Chapter- 6

Performance Appraisal

• 6.1. Concept of Performance Appraisal

Performance appraisal is the process of formally
assessing or measuring the performance of
employees and to understand the abilities of a
person for further growth and development .

• It is a systematic way of reviewing and

evaluating the performance of an employee
during a given period of time.
• It is the procedure of obtaining, analyzing and
recording information about the relative worth
of an employee.

• It provides guidelines about how to perform

job effectively in future. It should be confined
to past performance as well as potential future
performance.
• According to Gary Dessler "Performance
appraisal is the process of evaluating an
employee's current and past performance
relative to his/her performance standards."

• In conclusion, Performance appraisal is the

systematic, periodic, impartial evaluation of an
employee's ability for doing his/her present
job.
• 6.2. Uses of Performance Appraisal
1) Performance Improvement
2) Training and development
3) Promotion of employees
4) Transfer
5) Career Planning
6) Improve Communication
7) Performance Feedback
8) Reward and Punishment
9) Motivation
• 6.3. Methods of Performance Appraisal
• 1) Graphic Rating Scale Method:
• This is the most widely used method of
performance appraisal.

• Under this method, scales are established for a

number of specific factors and the rater
provides a subjective evaluation upon the
established criteria.
• While preparing a rating scale a set of personal
characteristics are identified such as quality of
work, attendance, attitude, dependability
cooperation level of confidence etc. .

• Then the rater goes through such factors rating

them on a scale showing the highest to the
lowest rating.

• A model of a graphic rating scale is given

below:
 Graphic Rating Scale
Employee Names ………………… Job Title ……………….
Department …………………………………Date ………………….
Rater's Name …………………………….
Activities Excellent Good Acceptance Fair Poor
(5) (4) (3) (2) (1)

1. Quality of Work
1. Attendance
1. Level of Confidence
1. Attitude

1. Dependability

1. Cooperation

1. Appearance
• Advantages
1) Simple and Easy
2) Provides Feedback
3) Quantitative Evaluation
4) Comparative Study

Disadvantages
1) Possibility of Biasness
2) Focus on personal characteristics
3) Lack of uniformity
4) Depends on rater's opinion
• 2) Alternative Ranking Method:
• Under this method, rater determines rank of
all the employees on the basis of their
performance quality. Rater ranks all the
employees from the highest to the lowest
order.

The best one is places on the number one and

in the same order the poor one is places in
last. A model of an alternative ranking is given
below:
 Alternative Ranking Method

For the trait of Creativity

Highest Ranking employee

1 ………………………………. 6 ……………………………………..
2 ……………………………….. 7 ……………………………………….
3 …………………………………. 8 ………………………………………
4 …………………………………… 9 …………………………………….
5 ………………………………… 10
……………………………………..
Lowest Ranking
Employee
• Advantages
• 1) Simple and easy
• 2) Takes less time and cost
• 3) No need of firms for evaluation.
• 4) Possibility of errors.
•   Disadvantages
• 1) Possibility of biasness
• 2) Depends on rater opinion
• 3) Only subjective judgment
• 4) Unable to compare different groups
• 3) Paired Comparison Method:
• Under this method, each employee is compare
with another employee in the form of pairs.

• It is more advance than individual ranking in

which everyone is compared with one more
employee.

• It ranks each individual to all others

respectively and score is obtained for each
employee by counting the number of pairs.
• This process is going to continue until and
unless every member of the group is paired
with all members.

