Performance Appraisal

Chapter- 3
Topic List

★ Definition and dimension of Performance appraisal

★ Purpose of Performance appraisal
★ Argument against Performance appraisal
★ Who are involved in performance appraisal
★ Why performance appraisal are important
★ Usage of Performance appraisal by organization
★ Characteristics of Performance appraisal
★ Performance appraisal Process
★ When d o e s p e r f o r m a n c e appraisal occurs
★ Factors that can distort appraisal
What is Performance Appraisal?
➔ A performance appraisal is the periodic assessment of an employee's job performance
as measured by the competency expectations set out by the organization.
➔ It is a assessment process of evaluating and documenting how well an
employee is carrying out his or her job. It is part of a company's performance
management system. Performance appraisals are based on the employee's progress
against goals set once a year with his or her manager.

Dimension of Performance Appraisal

➔ A performance appraisal dimension is an aspect of the company's evaluation process.
For example, Quantity of work, Quality of work, Timeliness of work, Efficiency,
Department Contribution , Productive Work Habits, Adding Skills & Capabilities,
Value add etc.
➔ It involves thinking through various facts of performance, identifying critical
dimensions of performance, planning, reviewing, developing, enhancing performance
and related competencies.
Performance appraisal has many dimensions

Input Process Output Outcome

Dimension 1# Input:
This dimension deals with the activities to be accomplished by the employee.
Performance can be achieved if the nature of inputs can be managed without mistake,
because performance is a function of three sets of factors – ability, motivation and
organizational support. If anyone among these three factor is less the performance is to
be poor.
Employee Performance(EP)= Employee Competence + Employee Motivation +
Organizational Support.
Dimension 2# Process:
The behaviors of job holders in applying their knowledge and skills to the delivery of
results. These are sometimes referred to as competences.
Dimension 3# Outputs:
Measurable/observable results of job holder’s behavior.
Dimension 4# Outcomes:
The ultimate impact of the job holders on the results of their teams or departments and
their overall contribution to achieving the objectives of the organization.
Purpose of Performance Appraisal
The major purpose of performance appraisal is to evaluate how well employees have
conducted their duty. Performance appraisal helps to keep a record of each employee’s
job performance, including what efforts they have made and what they have achieved.
 Performance appraisal helps the management to take decision about the salary
increase of an employee.
 The supervisor and employee can plan how to improve weak areas.
 An appraisal can help motivate employees.
 It minimizes the communication gap between the employer and employee.
 Promotion is given to an employee on the basis of performance appraisal.

Argument against Performance Appraisal

 Disparities between the theory and its application.
 Performance Appraisal is a bitter process for most of the employees.
 Creates emotional pressures and stress for the employees .
 PA process increases the dependent employees on their superiors.
Who are involve in Performance Appraisal
● The Appraisee (an appraisee is someone who is being appraised by an appraiser or
the one undergoing an appraisal)
● The Appraiser (a person who carries out a formal assessment of an employee's
performance)
● HR Department (Human resources (HR) is the division of a business responsible for
finding, screening, recruiting, and training job applicants)
Necessity of Performance Appraisals are Important
Performance appraisals are essential for the growth of a company and the employee. It
helps the company to find out whether the employee is being productive or is a liability. It
helps the employee to find out where his / her career is heading. It is an essential part of
HR management.

1. Employee satisfaction and Motivation

This motivates the employee to work hard,which in turn, benefits the company. A regular
appraisal program can have a deep impact on levels of employee satisfaction and
motivation.

2. Finding out the need for training and development

During an appraisal meeting, the employer can point out the areas where the employee
needs improvement. The employee can look at the data and agree with the employer, and
then work out a plan for training and development.
 Cont’d…
3. Analysing appraisal data for better recruitment
Appraisal data helps in monitoring the success of a company’s recruitment practices.
For example, how well the employees who were hired in the past one or two years
are performing, how is the attrition rate and so on. Based on it, the HR department
can strategize future hiring.

4. Improving communication between management and employee

Most often, there is a communication gap between the supervisor and the
employee,especially when the employee is new to the company. Most of the time
supervisor /manager will be too busy to pay proper attention to the new hire.
Performance appraisals will help to break that ice, which is good for both the
supervisor / manager, as well as, the employee because better communication leads
to better productivity.
Usages of performance appraisal by Organisation
In most work organizations, performance appraisals are used for a variety of reasons.
These reasons range from improving employee productivity to developing the employees
themselves. This diversity of uses is well documented in a study of why companies use
performance appraisals.
Traditionally, compensation and performance feedback have been the most prominent
reasons organizations use performance appraisals.

 Feedback to employees.
Performance appraisals provide feedback to employees about quantity and quality of job
performance. Without this information, employees have little knowledge of how well
they are doing their jobs and how they might improve their work.
 Self-development.
Performance appraisals can also serve as an aid to employee self-development.
Individuals learn about their strengths and weaknesses as seen by others and can initiate
self-improvement programs (see discussion on behavioural self-management programs).
Cont’d…
Reward systems.
In addition, appraisals may form the bases of organizational reward systems-particularly merit-based
compensation plans.

