planning
 Determining individual and organisational training and development
needs
 Providing legal defensibility for personnel decisions
 Confirming that good hiring decisions are being made
 Improving overall organisational performance by aligning individual goal
with organizational goal.
9.2.2 Process of Performance Appraisal
Performance appraisal is planned, developed and implemented through a
series of steps. The steps that are involved in the process of performance
appraisal are given in figure 9.1.

Figure 9.1: Process of Performance Appraisal

[Image Source: www.whatishumanresource.com]

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i) Establish performance standards:

In an appraisal system, performance standards are required to serve
as a benchmark. Every performance is measured against these
benchmarks. These benchmarks or standards should relate to the
outcome or desired result of the job. To avoid any kind of
embarrassments, the appraiser and appraisee must have clear
knowledge about the standards of the appraisal. The standards should
be written and developed after thorough analysis of the job. For
example, a manager needs to have the ability to plan, direct, control
and delegate. The manager should be cost conscious and result
oriented.
ii) Communicate the standards:
The performance standards must be communicated to the employees
so that they can prepare themselves according to the standards. If
appraisee has any reactions, it should be noted and if necessary,
certain changes or modifications may be done (if the organisation’s
policy allow). The appraiser should be ready with job description and
help the employees in setting their goal or target.
iii) Measure actual performance:
The third step is to measure the actual performance. Various
dependable tools are available and any one can be chosen to appraise
the performance. Managers usually use personal observation,
statistical reports, written reports and oral reports to measure the actual
performance. These measurements can be of two types: subjective
and objective. Objective performance measures are quantitative where
job performance can include length of service, quality of production,
absenteeism etc.
Subjective measurements are based on the opinion of the evaluators
which cannot be verified by others. It can be knowledge of goals or
rating by the superiors based on level of commitment, competence etc.
Subjective measures are more suitable for middle level jobs.
iv) Compare actual performance with standard:
The next step is comparing the actual performance with the expected
one. It may be better than the standard or may not be. It is a difficult
task to appraise the performance of another person. If the contribution
and ability of a person is not appraised well, then it may be

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demotivating and put a negative impact on the self-esteem of the

appraisee.
v) Discuss the appraisal and take action for correction:
The result of the appraisal is communicated and discussed with the
employees on a one-to-one basis. The focus of this discussion is on
communication and listening. The results, problems and the possible
solutions are discussed with the aim of solving problems and reaching
consensus. The feedback should be given with a positive attitude as
this can have an effect on the employees’ future performance. The
purpose of the meeting should be to solve the problems and motivate
the employees to perform better.
vi) Decision making:
The last step of the process is to take decisions which can be taken
either to improve the performance of the employees, take the required
corrective actions or the related HR decisions like rewards, promotions,
demotions, transfers etc.
Thus, we can see that the appraisal system should be effective because
many crucial decisions in the organisation are taken on the basis of
performance appraisal of the employees. Appraisal system should be cost
effective and quick. The strength of appraisal system is open
communication and post appraisal interviews.
Self Assessment Questions
Fill in the blanks
1. The focus of performance appraisal is ______________ measuring
and ____________ improving the actual performance of the employee.
2. The _______________ must be communicated to the employees so
that they can prepare themselves according to the standards.
3. Managers usually use personal observation, ________________ ,
_______________ and oral reports to measure the actual
performance.

9.3 Methods of Performance Appraisal

Every organisation follows a certain method of performance appraisal.
Sometimes more than one method is adopted to assess the performance of
employees. Companies like L&T use competency metrics which includes 73
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competencies to measure the performance of the employees. Pepsi follows

annual appraisal system which is basically target - driven.
Generally, the performance appraisal methods are of two types:
 traditional assessment methods and
 modern assessment methods.
I. Traditional assessment methods are as follows:
a. Graphic Rating Scales: Graphic rating is the term used to define the
oldest and most widely used performance appraisal method. It
compares performance of an individual to an absolute standard. The
evaluators are given a graph and asked to rate the employees on each
of the characteristics. The number of characteristics can vary from one
to one hundred. The rating can be a matrix of boxes for the evaluator
to check off or a bar graph where the evaluator checks off a location
relative to the evaluators rating. Points are assigned to different
qualities and the overall score is determined by adding up the scores
given to specific qualities. This too is highly subjective. A sample of
graphic rating is given in Table: 9.1.
Table 9.1: Example of Graphic Rating Scale Performance Appraisal Form

