Chapter 13

Performance Evaluation
and Job Evaluation
After reading this chapter, you
should be able to:

Understand the meaning and

objectives of performance evaluation.
Present an overview of performance
management.
Understand the process of
performance evaluation.
List the issues and challenges that
performance evaluation faces.
After reading this chapter, you
should be able to (contd.):

Enumerate the steps that make

performance evaluation programmes
effective.
Discuss the various methods and
stages used for job evaluation.
Understand the process of job
evaluation.
List the steps needed to make a job
evaluation programme effective.
Performance evaluation

Performance evaluation is an objective

review and rating of an employee’s
performance in comparison with the
relative performance standards.
Performance management

Performance management is a total

and integrated process comprising of
goal-setting, training, evaluation and
rewarding employees.
Objectives of performance
evaluation
To identify a performance gap.
To provide a basis for promotion,
transfer and termination.
To aid in designing training and
development programmes.
To assist in wage and salary
administration.
Objectives of performance
evaluation (contd.)
To help in increasing employee
effectiveness.
To improve interpersonal relations.
To identify employees’ grievances.
Uses of performance evaluation

Human resource planning

Recruitment and selection
Employee training and development
Compensation decisions
Career planning and development
Grievance and discipline issues
Employee feedback
Process of performance
evaluation
Setting performance appraisal goals.
Establishing performance criteria and
informing the employees about them.
Actual evaluation of performance.
Discussing the evaluation results with
the employees.
Process of performance
evaluation
Evaluator for conducting
performance evaluation

Immediate supervisor
Peer group
Employees
Committees
Self
Customers
Performance evaluation methods

Rating scales
Ranking method
Paired comparison
Forced distribution
Forced choice
Critical incident
Performance evaluation methods
(contd.)
Essay method
Cost–benefit
Work standard
Checklist
Field review
Confidential report (CR)
Result-based evaluation system
Performance evaluation methods
(contd.)
Rating scales method

In this method, employees are rated

according to pre-specified factors.
Evaluators record their assessment of
the performance of the employees on
a rating scale.
A scale actually lists a group of traits
and a range of performance expected
for each trait.
Rating scales method (contd.)

The supervisor evaluates an employee

by circling, in the evaluation form, a
scale of each factor that best describes
his or her performance.
Ranking method

In this method, each employee is

ranked by the evaluator on the basis
of his or her relative worth to the
organization, as compared to other
employees.
Each evaluated employee secures a
place in a ranking order ranging from
topmost to the worst for selected
characteristics.
Ranking method (contd.)

The best employee in the list is

ranked the highest, and the poorest
one is at the bottom for the same
traits.
Paired comparison

In this method, two employees of a

group are considered as a unit or pair.
On the basis of predetermined criteria,
such as total performance, one
employee is compared to another.
The process of comparing a pair of
employees continues until all the
employees have been compared.
Paired comparison (contd.)

Finally, the employee with the

greatest number of favourable
responses in inter-person comparison
gets the highest ranking.
Forced distribution method
In this method, the evaluator is forced to
assign the employees to various
performance categories like excellent,
good, average, poor, etc., each with a
predetermined percentage.
This method forces the weak managers to
act against the poor performers.
However, it might affect the morale of the
employees and keep them in constant fear
of their future.
Forced choice method

In this method, the evaluator has to

evaluate the employees with the help
of a series of statements (or list of
traits).
The series may contain both
favourable and unfavourable
statements.
Forced choice method (contd.)

Each statement carries weights or

scores which may not be known to the
evaluator.
The evaluator has to choose the most
appropriate statement which best
represents the individual being
evaluated.
Critical incident method

In this method, the supervisor is

required to keep a written record of
positive and negative work-related
actions of the employees.
During the evaluation, these records
can supplement other data effectively
in evaluating the employee’s
performance.
Critical incident method (contd.)

This method helps in identifying the

fundamental areas in which
employees are strong or weak.
However the superiors may find it
difficult to record the incidents
involving their employees on a regular
basis.
Essay method

In this method, the evaluator writes a

short description of an employee’s
performance.
This method focuses less on the
employees’ regular day-to-day
performance and more on their extreme
behaviour at work.
Essay method (contd.)

