Professional Documents
Culture Documents
PERFORMANCE AND
POTENTIAL APPRAISAL
Objectives
After going through this unit, you should be able to:
lunderstand different objectives and uses of performance appraisal system in an
organization;
2develop various approaches to performance appraisal and draw a distinction
between traditional and newer rating methods.
3identify various errors in performance appraisal in practice and the need for
periodic performance review and feedback.
Structure
15.1 Introduction
15.2 Objectives of Performance Appraisal
15.3 Uses of Performance Appraisal
15.4 Planning the Appraisal
15.5 Approaches to Performance Appraisal
15.6 Components of Performance Appraisal
15.7 Types of Performance Appraisal
15.8 Concerns and Issues in Appraisal
15.9 Steps in the Appraisal Programme
15.10 Methods of Performance Appraisal
15.11 Errors in Performance Appraisal
15.12 Potential Appraisal
15.13 Self Appraisal
15.14 Performance Appraisal Assessment
15.15 Performance Appraisal Guidelines
15.16 Performance Appraisal in Practice
15.17 Performance Review and Feedback
15.18 Strategies to Improve Performance
15.19 Summary
15.20 Self-Assessment Questions
15.21 Case
15.22 Further Readings
15.1 INTRODUCTION
Performance appraisal is a systematic evaluation of present potential capabilities
of personnel and employees by their superiors, superiors superior or a professional
from outside. It is a process of estimating or judging the value, excellent qualities or
55
Performance and
Potential Appraisal
authority, and at the other end, the performance achieved by the individual or any
given group.
Performance appraisal can be either formal or informal. Usage of former systems
schedule regular sessions in which to discuss an employees performance.
Informal appraisals are unplanned, often just chance statements made in passing
about an employees performance. Most organizations use a formal appraisal
system. Some organisations use more than one appraisal system for different types of
employees or for different appraisal purposes. Organizations need to measure
employee performance to determine whether acceptable standards of performance
are being maintained. The six primary criteria on which the value of performance
may be assessed are: quality, quantity, timelineness, cost effectiveness, need for
supervision, and interpersonal impact. If appraisals indicate that employees are
not performing at acceptable levels, steps can be taken to simplify jobs, train, and
motivate workers, or terminate them, depending upon the reasons for poor
performance.
The results of appraisal are normally used to: (1) estimate the overall effectiveness
of employees in performing their jobs, (2) identify strengths and weaknesses in job
knowledge and skills, (3)determine whether a subordinates responsibilities can be
expanded, (4) identify future training and development needs, (5) review
progress toward goals and objectives, (6) determine readiness for promotion, and
(7) motivate and guide growth and development.
increases, promotions, transfers, discharges, and for selection test validation. The
other main use is for employee development including performance improvement
training, coaching, and counseling.
In the open ended appraisal system, unlike in the close ended system, the
performance of the individual is discussed with him, and he is ranked in a five or ten
point rating scale. The company uses this tool primarily for rewarding a good
performer or for other considerations like promotions. The main weakness of this
system is that all the employees are ranked in a particular scale, and whereas the
good performers are rewarded, there is no concerted effort to motivate the average
performers in performing better. Another weakness of the grading system is that the
appraisal may turn out to be more subjective in nature due to insufficient data
maintained on the individual. This system also leads to unnecessary comparisons
made on different individuals performing similar jobs.
Performance appraisal can be a closed affair, where the appraisees do not get
any chance to know or see how they have been evaluated; or it can be completely
open, where the appraisees have the opportunity of discussing with their superiors
during the evaluation exercise.
and Myers suggest several steps to develop and administer the programme
effectively.
1. The personnel department may attempt to obtain as much as possible the
agreement of line management in respect of the needs and objective of the
programme. A choice has to be made among different kinds of appraisal
methods judiciously.
2. The personnel department has to examine the plans of other organisations as
well as the relevant literature in the field to formulate the most suitable plan
for the appraisal programme.
