MANAGING PEOPLE AT WORK UNIT-3

Performance Appraisal
Performance Appraisal is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development. Performance appraisal is generally done in systematic ways which are as follows: 1. The supervisors measure the pay of employees and compare it with targets and plans. 2. The supervisor analyses the factors behind work performances of employees. 3. The employers are in position to guide the employees for a better performance. Objectives of Performance Appraisal Performance Appraisal can be done with following objectives in mind: 1. To maintain records in order to determine compensation packages, wage structure, salaries raises, etc. 2. To identify the strengths and weaknesses of employees to place right men on right job. 3. To maintain and assess the potential present in a person for further growth and development. 4. To provide a feedback to employees regarding their performance and related status. 5. To provide a feedback to employees regarding their performance and related status. 6. It serves as a basis for influencing working habits of the employees. 7. To review and retain the promotional and other training programmes. Advantages of Performance Appraisal It is said that performance appraisal is an investment for the company which can be justified by following advantages: 1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion programmes for efficient employees. In this regards, inefficient workers can be dismissed or demoted in case. 2. Compensation: Performance Appraisal helps in chalking out compensation packages for employees. Merit rating is possible through performance appraisal. Performance

Appraisal tries to give worth to a performance. Compensation packages which includes bonus, high salary rates, extra benefits, allowances and pre-requisites are dependent on performance appraisal. The criteria should be merit rather than seniority. 3. Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps to analyse strengths and weaknesses of employees so that new jobs can be designed for efficient employees. It also helps in framing future development programmes. 4. Selection Validation: Performance Appraisal helps the supervisors to understand the validity and importance of the selection procedure. The supervisors come to know the validity and thereby the strengths and weaknesses of selection procedure. Future changes in selection methods can be made in this regard. 5. Communication: For an organization, effective communication between employees and employers is very important. Through performance appraisal, communication can be sought for in the following ways: a. Through performance appraisal, the employers can understand and accept skills of subordinates. b. The subordinates can also understand and create a trust and confidence in superiors. c. It also helps in maintaining cordial and congenial labour management relationship. d. It develops the spirit of work and boosts the morale of employees. All the above factors ensure effective communication. 6. Motivation: Performance appraisal serves as a motivation tool. Through evaluating performance of employees, a persons efficiency can be determined if the targets are achieved. This very well motivates a person for better job and helps him to improve his performance in the future. Tools and Techniques of Performance Appraisal Following are the tools used by the organizations for Performance Appraisals of their employees. 1. Ranking 2. Paired Comparison 3. Forced Distribution

4. Confidential Report 5. Essay Evaluation 6. Critical Incident 7. Checklists 8. Graphic Rating Scale 9. BARS 10. MBO 11. Assessment Centers 12. 360 degree appraisal We will be discussing the important performance appraisal tools and techniques in detail. 1. Ranking Method The ranking system requires the rater to rank his subordinates on overall performance. This consists in simply putting a man in a rank order. Under this method, the ranking of an employee in a work group is done against that of another employee. The relative position of each employee is tested in terms of his numerical rank. It may also be done by ranking a person on his job performance against another member of the competitive group. Advantages of Ranking Method a. Employees are ranked according to their performance levels. b. It is easier to rank the best and the worst employee. Limitations of Ranking Method c. The whole man is compared with another whole man in this method. In practice, it is very difficult to compare individuals possessing various individual traits. d. This method speaks only of the position where an employee stands in his group. It does not test anything about how much better or how much worse an employee is when compared to another employee. e. When a large number of employees are working, ranking of individuals become a difficult issue.

f. There is no systematic procedure for ranking individuals in the organization. The ranking system does not eliminate the possibility of snap judgements. 2. Paired Comparison In this method each and every person is the group, department or team is compared with every other person in the team/group/department. The comparison is made on certain criteria and finally ranks are given. This method is superior because it compares each and every person on certain qualities and provides a ranking on that basis.
As compared to A B C D E + + + + + A B + C + D + + E +

3. Forced Distribution method This is a ranking technique where raters are required to allocate a certain percentage of rates to certain categories (eg: superior, above average, average) or percentiles (eg: top 10 percent, bottom 20 percent etc). Both the number of categories and percentage of employees to be allotted to each category are a function of performance appraisal design and format. The workers of outstanding merit may be placed at top 10 percent of the scale, the rest may be placed as 20 % good, 40 % outstanding, 20 % fair and 10 % fair.