PERFORMANCE APPRAISAL FORM

Employee Name: Date:
Position: Department:
Appraised by: Date started:
PERFORMANCE ASSESSMENT
Major Responsibilities Evaluation of goal achievement
Rating: 1 = Low ; 3 = Medium;
5 = Outstanding
1. Manages quality of service. 1 2 3 4 5
2. Achieves or exceeds employee productivity 1 2 3 4 5
targets.
3. Achieves turnover targets. 1 2 3 4 5
4. Facilitates communication with team. 1 2 3 4 5
5. Meets financial targets. 1 2 3 4 5
6. Assists others in the team to achieve their 1 2 3 4 5
goals.
Manager’s Comments:
[Source: www.whatmakesagoodleader.com]

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b. Confidential Report: Confidential reports are descriptive reports

which are prepared at the end of every year. This evaluation method is
generally used in government organisations. It is done by the
immediate superiors, who express the strengths and weaknesses of
the subordinate on the basis of their own observations, impressions
and judgment. In this method no feedback is provided to the
appraisee. The appraisee is not even explained why a particular rating
was awarded. The results of this appraisal are not made public and no
feedback is provided.
c. Free Form or Essay Evaluation: Under this method, the rater is
asked to express the strong as well as weak points of the employee's
behavior. 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 the rating. While preparing
the essay on the employee, the rater considers the following factors:
(i) job knowledge and potential of the employee (ii) employee's
understanding of the company's programmes, policies, objectives etc.
(iii) the employee's relations with co-workers and superiors (iv) the
employee's general planning, organising and controlling ability (v) the
attitudes and perceptions of the employee, in general. It is not a
quantitative method. Even though this method gives many details
about the employee, it is subjective and there is always a chance of
error and bias in it. Also, this is a time consuming process.
d. Critical Incidents: In critical incident technique we make use of critical
incidents or events which represent the employee’s outstanding or
poor behavior on the job. The manager prepares a list of statements of
effective and ineffective behavior of the employee on the job. A record
is kept of the critical incidents of the worker’s behavior and at the end
of the rating period; the manager evaluates the worker’s performance
on the basis of recorded critical incidents. It is an objective method of
appraisal and avoids certain biases. However, this too also has
limitations. Negative incidents may be more highlighted than the
positive ones. So, in other words, we can say that the notable incident
of success and failure of each employee are recorded whenever they
are observed. Gradually a record of debits and credits is built up. The

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possibility of bias still exists in this system and inaccurate or

insufficient information could result in wrong assessment.
e. Checklists: Another simple type of individual evaluation method is the
checklist. A checklist represents in its simplest form, a set of objectives
or descriptive statements about the employee and the employee’s
behavior. If the rater believes strongly that the employee possesses a
particular listed trait, the rater checks the item otherwise, it is left blank.
The advantage of checklist method is that it is economical, easy to
administer and standardised. Table 9.2 illustrates a sample of a
checklist. However, there could be bias in this method also. The
appraiser may misinterpret the checklist items.
Table 9.2: Sample Checklist Appraisal

Employee Employee
name: code:
Designation: Department:
Item to be assessed Yes No
1. Is the employee really interested in the task
assigned?
2. Does he/she possess adequate knowledge
about the job?
3. Does he/she cooperate with co workers?
4. Does the employee maintain sound
customer relations?
5. Is the employee sincere in doing the work?
6. Does he/she evade responsibility?
7. Does he/she make mistakes frequently?