3. Attempts should be made to obtain the co-operation of supervisors in
devising the appraisal form and discuss with them the different factors to be
incorporated, weights and points to be given to each factor, and description or
instructions to be indicated on the form.
4. The personnel or industrial relations manager tends to explain the purpose
and nature of the programme to all the superiors and subordinates to be
involved and affected by it. Care should be taken to take into confidence the
representatives of the union, if it exists in the company.
5. Attempt is to be made to provide intensive training to all the supervisors with
a view to obtaining unbiased and uniform appraisal of their subordinates.
6. Care may be taken to acquire line and staff co-ordination and mutual checking
of appraisals with a view to achieving intra and inter-departmental consistency
and uniformity.
7. There should be an arrangement for periodic discussion of the appraisal by
the superior with each of the subordinates where attempts may be made to
stress good points, indicate difficulties, and encourage improved performance.
Explicitly, in this context, the discussion should be in the form of a progress
review and every opportunity should be given to the subordinate to express
himself, if he feels that the appraisal has been biased and that it should be
otherwise.
8. As soon as the appraisal has been duly discussed, attempts may be made to
recommend for salary increases or promotion, if these decisions seem plausible
in the light of appraisals.
9. There should be provision for challenge and review of appraisals, if the
employees or their union representatives are dissatisfied with the personnel
decisions which the management has taken on the basis of these appraisals.
These steps, if followed carefully, are likely to help the superiors to
evaluate their subordinates effectively.
assigned such ranks as first, second, third and so on. If the evaluation process
involves several traits, the ranking is made separately for each trait. Although this
method is simple to understand and easy to apply, this technique becomes
cumbersome and difficult when a large number of employees are to be evaluated in
theorganisation.
(ii) Paired-comparison System\: Under this, each individual is compared with every
other individual. The appraiser is required to put a tick-mark against the name of the
individual whom he considers better on the trait in question. The final ranking is
determined by the number of times he is judged better than the other. This method
becomes complicated when the number of individuals for evaluation is large.
(iii) The Forced Distribution Procedure: It is a form of comparative
evaluation in which an evaluator rates subordinates according to a specified
distribution. Here judgments are made on a relative basis, i.e., a person is assessed
relative to his performance in the group he works. This procedure can be used for
numerous traits if required by evaluating the individuals separately on each trait.
The forced distribution method is primarily used to eliminate rating errors such as
leniency and central tendency.
(iv) The Forced Choice Technique: It forces the rater to select from a series of
several statements or traits, the one which best fits the individual and one which least
fits, and each of these statements is assigned a score. Since the appraiser does not
know the score value of statements, this method prevents the rater from
deliberately checking only the most favourable trait. Moreover, the appraiser is
62
Key HR Practices unable
to introduce personal bias into the evaluation process because he does not
know which of the statements is indicative of effective performance. This enhances
the overall objectivity of this procedure.
However, it is a costly technique and also difficult for many raters to understand.
(v) The Critical Incident Method: This technique of performance appraisal was
developed by Flanagan and Burns. Under this procedure, attempts are made to
devise for each job a list of critical job requirements. Superiors are trained to be on
the lookout for critical incidents on the part of the subordinates in accomplishing
the job requirements. The superiors enlist the incidents as they happen and in the
process, tend to build up a record of each subordinate with debit on the minus side
and credit on the plus side. The merit of this procedure is that all evaluations are
based on objective evidence instead of subjective rating.
(vii) The Field Review: It is an appraisal by someone outside the employees own
department, usually someone from the corporate office or from the employees own
human resource department. The field review process involves review of employee
records, and interviews with the employee, and sometimes with the employees
superior. Field review as an appraisal method is used primarily in making promotion
decisions at the managerial level. Field reviews are also useful when comparable
information is needed from employees in the different units or locations.
(c) Results-Oriented Appraisal: The results-oriented appraisals are based on the
concrete performance targets which are usually established by superior and
subordinates jointly. This procedure has been known as Management by Objectives
(MBO).
