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 employees 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 Costbenefit 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 employees 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 employees 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 evaluators 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 evaluators 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 employees 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 persons 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 latters 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.