BBA-HRM_Unit 3_Performance Appraisal
Meaning
Performance appraisal can be described as a systematic evaluation of performances of
several employees so that they can understand all abilities of a person and their
development and growth. It includes measuring the pay of employees and comparing it
with all plans and targets.
Features of Performance Appraisal
On continuous basis
Required to determine contribution to attain given objectives
Relates to quality of worker performance and work relationship
Expressed as personal opinions, merit rating, employee evaluation, and progress
report.
Purpose and Importance
1. Ascertain whether behaviour integrated with role requirement
2. Considered success / failure
3. Basis of promotion, transfer, training
4. Data used for selection for training, development
5. Ascertain potential for special projects
6. Pinpoint poor performers and corrective action
7. Reduce grievances
8. Improved job performance
9. Indicates to employee about accomplishments
Process of Performance Appraisal
Edited and Compiled by Dr Rasmeet Kaur Malhi
BBA-HRM_Unit 3_Performance Appraisal
Step 1: Establish performance standards
Performance standards are set to ensure achievement of departmental goals and
objectives and the organizations overall strategy and objectives. Standards are based on
the position, rather than an individual. In order to be clearly understood and perceived
as objective, standards should adhere to the same rules that apply to goal-setting; that
is, they should be “SMART:” specific, measurable, achievable, relevant and time bound.
Step 2: Communicate performance standards
In order to be effective, performance standards must be clearly communicated and
understood to be expectations. Performance standards assume that an individual is
competent, so initial and corrective training should be factored into the performance
management process. If there is a specific training period after which an employee is
assumed to be competent and performing to standards, that should be communicated as
well.
Step 3: Measure performance
Performance that is expressed in numeric terms—for example, cost, quantity, quality,
and timeliness is relatively easy to measure. Performance in the area of soft skills—for
example, communication, customer service and leadership is more difficult to evaluate.
DeCenzo, Robbins and Verhulst recommend using a variety of sources of information
including personal observation, oral reports and written reports. They note, however,
that what is measured is probably more critical than how an aspect is measured. The
focus should be on measuring what matters rather than measuring what’s easy to
measure.
Step 4: Compare actual performance to performance standards
In this step of the appraisal process, actual performance is compared to the performance
standards. Documentation should highlight actions and results.
Step 5: Discuss the appraisal with the employee
This is generally the step in the process that is the most difficult for managers and
employees alike and it can be a challenge to manage emotions and expectations. Even
when performance is strong, there can be differences of opinion on the next action. A
significant difference of opinion regarding performance can create an emotionally-
charged situation. If the manager is providing feedback and coaching on a regular basis,
this shouldn’t be the case. Related point: If an employee has consistently poor
performance, the issue should be addressed—corrective action taken—in a timely
manner and not deferred to an annual review. To identify and prepare for differences of
opinion, management can ask employees to complete and submit a self-evaluation prior
to the appraisal meeting. A key point to keep in mind is that the manager’s ability to
remain calm and civil will have a significant impact on the employee’s confidence,
motivation and future performance.
Edited and Compiled by Dr Rasmeet Kaur Malhi
BBA-HRM_Unit 3_Performance Appraisal
Step 6: Implement personnel action
The final step in the appraisal process is the discussion and/or implementation of any
next steps: a reward of some sort—a raise, promotion or coveted development
opportunity—or corrective action—a performance plan or termination. Note, however,
that corrective action that might help an employee achieve expectations shouldn’t be
tabled until the next formal appraisal. As performance gaps are identified, supervisors
and managers should take the time to identify why performance is not meeting
expectations and determine whether the employee can meet expectations with
additional training and/or coaching. As mentioned above, if performance is such that
termination is warranted, that action should be taken in a timely manner as well.
Important Rules for Good Appraisal System
Encompass all levels and categories of employees
Necessary training to evaluators
Evaluators should know purpose and value of plan
Factors and terms of evaluation should be clearly understood
Measure performance against organisation’s needs
Should clearly link to promotions, training, transfer policies
Methods of Performance Appraisal
1. Traditional Methods
Ranking Method
Paired Comparison
Grading Method
Forced Distribution Method
Confidential Report
2. Modern Methods
Management by Objectives
Behaviorally Anchored Rating Scales
Assessment Centers
360-Degree Performance Appraisal
Human Resource Accounting
Edited and Compiled by Dr Rasmeet Kaur Malhi
BBA-HRM_Unit 3_Performance Appraisal
Traditional Methods
1. Ranking Methods
It is the oldest and simplest formal systematic method of performance appraisal in which
employee is compared with all others for the purpose of placing order of worth. The
employees are ranked from the highest to the lowest or from the best to the worst.
2. Paired Comparison:
In this method, each employee is compared with other employees on one- on one basis
only. The rater is provided with a bunch of slips each coining pair of names, the rater
puts a tick mark against the employee whom he insiders the better of the two.
3. Grading Method
In this method, certain categories of worth are established in advance and carefully
defined. There can be three categories established for employees: outstanding,
satisfactory and unsatisfactory. The employee is, then, allocated to the grade that best
describes his or her performance.
4. Forced Distribution Method:
This method assumes that employees performance level confirms to a normal statistical
distribution i.e., 10, 20, 40, 20 and 10 per cent. This is useful for rating a large number
of employees’ job performance and promo ability. It tends to eliminate or reduce bias.
5. Confidential Report
It is the traditional way of appraising employees mainly in the Government
Departments. Evaluation is made by the immediate boss or supervisor for getting effect
to promotion and transfer. Usually a structured format is devised to collect information
on employee’s strength, weakness, intelligence, attitude, character, attendance
discipline etc.
Modern Methods
1. Management by Objectives
The concept of MBO can be described “process whereby the superior and subordinate
managers of an organization jointly identify its common goals, define each individual’s
major areas of responsibility in terms of results expected of him, and use these measures
as guides for operating the unit and assessing the contribution of each its members”.
2. Behaviorally Anchored Rating Scales (BARS)
Behaviorally Anchored Rating Scales (BARS) are designed to bring the benefits of both
qualitative and quantitative data to the employee appraisal process. BARS compare an
individual’s performance against specific examples of behaviour that are anchored to
Edited and Compiled by Dr Rasmeet Kaur Malhi
BBA-HRM_Unit 3_Performance Appraisal
numerical ratings.
3. Assessment Centers
An assessment center is a central location where the managers may come together to
participate in job related exercises evaluated by trained observers. The principle idea is
to evaluate managers over a period of time by observing and later evaluating their
behaviour.
4. 360 degree Appraisal
In 360-degree appraisal system, an employee is appraised by his supervisor,
subordinates, peers, and customers with whom he interacts in the course of his job
performance. All these appraisers provide information or feedback on an employee by
completing survey questionnaires designed for this purpose.
5. Human Resource Accounting
Human Resource Accounting method attaches money values to the value of a firms
internal human resources and its external customer goodwill. Under this method,
performance is judged in terms of costs and contributions of employees. Difference
between the cost and contribution will reflect the performance of the employees.
References
C.B. Mamoria and V.S.P Rao, Personnel Management, Himalaya
Publications.
Michael Vaz and Meeta Seta, Human Resource Management, Manan
Prakashan.
https://courses.lumenlearning.com/wmopen-
humanresourcesmgmt/chapter/steps-in-the-appraisal-process/
Edited and Compiled by Dr Rasmeet Kaur Malhi