MBO: The definition of MBO, as expressed by its foremost proponent, Dr.
George S. Odiorne, is: Management by objectives is a process whereby the
superior and subordinate managers of an organization jointly identify its
common goals, define each individuals major areas of responsibility in terms of
the results expected of him, and use these measures as guides for operating the unit
the employee often has helped to set. In the goal-setting phase of MBO, a superior
and subordinate discuss job performance problems and a goal is agreed upon.
Along with mutual goal-setting, a major component of MBO is the performance
review session between the superior and subordinate, which takes place regularly to
evaluate progress towards specified goals.
The key features of management by objectives are as under:
1. Superior and subordinate get together and jointly agree upon _the list the
principal duties and areas of responsibility of _the individuals job.
2. The subordinate sets his own short-term performance goals or _targets in cooperation
with his superior.
3. They agree upon criteria for measuring and evaluating _performance.
4. From time to time, as decided upon, the superior and _subordinate get
together to evaluate progress towards the _agreed-upon goals. At those
meetings, new or modified goals _are set for the ensuing period.
5. The superior plays a supportive role. He tries, on a day-to-_day basis, to help
the subordinate achieve the agreed upon _goals. He counsels and coaches.
6. In the appraisal process, the superior plays less of the _role of a judge and
more of the role of one who helps the _subordinate attain the organisation
goals or targets.
7. The process focuses upon results accomplished and not upon personal traits.
There are four main steps in MBO:
1. Define the job. Review, with the subordinates, his or her _key responsibilities
and duties.
2. Define expected results (set objectives). Here specify in _measurable terms
what the person is expected to achieve.
3. Measure the results. Compare actual goals achieved with _expected results.
4. Provide feedback, appraise. Hold periodic performance review _meetings with
Balance Score Card: The Balance Score Card (BSC) creates a template for
measurement of organisational performance as well as individual performance. It is
a measurement based management system, which enables organisations to clarify
vision and strategy before initiating action. It is also a monitoring system that
integrates all employees at all levels in all departments towards a common goal. BSC
translates strategy into performance measures and targets, thus making it operational
and highly effective. It helps cascade corporate level measures to lower level so that
the employees can see what they must do well to improve organisational
effectiveness and helps focus the entire organisation on what must be done to
create breakthrough performance. BSC was introduced in 1992 by Dr. Robert
Kaplan and David Nortan and has been successfully adopted by numerous
companies worldwide.
Assessment Centre Experts from various departments are brought together to
evaluate individuals or groups specially their potentials for promotions.
Activity A
What type of executive performance appraisal system exists in your organisation?
...................................................................................................................................
...................................................................................................................................
...................................................................................................................................
...................................................................................................................................
...................................................................................................................................
...................................................................................................................................
...................................................................................................................................
for what he believes in. Individual rater bias can seriously compromise the
credibility of an appraisal. Some of the common syndromes are:
Halo Effect: This is a tendency to let the assessment of a single trait influence the
evaluation of the individual on other traits too.
Horns Effect: This is a tendency to allow one negative trait of the employee to
colour the entire appraisal. This results in an overall lower rating than may be
warranted.
Leniency or Constant Error: Depending upon the appraisers own value system
which acts as a standard, employees may be rated leniently or strictly. Such
ratings do not carry any reference to actual performance of the employees. Some
appraisers consistently assign high values to all employees, regardless of merit. This
is a leniency error. The strictness tendency is a reverse situation, where all
individuals are rated too severely and performance is understated.
Central Tendency: This is the most common error that occurs when a rater assigns
most middle range scores or values to all individuals under appraisal. Extremely
high or extremely low evaluations are avoided by assigning average ratings to all.
Spill-over Effect: This refers to allowing past performance to influence the
evaluation of present performance.
66
Personal Bias: Perhaps the most important error of all arises from the fact that
very few people are capable of objective judgments entirely independent of their
values and prejudices.