[Source: www.openlearningworld.com]
f. Forced Choice Method: Force choice method was developed during
II World War. The main purpose of this method was to correct the
tendency of giving consistently high or low ratings to all the
employees. In this method, several sets of phrases are used in which
two may be positive and another two may be negative. It helps in
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discriminating effective from ineffective worker as the method forces

reluctant managers to make difficult decisions and identify the most
and least talented members of the work group. They create and
sustain a high performance culture in which the workforce continuously
improves. It also reflects the valuable personal qualities. In spite of
certain limitations (it is expensive and needs technical expertise for
preparation), the force choice method is very popular in organisations
such as Ford, GE, Cisco Systems, EDS etc. In this method, four
possible statements are given in table 9.3.
Table 9.3: Sample Forced-Choice Appraisal

Statement Least Most

Commands respect
Wastes time
Easy to talk to
Takes time to grasp things

g. Straight Ranking Method: In this method, the superior starting from

best to worst ranks the subordinates according to their merits. The
relative position of each employee is expressed in terms of the
numerical rank. The appraiser rates the employees from highest to
lowest. It is an easy method. However, this method speaks only about
the position and says nothing about how much better or how worse an
employee is in comparison to other employees.
h. Paired Comparison Method: In this method, each employee is
compared with other employees who are doing the same job. This
method is more effective in smaller groups. Here, paired comparisons
are usually made for one individual trait, i.e., overall suitability to
perform a job. The rater is given a bunch of slips, each containing a
pair of names. The rater puts a tick mark against the person whom it
considers the better of the two and final ranking is based on the
number of times that person is judged better than the others. For e.g.,
in a class of 10, the total comparison will be N (N-1)/2= 10*9=90/2=45.
The person getting highest count/preference will be adjudged the best.

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i. Group Appraisal: In group appraisal the employee is appraised by a

group of people. The people involved in this appraisal can be
immediate superiors and other superiors who have close contact with
the employee’s job. The immediate supervisor explains about the job
dimensions, demands and standard of the job. Then the group
appraise the performance and compare it with the standards. Though
it has many evaluators, it may have less chance of biases. However,
this method is time consuming. This method is widely used for
promotion decisions.
j. Field Review Method: In field review method, the evaluation is done
in the field of work. In this method, one expert from HR department
goes to the field and helps the line manager to review the performance
of the subordinates. The HR person collects information regarding the
performance of the employee to be evaluated and on the basis of the
information, a report is prepared. This report is again sent to the line
manager or supervisor for review, changes, discussions and approval.
It is done on a standardised format. Some times this method becomes
expensive due to the HR department’s approach to review and
evaluation.
II. The modern methods of performance appraisal are as follows:
a) Assessment Centre: The assessment centre method of appraising
was first used by the German army in 1930. Thereafter the business
world started using this method. Assessment centre is an approach
and it does not refer to a physical structure. This approach uses
various techniques such as in-basket, role playing, case studies,
simulation exercises etc. Through these techniques an on the job
experience is recreated to evaluate the performance of an employee.
In this method, employees from various departments are brought
together to work on individual or group assignments. These
assessment centers are meant to evaluate the potential of the
employee to be promoted to a higher rank. So, the employees are
given tasks that they will perform in the future. Thus, they get equal
opportunity to show their merit. It is an objective method of evaluation.
If used on a regular basis, this method helps in improving the morale
of the candidate.

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b) Appraisal by Results or Management by Objectives: The term

Management By Objectives (MBO) was first coined by Peter Drucker
as a means of building team work. MBO is a process in which
managers and their employees jointly set objectives for the employee,
periodically evaluate the performance and reward according to the
results. The practical utility of MBO is well recognised. It encourages
managers not to depend upon hunches or guess work but to work for a
defined goal in systematic manner. The organisational goals are
converted into personal goals for all managerial levels to integrate the
individual with the organisation.
The following steps are implemented while implementing MBO:
 Setting objectives
 Developing action plan
 Conducting periodic reviews
 Appraising annual performance
Appraisal system developed under MBO has significant advantages
over other appraisal methods because:
 It is oriented towards job requirements and work rather than
personality.
 It is more objective as it is based on facts and accurate
information.
 It is positive. It does not provide for unilateral actions. It is based
on the principles of meeting of minds, communications, job
expectations and motivations.
 It is innovative and future oriented. The employee is encouraged to
experiment for advancement.
c. Human Asset Accounting Method: This method evaluates the
performance of the employee on the basis of cost. This includes the
cost of keeping an employee and its benefit to the organisation. .
Human resource cost includes expenditure by the company in terms
of recruitment, training, compensation and development. The
employee’s contribution is the money value of the labour
productivity. The employee’s performance is measured in terms of
the contribution in the organisation. Performance is positive if
contribution is higher than the cost and it is negative if the cost is