• Suppose there are five members like A, B, C,

D and E. Now let's make a chart that is
indicating all pairs of employee for each trait.
Every trait is indicates with + and – sign. +
sign is indicates better and – sign is indicates
worse.
 For the Trait of "Quality of Work"
As Compared to Employee rated
A B C D E
A + + - -
B - - - -
C - + + -
D + + - +
E + + + -
 For the Trait of "Creativity"
As Compared to Employee rated

A B C D E

A - - - -

B + - + +

C + + - +

D + - + -

E + - - +
• Above table shows that B is rated better in
quality of work and A is rated better in
creativity because they have got the highest
plus signs.
•  
•  
• Advantages
• 1) Each employee is compared with other
employee.
• 2) It consists of higher reliability.
• 3) It facilitates to know overall efficiency.
•  
• Disadvantages:
• 1) Need to large number of employees.
• 2) Does not consider specific quality
• 3) Takes more time.
• 4) It is based on subjective judgment.
• 4) Critical Incident Method: This approach is
focused on certain critical behavior of
employees that makes difference in the
performance.

• In this method, manager prepares lists of

statement of very effective and ineffective
behavior of an employee.

Critical incidents or events represent the

outstanding or poor behavior of employee on
the job.
Manager maintains register of each employee
whereby he/she periodically records critical
incidents of the workers behaviour .

• At the end of the rating period, such recorded

critical incidents are used in the evaluation.
• Advantages
• It evaluates actual job behaviour
• It is easy and to get feedback of behaviour
• No possibility of biasness
• It improves the performance
• Disadvantages
• It focuses negative behaviour
• Time consuming and boredom in some tasks.
• Difficulty to mention quantity
• Difficult to mention critical incident
• 5) Forced Distribution Method: Under this
method, the rater is given a series of
statement about an employee and has the
forced choice of selecting certain percentage
of employees in various performance
categories.

• It is operated under the assumption that the

ready made statements conform to a normal
statistical distribution.
• Under this method, employees are classified
into five different groups ranging from
outstanding, above average, average, below
average and poor.

• Then, the rater is forced to fit the candidate

into such categories. The forced distribution
should be made as per the following:
Outstan above Average below Poor
ding average Average

10% 20% 40% 20% 10%

• Advantages
• Gives clear Instructions
• Eliminates probability mistakes
• Easy and understandable
• Large number of employees rated at a same time
•
• Disadvantages
• Unsuitable for small group of employees
• It takes long time
• Difficult to assessing for similar level employees.
• Based on assumptions
• 6) Checklist Method:
• Checklist represents a set of objectives or
descriptive statement about the employee
and his/her behaviour in simple form.

• In this method the rater listed employees'

behavior and characteristics in the form of yes
or no.

• Such list helps to know about the performance

of ability, quality attitude and knowledge. A
model of Checklist is given below:
 Check List Performance Appraisal Form
 
Employee's Name ………………………………… Job Title …………………..
Department …………………………….. Date …………………..
Rater's Name ……………………………………..

Check List Factors Yes No

1. Is he/she punctual in attendance?
2. Does he/she cooperative to team members?
3. Does he/she follow instructions properly?
4. Does he/she respect to his/her superiors?
• Advantages
• 1) Easy and simple
• 2) Reduce biasness
• 3) Economical
• 4) Provides feedback

• Disadvantages
• 1) It takes more time
• 2) Focus traits than performance
• 3) Differs with job category
• 4) Misinterpretation
•  
7) Behaviourally Anchored Rating Scale (BARS):
This is the combination of critical incident and
graphic rating scale method .
It focuses on assessing an employee's behaviour
relating to the critical areas of performance for
a job.
Then, rater evaluates more effective and less
effective behaviour for getting result.
The incident serve as anchor statement on a scale
and the rating form usually contains six to
eight specifically defined performance
dimension.

The following procedures should be taken into

consideration for fulfillment of behaviourally
anchored rating scales:
1) Identify performance dimension: This is the step of
determining job areas of every employee.
2) Collection of critical incident: This is the step of
collection of incident which happened in the period
of performance.
3) Reclassification of Incident: In this step, the
manager again classify the incident and put the
records in detail.
4) Assessing scale value of incident: In this step, a
rater evaluate the incident with rating scale.