The above errors have evoked concerns about performance appraisal. McGregor
(1960), with his concern for the human side of enterprise, appraisal represented a
judgemental and demotivating process. Similar concerns were voiced by Deming
(1982) who suggested that appraisal was a deadly disease which blamed
individuals for problems systematic to organisations. Margerison (1976) went as far
as to predict that appraisal would fall apart at the seams due to a combination of
managerial indifference, employee ambivalence and union opposition. This theme
was reiterated by Fletcher (1993), who suggested that the days of standardised
appraisal were numbered. But, despite these gloomy predictions, the use of
performance appraisal has flourished.
descriptions should spell out the various functions involved in performing the job.
Qualities Required: Besides job descriptions, it is necessary to have a detailed list of
qualities required to perform each of these functions. These qualities may be
broadly divided into four categories - (1) technical knowledge and skills, (2)
managerial capabilities and qualities, (3) behavioural capabilities, and (4)
conceptual capabilities.
Indicators of Qualities: A good potential appraisal system besides listing down
the functions and qualities would also have various mechanisms for judging these
qualities in a given individual. Some of the mechanisms for judging these qualities
are - (a) rating by others, (b) psychological tests, (c) simulation games and
exercises, (d) performance appraisal records.
Organising the System: Once the functions, the qualities required to perform these
functions, indicators of these qualities, and mechanisms for generating these
indicators are clear, the organisation is in a sound position to establish and operate
the potential appraisal system. Such establishment requires clarity in
organisational policies and systematisation of its efforts.
67
Performance and
Potential Appraisal
appraiser and the appraise understand each other better by communicating the
performance analysis of the appraisees performance. It is in this discussion that the
appraiser should:
1. complement the appraisee for his accomplishments and good qualities;
2. understand and appreciate his difficulties and make action plans to help him in
the future;
3. understand the appraisees perceptions of the situation and correct the
perceptions if necessary;
4. help him to recognise his strong points and weak points;
5. communicate the expectations of the appraiser from the appraisee; and
6. identify developmental needs of the appraisee and chalk out a course of action
for meeting these needs.
68
lQuality
of Work
lLeadership
lProblem
70
Key HR Practices supervised.
This argument is quite valid for higher level executives including CEOs.
Therefore, all the three approaches, top-bottom, bottom-top and peer level appraisal
will be very relevant. Perhaps, appropriate weightage is required to be assigned
for appraisals being carried out in the 360 degree system, which is yet to take off
seriously in many organisations.
It is quite disappointing to note that appraisals are not being carried out with the
due importance and seriousness they deserve though the systems provide scope for
periodic and timely appraisals. Normally appraisals are being carried out once a year
or at the most twice a year as per the existing practice. Many organisations do
follow monthly and quarterly appraisals for management trainees till they are
confirmed, and follow the by-annual or annual appraisal system thereafter.
Appraisal is a continuous process, to be scientifically carried out day in day
out, if one has to seriously carry out appraisals.
Potential Appraisal
Prepare for each appraisal and counseling session, select _an appropriate
place, provide enough time, and review _records.
4. Make appraisal sessions cooperative. The subordinate must be _encouraged to
appraise his own performance and share his _ideas and feelings with the
appraiser.
5. Establish and maintain rapport with the subordinate by _words, actions, and
attitude.
6. Jointly explore alternative solutions and the consequences _of selecting each
one.
7. Help the subordinate to come to a self-determined solution _to the problem or
deficiency.
8. Terminate the session gracefully.
9. Complete records of the session and decisions for future reference.
10. Carry out the decisions and actions.
11. Follow up and evaluate results.
Many situations that arise at work demand effective counseling skills. Counseling
is an important communication based activity. Counseling skills include
listening, understanding, initiating effective communication, and evaluating
solutions. Effective counseling skills are aimed at:
(i) bringing about some constructive change in the subordinates behaviour;
(ii) locating the root cause of subordinates problem;
(iii) reducing frustration by allowing subordinates to express their attitudes and
feeling about their jobs; and
(iv) stimulating problem-solving for the purpose of finding solutions to the
subordinates problems and achieve excellence in his performance.