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higher than the contribution. This method is not prevalent across the
industries and is yet to be implemented widely.
d. Behaviorally Anchored Rating Scales: This method also known as
the behavioral expectations scale is a combination of the rating scale
and critical incident technique of employee performance evaluation.
The critical incidents serve as anchor statements on a scale and the
rating form usually contains six to eight specifically defined
performance dimensions. Table 9.4 represents an example of a
sales trainee's competence and a behaviorally anchored rating
scale.
Table 9.4: An Example of Behaviorally Anchored Rating Scale (BARS)

Performance Points Behaviour

Can expect trainee to make valuable
Extremely suggestions for increased sales and to have
7
good positive relationships with customers all over the
country.
Can expect to initiate creative ideas for
Good 6
improved sales.
Can expect to keep in touch with the customers
Above average 5
throughout the year.
Can manage, with difficulty, to deliver the goods
Average 4
in time.
Can expect to unload the trucks when asked by
Below average 3
the supervisor.
Can expect to inform only a part of the
Poor 2
customers.
Can expect to take extended coffee breaks and
Extremely poor 1
roam around purposelessly.

[Source: www.openlearningworld.com]
e. Self-appraisal: In self-appraisal the employees evaluate their own
performance. It is used when motive of appraisal is executive
development. If the employees are capable of understanding the
objectives to be achieved and the standard on which they are
evaluated, they can be the best person to evaluate their own
performance. This method helps in motivating employees for further
development. In this method, a self-appraisal form is given where

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relevant job related questions are asked to the employees as

illustrated in table 9.4.
Table 9.4: Example of a self-appraisal form

Employee name: Employee code:

Designation: Department:
Self -assessment
1 Current responsibilities:
2 Accomplishments:
3 Goals for next assessment period:
4 Areas for improvement:
5 Training requirements for present job:
6 Problems faced:
7 Solutions tried:
8 Responsibilities you would like to add:

f. 360-Degree appraisal: 360 degree feedback also known as 'multi-

rater feedback' is the most comprehensive appraisal where the
feedback comes from all sources that come in contact with the
employee on the job. In 360-degree, 360 degree performance for
employees are appraised by their peers, managers (i.e., superior),
subordinates, team members, customers, suppliers or vendors as
shown in figure 9.2. This method was first developed and used by
General Electric in USA in 1992. Later on it became popular in many
of the companies all over the world. In India also, companies such as
Wipro, Reliance, Infosys and Godrej among others are using this
method to appraise the performance of their employees. The
advantage of this method is that the information comes from multiple
sources, so it creates an atmosphere of team work and
improvement. However, we should not forget that the appraisals
provided by all stakeholders can be a very sensitive issue and may
fail to deliver result.

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Figure 9.2: Appraisers of 360 Degree Performance Appraisal

Thus, we can see that it is important that the appraisal system should be
effective because many crucial decisions are based on it.
Self Assessment Questions
Fill in the blanks
4. In ___________________ method of performance appraisal, we make
use of critical events which represent the employee’s outstanding or
poor behavior on the job.
5. The main purpose of _________________ method is to correct the
tendency of giving consistently high or low ratings to all the employees.
6. The term Management By Objectives (MBO) was first coined by
______________________ as a means of building team work.

Activity 1:
Suppose you are an HR Manager and have four team members reporting
to you. List the criteria based on which you would assess the
performance of your team members.
Refer: Section 9.3

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9.4 Major Issues in Performance Appraisal