The efficiency of this method depends

greatly on the evaluator’s writing skills
and objectivity.
However, it provides scope for
manipulation by the evaluator.
Cost-benefit method

In this method, the management

evaluates the cost of retaining an
employee in the organization and also
the benefits accruing to it through that
employee.
A cost-benefit comparison is made as
part of performance evaluation to
determine the real contribution of that
employee to the organization.
Cost-benefit method (contd.)

The value and quality of goods

produced, cost of goods, appearance,
manners and sociability skills of the
employee are some of the guidelines
used for evaluating the employees.
Work standard method

In this method, the evaluator compares the

performance of the employees against the
standards established in the form of
expected output.
The standard output is usually established
on the basis of the normal performance of
an average employee.
This method by and large avoids
evaluator’s bias as the standards are fixed
scientifically and objectively.
Checklist method

In this method, a checklist containing

a series of statements about the traits
of the employees is presented to the
evaluator.
Each statement is to be answered in
‘Yes or No’ format.
Checklist method (contd.)

Each statement carries a score based

on its importance to the overall
evaluation.
After the evaluator completes the
evaluation, the checklist is sent to the
HR department for further processing
like assigning predetermined scores,
totalling such scores etc.
Field review method

In this method, the evaluation of an

employee is done by someone other
than his or her own superiors.
Normally, evaluation is done by the
HR people, who scrutinize the records
of those employees who are being
evaluated and conduct interviews with
them and their superiors.
Field review method (contd.)

This method facilitates inter-person

comparison of the managerial
personnel in different places.
Confidential report (CR)

CR is a kind of evaluation practised

predominantly in government and
public sector organizations.
The evaluation report is prepared by
the immediate superiors, usually on
the basis of the continuous
observation of employees over a
period of time.
Confidential report (CR) (contd.)

The CR follows a predetermined

format for gathering data relating to
employee’s skills, knowledge,
initiative, attitude, integrity, scope for
improvement, aptitude and area of
concern.
Result-based evaluation system

Under the result-based system, the

superior and the employees work
together on setting goals for the
subsequent evaluation periods.
On the basis of consensus, the
employees agree to achieve the goals
set for them.
Behaviourally Anchored Rating
Scales (BARS) method
In this method, the different performance
levels of employees are shown by the side
of the scale, with each level described in
terms of specific behavioural example,
either good or bad performance.
This method specifies the various
dimensions to be rated in behavioural
terms and makes use of critical incidents to
explain the various levels of performance.
Behaviourally Anchored Rating
Scales (BARS) method (contd.)
It helps the evaluators with a uniform
frame of reference for evaluating the
employees.
Steps in BARS

Developing critical incidents.

Formulating performance dimensions.
Reassigning the incidents.
Rating the incidents.
Evolving a final instrument.
360-degree feedback

360-degree feedback is a systematic

collection and feedback of performance
data on an individual or group derived
from a number of the stakeholders on
their performance - P. Ward
360-degree feedback
360-degree feedback method

In this method all those who interact

with an employee in any capacity will
prepare an evaluation report on him or
her.
Senior managers, supervisors,
employees, peers, team members,
internal or external customers and
even the employees themselves
evaluate the performance.
360-degree feedback method
(contd.)
360-degree feedback method aims at
ensuring an objective and
comprehensive evaluation of a
person’s performance.
Steps in the development of the
360-degree feedback method
Determining the objectives.
Deciding the receiver and giver of
feedback.
Establishing the performance criteria.
Determining the mode of collecting
data.
Finalizing the method of data analysis
and presentation.
Steps in the development of the
360-degree feedback method
(contd.)
Trying a pilot scheme.
Execution of the feedback process.
Evaluation and communication.
Management by objectives (MBO)

MBO involves setting specific

measurable goals by the managers in
consultation with the employees and,
subsequently, examining the latter’s
progress towards those goals.
MBO counts on joint goal-setting to
formulate and achieve objectives for
the organization, the department and
the individual.
Management by objectives (MBO)
(contd.)
MBO enables employees to get
involved in the evaluation process by
setting their own goals.
Steps in MBO

Projecting the goals.