Effective counseling demands effective communication, active listening, and
transactional analysis. In addition, some specific counseling guidelines include:
1. Avoid making your subordinates defensive; recognise that defensive behaviour is
normal.
2. Never attack a persons defense; try to concentrate on the act itself (inadequate
sales, decreasing profits and so on) rather than on the subordinate.
3. Postpone action; sometimes, the best thing to do is nothing at all.
4. Be an active listener; be sure you understand not only the words, but, more
importantly, the feelings and attitudes underlying them.
5. Try not to criticise; criticism often just evokes defensive behaviour.
6. Try to counsel often, on a daily basis, rather than once or twice a year; give
feedback.
7. Use critical incidents. No one likes being told with vague generalities that his
performance is not up to the mark. Try to be especially specific about the
behaviour you consider unsatisfactory.
8. Agree on standards of improvement. Best results are always achieved when the
superior and subordinate set specific goals to be achieved.
9. Get your subordinates to talk.
Performance and
Potential Appraisal
Activity D
What is the strategy of your organisation to improve overall performance of
employees?
...................................................................................................................................
...................................................................................................................................
...................................................................................................................................
...................................................................................................................................
...................................................................................................................................
...................................................................................................................................
There is great degree of unhappiness all around with performance appraisals. Rarely
does one come across managers who are happy with the appraisal systems in their
organisations. But managers find it difficult to do without them because in the
absence of an appraisal mechanism, howsoever weak it may be, it is difficult to get
work out of people. It is a good mechanism to control people. In practice, a
development-oriented performance appraisal system has to be evolved by combining
certain key elements such as performance analysis, self-appraisal, performance
ratings, and counseling. Voltas have evolved a development-oriented appraisal
system on the basis of their own experiments and experiences over the years.
Larsen & Toubro Limited is the first company in India to introduce a
development-oriented performance appraisal system almost a decade ago as a part
of an integrated human resource development system. The State Bank of India also
introduced such a system in some of its branches covering a large number of
officials. Any organisation interested in changing its appraisal system from
control-oriented confidential reports to a development oriented system is actually
initiating a change in its culture. Such a change is slow, and is likely to be resisted
even if it is good for the employees and, therefore, should be carefully planned
and monitored.
Exhibit 2
Performance Appraisal at Pepsi-Cola International
Pepsi-Cola International (PCI), with operations in over 150 countries, has
devised a common performance appraisal system that focuses on motivating
managers to achieve and maintain high standards of performance. Administrative
consistency is achieved through the use of a performance appraisal system of five
feedback mechanisms - instant feedback, coaching, accountability based
performance appraisals, development feedback, and a human resource plan. The
common system provides guidelines for performance appraisal, yet allows for
modification to suit cultural differences. For example, the first step of instant feedback
is based on the principle that any idea about any aspect of the business or about
an individuals performance is raised appropriately and discussed in a sensitive
manner. The instant feedback message can be delivered in any culture; the important
thing is not how it is done but that it is done. The purpose of instant feedback is
always to improve business performance, not to criticise cultural styles. Using this
system, PCI tries to balance the cultural and administrative imperatives of
successful managing the performance of a diverse workforce.
15.19 SUMMARY
The performance appraisal system ideally is an organisation designed programme
involving both the organisation and the personnel to improve the capability of both.
The elements of performance management include: purpose, content, method,
74
Key HR Practices appraiser, frequency, and feedback. The
central tendency occurs when all or most employees are ranked in the middle of the
rating scale. The halo effect occurs when a manager allows his or her general
impression of an employee to influence judgment of each separate item in the
performance appraisal. A sound appraisal system involves assessing employee
performance on a regular basis. Performance appraisal can be done by superiors
who rate subordinates, subordinates who rate their superiors, and self-appraisal. A
suitable performance appraisal system has to be designed keeping in view the culture
and requirements of an organization.