The data which is collected through performance appraisal is used for
various important HR decisions such as compensation, promotion, training,
retrenchment, transfer, termination etc. A performance appraisal system can
be a target of legal dispute, having charges of bias and unfairness. So it is
important that certain issues must be taken care of while using an appraisal
system. They are as follows:
a. Reliability and validity: The appraisal system should be consistent,
reliable and valid and should provide relevant information and data to
protect the organisation from any external or internal challenges. Same
appraisal system should be used to evaluate two equally competent
people in the company.
b. Job relatedness: It is very important that the evaluation of the
performance should be done on job dimensions. In other words the
appraiser should measure the performance and provide information in
job related activities.
c. Standardisation: In this age of globalisation where MNCs are working
all over the world, it is important that there should be standardisation in
appraisal forms, technique of evaluation, rating etc. This standardization
helps maintaining uniformity in decision making and any unpleasant
situation is avoided.
d. Practical viability: The appraisal system should have practical viability.
This can help in administering and implementing the system. It also
makes it economical.
e. Legal sanctions: A discriminating performance appraisal can force the
employee to go for a legal suit. So it is necessary to comply with
provisions of various statutes relating to labor.
f. Training of appraisers: The appraiser should be given proper training
about the technicality of the appraisal system. It helps in eliminating
errors. Familiarity with rating errors, idea about documentation and
conducting evaluation can improve the performance of the rater.
g. Open communication: As we have discussed that in overall appraisal
process, communication plays an important role. Communicating the
standard and providing feedback is an important aspect of appraisal
system and without proper communication, it is not possible. The

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appraisal should be helpful in identifying the gaps and preparing

themselves for better performance in future.
h. Employee access to results: After the appraisal it is very important that
employees should know about their performance. Only then can they
can improve in future. Withholding information does not serve the
purpose.
i. Grievance management system: There should be a proper system of
grievance handling so that any employee who is not happy with the
system or consider the appraisal as unfair can ask for a redress. .
Thus, we can say that performance appraisal should help the employee to
become a valuable resource of the organization, which is why it is important
that during appraisal, the rater should be free from all bias. The different
kinds of bias can be:
a) Halo effect: It is where the rater looks at one trait of the person and
neglects other aspects.
b) Error of central tendency: It is a tendency to rate all the employees
around middle point.
c) Leniency and strictness: It a tendency to be very liberal or very strict.
d) Recency error: In this error, evaluator only considers the recent behavior
or task of the employee and neglects the previous better or worse
performance.
Thus, by taking care of certain issues, performance appraisal system can be
very useful in identifying the potential of the employee and taking various
HR decisions.

Activity 2:
Interview an employee working in an IT company and prepare a report on
the performance appraisal related issues faced by him/her.
Refer: Section 9.4

Self Assessment Questions:

7. In 360 degree performance appraisal, only the subordinate is the
appraiser. (True/False)
8. Communicating the standard and providing feedback is a very
important aspect of appraisal system. (True/False)
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9. In _____________ error, evaluator only considers the recent behavior

or task of the employee and neglects the previous better or worse
performance.
10. Self-appraisal method is used when the motive of appraisal is
_____________________.

9.5 Summary
Let us recapitulate the important concepts discussed in this unit:
 Performance appraisal is the systematic description of an employee’s
job related strengths and weaknesses.
 It is a systematic and planned process. Generally, it is done annually.
 It is designed to evaluate and improve the performance of the
employees.
 Performance appraisal system is useful for both organisation and
employees. It helps in various decisions making in the organisation.
 The purpose of performance appraisal are mainly providing feedback to
employees about their performance, determining who gets promoted,
facilitating layoff or downsizing decisions, encouraging performance
improvement, motivating superior performance, setting and measuring
goals, counseling poor performers, determining compensation changes,
encouraging mentoring and coaching etc.
 The process or performance appraisal includes establishing
performance standards, communicating standards and expectations,
measuring the actual performance, comparing with the standards,
discussing results and decision making along with corrective action.
 The appraisal methods are of two types: traditional methods and modern
methods.
 Major traditional methods are graphic rating scales, confidential reports,
free form or essay evaluation, group appraisal, critical incidents, check
list method, force choice method, straight ranking and paired
comparison.
 Modern methods of performance appraisal are assessment centre,
management by objectives, human asset accounting, behaviorally
anchored rating scale, self-appraisal and 360 degree appraisal.

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 Major issues that affect performance appraisal are reliability and validity,
job relatedness, standardisation, practical viability, legal sanctions,
training of appraisers, open communication, employee access to results
and grievance management.
 Many crucial decisions are taken on the basis of performance
evaluation. So performance appraisal should be effective and reliable.
 There are various issues such as legal issues and other bias such as
halo effect, error of central tendency, leniency and recency errors which
should be taken care of while appraising the performance of an
employee.