Discussing the goals.
Developing yardsticks.
Executing performance reviews.
Providing feedback.
Problems in performance
appraisal

Absence of objectivity
Halo effects
Central tendency
Lenient attitude
Bias
Recency effects
Employee resistance
Steps to overcome the problems
in the evaluation process
Proper training of the evaluators.
Continuous evaluation.
Determining the right tool for
evaluation.
Anticipating the possible problems in
evaluation and developing their
remedy.
Section B
Job Evaluation
What is job evaluation?

Job evaluation is a systematic technique

used for deciding the relative worth of a job
based on its comparison with other jobs.
Objectives of job evaluation

To rank the jobs in order of importance.

To determine the pay scales of the
employees based on the relative worth
of the jobs.
To develop job grades and pay grades.
Objectives of job evaluation
(contd.)
To institutionalize the system of pay
scale fixation.
To avoid or eliminate the employees’
grievances against bias and prejudice.
To enhance the ability of the
organization to attract and retain the best
talents.
Job evaluation process

The steps in a job evaluation process

are
Identification of jobs to be evaluated.
Gathering relevant information about
the jobs.
Determination of job ranking.
Selection of benchmark jobs.
Wage and salary surveys.
Periodic review and feedback.
Job evaluation process
Methods of job evaluation
Non-analytical Methods
Ranking

In this method, each job is ranked

after its comparison with all other jobs
in the organization.
Based on their worth to the
organization, jobs are placed in a
vertical order.
Ranking (contd.)

An important prerequisite for the job

ranking method is job analysis based
on which the evaluator identifies the
most critical factor required for
successful performance of the job.
Paired comparison

In this method, each job is individually

compared with every other job in the
organization.
If, in the comparison, a job is found to
have more value than another, it is
assigned some reward points.
If it is considered less important, it
gets no points.
Paired comparison (contd.)

In this way, each job accumulates

points and at the end of the multiple
comparisons, rankings are done on
the basis of the aggregate scores.
Job grading

In this method, jobs are grouped on

the basis of the similarities found in
their characteristics and values.
Generally, jobs within each job group
or class are eligible for the same pay
scale or grade.
Job grading (contd.)

This method requires the preparation

of both class description statement and
job description.
Job description indicates the job
characteristics while class description
specifies the group characteristics.
Market pricing

Job evaluation must ensure both

internal equity and external equity.
External equity refers to bringing the
pay scales for jobs in the organization
on a par with the pay scales of similar
jobs in other organizations.
Market pricing (contd.)

In the market pricing method, the

wages prevailing in the labour market
act as the basis for job evaluation.
In this regard, organizations often
conduct salary surveys to know the
relevance of their own pay scales to
the market conditions.
Analytical Methods
Point ranking

In this method, the worth of a job is

determined on the basis of the extent
of the presence of some defined
factors in that job.
These factors are usually called
compensable factors. They may
include any key factor like skills,
knowledge or efforts that are
compensable in monetary terms.
Point ranking (contd.)

The evaluators may assign more

weight to some factors if they consider
them as decisive for the performance
of a job.
Factor comparison

In this method, a set of factors common to

all jobs are identified and assigned points.
The five universal job factors are mental
requirements, physical requirements,
skills, working conditions and
responsibilities.
Factor comparison (contd.)

Each job is compared with others for

each one of these factors and ranked for
all the defined factors.
Finally, the points secured by a job for
all common factors are totalled and its
overall rating is determined.
Benefits of job evaluation
Basis for developing job grading and job
family structure.
Basis for fair pay policy.
Facilitates better financial management.
Ensures harmonious industrial relations.
Basis for training need identification.
Basis for career planning and
development.
Limitations of job evaluation
None of the methods in job evaluation is
considered to be completely objective.
Job evaluation does not usually consider
the influence of external factors on the
jobs.
Job evaluation results are relevant for a
short period only due to rapid changes in
the external environment.
Limitations of job evaluation
(contd.)
Organizations are averse to the job
evaluation exercise as it often means
additional financial commitment to them.
The job evaluation process never
considers factors such as the bargaining
power of employer and employees while
deciding the pay scales for the jobs.
Measures to enhance the
effectiveness of job evaluation
Gaining confidence of the employees.
Adequate training for the evaluators.
Ensuring top management support.
Defining the job factors clearly.
Distinguishing the job from the job
holder.
Ensuring the accuracy and reliability
of the source documents.
Recognizing the role of trade unions.