The following table represents an example of a sales

trainee's competence and a behaviourally anchored
rating scale
 Critical Behaviour Points Performance
Can expect trainee to make valuable suggestions 7 Excellent
for increased sales and to have positive
relationship with customers all over the country.
Can expect to initiate creative ideas for improved 6 Good
sales
Can expect to keep in touch with the customers 5 Above average
throughout the year
Can manage with difficulty to deliver the goods in 4 Average
time
Can expect to unload the trucks when asked by the 3 Below Average
supervisor
Can expect to inform only a part of the customer 2 Poor
Can expect to take extended coffee breaks and 1 Extremely
wander around purposelessly. poor
Advantages
1) Easy to use
2) Equitable
3) Fully individualized
4) Action oriented
5) Behaviourally based

Disadvantages
6) Time consuming and expensive
7) Complex process
8) High monitoring
9) Need detail information
10)Activity oriented
6.4. MBO Approach to Appraisal:
This is a comprehensive technique applied for
planning and goal setting.
It is also known as management by results.
This approach was first introduced by Peter
Drucker in 1954.
In this approach both top and operational level
managers jointly identify organizational
objectives, define the specific roles and
responsibilities of each employee and finally
measures the employee's performance to
assess the contributions of each of its members
toward organizational goals.
It is a method by which managers and their
subordinates plan, organize, communicate,
control and appraise the employees
performance in terms of contributions given
by them .
The process of MBO includes the following
steps:
1) Setting organizational objectives:
2) Setting subordinates objectives:
3) Matching resources with objectives:
4) Appraisal
Advantages
1) Systematic evaluation of performance
2) Improving productivity
3) Improve communication and organizational
structure
4) Motivate to subordinates
5) Employees are self directed and self
controlled
Disadvantages
1) Cannot be implemented effectively
2) It took much time and increase the paper
work
3) It emphasizes the tendency of developing
short term objective
4) It is inflexible
5) Lack of training and knowledge on the part of
supervisor .
6.5. Concept of Appraisal Interview:
An appraisal interview is a communication
between a manager and an employee that is
designed to evaluate the employee and create a
career development plan.

This is the process of discussing about job

expectations, work performance and possible
areas of growth for the worker.

It is a two way communication which allows both

the managers and employees to input into the
process.
This is the first step of performance appraisal process.
Under this, a manager and an employee sit together
with round table and discuss all aspects of the
employee's performance and remove any differences
in perception.

It provides an opportunities to the employee to defend

himself/herself against poor evaluation by the
manager.

In addition it gives a chance to provide some clear

direction and guidelines for future career path and
career goal.
6.6. Problems in Performing Rating:
1) Human Error: This error is a reflection on the trait
of the rater.

Some raters are too liberal by nature and others too strict
and some tend towards rating most people in the
middle.

If one rater is softer by nature, he/she may tend to give

higher performance rating to people under him/her.
On the other hand , a severe rater may not rate the
employees in an extreme manner.

These issues create discrepancies on rating of employees.

2) Focus on recent event:
There is a tendency of many evaluators to give
much more weight to the recent behaviour of
the candidate than the past behaviour.
This is based on the reflection that the future
trend is established by the simple recent
behaviour.
Such consideration would not be effective all the
time in future performance.
3) The central Tendency:
It is the tendency of most raters to give average
number or the center of the scale.

This may be due to the fact that a very high

rating or a very low rating could raise
questions and criticisms.
4) Error of variable standard:
It is quite possible that raters follow different
standards of performance.

Some divisional heads may require much higher

quality of performance than others.
5) Stereotyping:
It is a mental picture that an individual holds
about a person because of that person's sex,
age, religion, caste, education, knowledge etc.

Such unclear images, the rater grossly over

estimates or under estimates a persons
performance.
6) The halo effect:
The halo effect is introduced when overall
impression of an individual is judged on the
basis of a single trait.

A high rating on one trait leads automatically to

high rating on all other trait .

A very high rating may be given to protect an

employee for whom there may be personal
sympathy.