Advantages of Forced Distribution This method tends to eliminate raters bias By forcing the distribution according to pre-determined percentages, the problem of making use of different raters with different scales is avoided.

Limitations of Forced Distribution The limitation of using this method in salary administration, however, is that it may lead low morale, low productivity and high absenteeism. Employees who feel that they are productive, but find themselves in lower grade(than expected) feel frustrated and exhibit over a period of time reluctance to work.

4. Confidential Report This method is very popular in government departments to appraise IAS officers and other high level officials. In this method the senior or the boss writes a report about the junior giving him details about the performance about the employee. The +ve and ve traits, responsibilities handled on the job and recommendations for future incentives or promotions. The report is kept highly confidential and access to the report is limited.

5. Critical Incident techniques Under this method, the manager prepares lists of statements of very effective and ineffective behaviour of an employee. These critical incidents or events represent the outstanding or poor behaviour of employees or the job. The manager maintains logs of each employee, whereby he periodically records critical incidents of the workers behaviour. At the end of the rating period, these recorded critical incidents are used in the evaluation of the workers performance. Example of a good critical incident of a Customer Relations Officer is : March 12 - The Officer patiently attended to a customers complaint. He was very polite and prompt in attending the customers problem. Advantages of Critical Incident techniques This method provides an objective basis for conducting a thorough discussion of an employees performance. This method avoids recency bias (most recent incidents are too much emphasized)

Limitations of Critical Incident techniques Negative incidents may be more noticeable than positive incidents. The supervisors have a tendency to unload a series of complaints about the incidents during an annual performance review sessions. It results in very close supervision which may not be liked by an employee.

The recording of incidents may be a chore for the manager concerned, who may be too busy or may forget to do it.

7. Checklists and Weighted Checklists In this system, a large number of statements that describe a specific job are given. Each statement has a weight or scale value attached to it. While rating an employee the supervisor checks all those statements that most closely describe the behaviour of the individual under assessment. The rating sheet is then scored by averaging the weights of all the statements checked by the rater. A checklist is constructed for each job by having persons who are quite familiar with the jobs. These statements are then categorized by the judges and weights are assigned to the statements in accordance with the value attached by the judges. Advantages of Checklists and Weighted Checklists Most frequently used method in evaluation of the employees performance.

Limitations of Checklists and Weighted Checklists This method is very expensive and time consuming Rater may be biased in distinguishing the positive and negative questions. It becomes difficult for the manager to assemble, analyze and weigh a number of statements about the employees characteristics, contributions and behaviours.

8. BARS (Behavioural Anchored Rating Scale) In this method the appraisal is done to test the attitude of the employee towards his job. Normally people with +ve approach or attitude view and perform their job differently as compared to people with a ve approach. 9. MBO Defining the performance objectives can be very useful as it defines the performance expectations. Objectives which are written down and are verifiable can be far more useful if they are SMART in nature which means Specific, Measurable, Achievable, Realistic and Time Bound. Many organizations set goals and objectives through a formal process known as Management by Objectives (MBO) which is an organized and a systematic approach of defining organizational goals and realizing them within the available resources. The main aim of this approach is to improve organizational performance by aligning the organizational goals with the individual objectives at all levels and attaining those goals within a prescribed time frame. The system involves continuous monitoring and feedback for improving the quality of outcome. The chief proponent of MBO system was Peter F Drucker in 1954 in his book entitled The Practice of management. GE was the first organization to adopt the MBO method for defining