9.6 Glossary
 Appraise: To evaluate or estimate the nature, quality, ability, extent of
professionalism in an employee.
 Benchmark: A standard or a reference point against which something
can be measured or judged or compared to.
 Bias: A partiality or an irrational impression that prevents a person from
objective consideration of an issue or situation.
 Competence: It is a specific range of skill, knowledge or ability that is
required in performing a job well.
 Demotion: It is a reduction in an employee's rank or job title within the
organisational hierarchy of a company. A demotion may also lead to the
loss of other privileges associated with a more senior rank and/or a
reduction in salary or benefits. An employee may be demoted for
violating the rules of the organisation by behaviour such as misconduct
or negligence.
 Downsizing: It is the process of terminating employees in an attempt to
cut costs and improving organisational performance.
 Grievance: It is any dissatisfaction or feeling of injustice that an
employee feels in connection with the employment situation. It may be
or may not be valid. It may or may not be expressed to the
management.
 Simulation: The act of imitating or replicating the behaviour of some
situation or some process by means of some technology or enacted
especially for the purpose of personnel training.

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 Statute: A statute is a written law passed by a legislature on the state or

central level. A statute may forbid a certain act, direct a certain act,
make a declaration or set forth governmental mechanisms to aid society.
 Viability: Capable of being done in a practical and useful way.

9.7 Terminal Questions

1. What do you understand by performance appraisal? Explain the process
of performance appraisal.
2. List the traditional methods of performance appraisal.
3. List the modern methods of performance appraisal. Explain
’Management by Objectives’ in detail.
4. State the major issues in performance appraisal.

9.8 Answers
Self-Assessment Questions
1. Measuring and improving
2. Performance standards
3. Statistical reports, written reports
4. Critical incident technique
5. Force Choice
6. Peter Drucker
7. False
8. True
9. Recency
10. Executive development

Terminal Questions
1. Performance appraisal is the systematic, periodic and impartial rating of
an employee’s excellence in matters pertaining to the present job and
potential for a better job. The process or performance appraisal includes
establishing performance standards, communicating standards and
expectations, measuring the actual performance, comparing with the
standards, discussing results and decision making along with corrective
action. Refer section 9.2 and 9.2.2 for more details.

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2. Major traditional methods are graphic rating scales, confidential reports,

free form or essay evaluation, group appraisal, critical incidents,
checklist method, force choice method, straight ranking and paired
comparison. For more details refer section 9.3.
3. Modern methods of performance appraisal are assessment center,
management by objectives, human asset accounting, behaviorally
anchored rating scale, self-appraisal, 360 degree appraisal. MBO is a
process in which managers and their employees jointly set objectives for
the employee, periodically evaluate the performance and reward
according to the results. For more details refer section 9.3.
4. Major issues that affect performance appraisal are reliability and validity,
job relatedness, standardisation, practical viability, legal sanctions,
training of appraisers, open communication, employee access to results
and grievance management. For more details refer section 9.4.

References:
 C. B., Mamoria and S. V, Gankar., (2010). Human Resource
Management. Mumbai: Himalaya Publishing House.
 D'Cenzo, David A. & Robbins, P. Stephen., (2001). Human Resource
Management. New Jersey: Prentice Hall.
 Deb,T., (2009). Human Resources and Industrial Relations. New Delhi:
Excel Books.
 Dessler, Gary., (2010) Human Resource Management .New Jersey:
Prentice Hall .
 K. Aswathappa., (2006). Human Resource and Personnel Management.
New Delhi: Tata Mc Graw Hill.
 Rao, V.S.P., (2009). Human Resource Management. New Delhi: Excel
Books.
E- References:
 http://appraisals.naukrihub.com/assessment-centers.html
(Retrieved on 02 November, 2011)
 http://careerplanning.about.com/od/performancereview/a/reviews.htm
(Retrieved on 04 November, 2011)
 http://managementhelp.org/performancemanagement/definition.htm
(Retrieved on 02 November, 2011)

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 http://www.businessballs.com/performanceappraisals.htm
(Retrieved on 02 November, 2011)
 http://www.whatmakesagoodleader.com/Performance-Appraisal-
Forms.html (Retrieved on 04 November, 2011)
 https://sites.google.com/site/whatishumanresource/history--origin-of-
performance-appraisal (Retrieved on 04 November, 2011)

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