Personnel decisions.
Performance appraisals serve personnel-related functions as well. In making personnel decisions, such as
those relating to promotions, transfers, and terminations, they can be quite useful. Employers can make
choices on the basis of information about individual talents and shortcomings. In addition, appraisal
systems help management evaluate the effectiveness of its selection and placement functions. If newly
hired employees generally perform poorly, managers should consider whether the right kind of people
are being hired in the first place.

Training and development.

It is apparent that performance appraisal systems serve a variety of functions in organizations. In light of
the importance of these functions, it is imperative that the accuracy and fairness of the appraisal be
paramount considerations in the evaluation of a system. Many performance appraisal systems exist. It is
the manager’s job to select the technique or combination of techniques that best serves the particular
needs (and constraints) of the organization
Characteristics of performance appraisal
 It is a step by step process
 It examine the employee strength and weakness
 Scientific and objective study
 Ongoing and continuous process
 Secure information for making correct decisions on employee
 Process of Performance Appraisal
One of the most important things to remember about performance appraisals is that
its effectiveness will be highly influenced by its purpose.
The process of performance appraisal starts with employee planning and ends with
an evaluation of employee progress. The process of performance appraisal consists
broadly two steps. First, complete the performance appraisal form; secondly,
participate in a performance appraisal interview and discussion. These two sages
comprise the following levels in the appraising performance of the staff.

1. Establish Performance Standards or Goals

The appraisal process begins with the establishment of performance standards. The
evaluators must determine what outputs, accomplishments and skills will be
evaluated. These standards should have evolved out of job analysis and job
description. These performance standards should be clear and objectives are to be
understood and measured.
Cont’d…
2. Communicate Performance Expectations to Employees
Once the performance standards are established, these need to be communicated to the
respective employees so that they come to know what expected of them. Past experience
indicates that not communicating standards to the employees compounds the appraisal
problems.
3. Measure Actual Performance
This is the third step involved in the appraisal process. In this stage, the actual
performance of the employees is measured on the basis of information available from
various sources such as personal observation, statistical reports, oral reports, and written
reports. The evaluator’s feeling should not influence the performance measurements of
the staff. Measurement must be objective based on facts and findings.
4. Compare Actual Performance with Standards
In this stage, the actual performance is compared with the predetermined standards.
Such a comparison may reveal the deviation between standard performance and actual
performance and will enable the evaluator to proceed to the fifth step on the process i.e.
Review and discussion of the appraisal with the concerned staff.
Cont’d…
5. Discuss and Review the Appraisal with the Staff
The fifth step in the appraisal process is to communicate to and discuss
with the employees the results of the appraisal. This is one of the most
challenging tasks the evaluators face to present an accurate appraisal to the
staff and then make them accept the appraisal in a constructive manner. A
discussion on appraisal enables employees to know their strengths and
weaknesses. This has, in turn, impact on their future performance. The
impact may be positive or negative depending upon how the appraisal is
presented and discussed with the employees.
6. Initiate Corrective Action
The final step in the appraisal process is the initiation of corrective action
when it is necessary. The areas needing improvement are identified and
then, the measures to correct or improve the performance are identified
and initiated.
When performance Appraisal Occurs
Companies use performance appraisals to give employees big-picture feedback on their work and to
justify pay increases and bonuses, as well as termination decisions. They can be conducted at any
given time but tend to be annual, semi-annual, or others.
 Annual
The annual performance appraisal process is designed to support and develop employees by
providing specific feedback on their goals and job responsibilities through both a one-on-one
conversation with their supervisor and a written appraisal document. The appraisal addresses not
only the job content – the “what” of the role -- but also how the work was accomplished. An
effective performance appraisal process enhances an employee’s job performance while
establishing good communication channels between the employee and the supervisor.
 Semi-annual
Semi-annual reviews allow for twice yearly looks at an employee's performance, sort of like a check
in at the halfway point. One of these reviews can be tied to compensation.
 Others
The most common types of appraisal are: straight ranking appraisals, grading management by
objective appraisals. trait-based appraisals.
Factors that can hampers Appraisal
Halo Effect: The halo effect is a “tendency to rate high or low on all factors
due to the impression of a high or low rating on some specific factor”. This
problem often occurs with employees who are especially friendly or
unfriendly toward the supervisor.
Central Tendency: A tendency to rate all employees the same way, such as
rating them all average.
Leniency Error: Every evaluator has his/her own value system which acts as
a standard against which appraisal are made. Relative to the true or actual
performance an individual exhibits, some evaluators mark high and others
low. The former is referred to as positive leniency error, and the latter as
negative leniency error. When evaluators are positively lenient in their
appraisal, an individual’s performance becomes overstated, that is, rated
higher than it actually should. Similarly, a negative leniency error
understates performance, giving the individual a lower appraisal.
Cont’d…
Bias: The tendency to allow individual differences such as age, race, and sex
to affect the appraisal rates these employee receive.

The Regency Effect: The raters generally remember the recent actions of the
employee at the time of rating them on the basis of these recent actions
favorable or unfavorable-rather than on the whole activities.

Personal Prejudice: If the rater dislikes any employee or any group, he may
rate them at the lower end, which may distort the rating purpose and affect
the career of these employees.
Management by Objectives (MBO) - Employees are evaluated how well they
accomplished a specific set of objectives that have been determined to critical in the
successful completion of the job.