goals. The major focus of this approach is on inviting participation from all the managers in the goal setting process and strategic planning and implementing a range of performance systems which help an organization to remain on the right path. On the whole, it may be regarded that objective setting process is an important part of performance management process as it defines and manages expectations by establishing an understanding on the part of the role holder about what has to be achieved and at the same time acts as a point of reference during the period of performance review. MBO requires the management to set specific, measurable goals with each employee and then periodically discuss the latter's progress towards these goals. This technique emphasises participatively set goals (that are agreed upon by the superior and the employee) that are tangible, verifiable and measurable. MBO focuses attention on what must be accomplished (goals) rather than how it is to be accomplished. It is, thus, a kind of goal setting and appraisal programme involving six steps: Set the organisations goals: Establish an organisationwide plan for next year and set company goals.

ii. Set departmental goals: Departmental heads at this stage take the broader company goals (such as improving profits by 20 per cent, increasing market share by 10 per cent etc.) and, with their superiors, jointly set goals for their departments.

iii. Discuss departmental goals: The departmental goals are now put to discussion in a departmental meeting with subordinates. The departmental heads would require the subordinates to set their own preliminary individual goals, focusing mostly on what they can do to achieve the department's goals.

iv. Define expected results: In the next step, the departmental heads and their subordinates agree on a set of participatorily set short term, and individual performance targets.

v. Performance reviews: Departmental heads compare each employee's actual and targeted performance, either periodically or annually. While periodic review is intended to identify and solve specific performance problems, the annual review is conducted to assess and reward ones overall contribution to the organisation. Because employees are evaluated on their performance results, MBO is often called a result-based performance appraisal system.

v. Provide feedback: Both parties now discuss and evaluate the actual progress made in achieving goals, where things have gone off the track, how best to rectify the mistakes made in the past, and how the employee could meet the targets next time, focusing attention on his strengths.

It was intended to be a method of group decision making. It can be use for performance appraisal also. In this method all members of the of the department starting from the lowest level employee to the highest level employee together discus, fix target goals to be achieved, plan for achieving these goals and work together to achieve them. The seniors in the department get an opportunity to observe their junior- group efforts, communication skills, knowledge levels, interest levels etc. based on this appraisal is done.

10. Assessment Centers Assessment centers (AC) are places where the employees are assessed on certain qualities talents and skills which they possess. This method is used for selection as well as for appraisal. The people who attend assessment centers are given management games, psychological test, puzzles, questioners about different management related situations etc. based on their performance in these test an games appraisal is done. 11. 360 degree appraisal Typically, performance appraisal has been limited to a feedback process between employees and supervisors. However, with the increased focus on teamwork, employee development, and customer service, the emphasis has shifted to employee feedback from the full circle of sources depicted in the diagram below. This multiple-input approach to performance feedback is sometimes called 360-degree assessment to connote that full circle. The circle, or perhaps more accurately the sphere, of feedback sources consists of supervisors, peers, subordinates, customers, and ones self. It is not necessary, or always appropriate, to include all of the feedback sources in a particular appraisal program. The organizational culture and mission must be considered, and the purpose of feedback will differ with each source. For example, subordinate assessments of a supervisors performance can provide valuable developmental guidance, peer feedback can be the heart of excellence in teamwork, and customer service feedback focuses on the quality of the teams or agencys results. The following are the sources of ratings and feedback.

a) Superiors Evaluations by superiors are the most traditional source of employee feedback. This form of evaluation includes both the ratings of individuals by supervisors on elements in an employees performance plan and the evaluation of programs and teams by senior managers. b) Self Assessment This form of performance information is actually quite common but usually used only as an informal part of the supervisor-employee appraisal feedback session. Supervisors frequently open the discussion with: How do you feel you have performed? In a somewhat more formal approach, supervisors ask employees to identify the key accomplishments they feel best represent their performance in critical and non-critical performance elements. c) Peers With downsizing and reduced hierarchies in organizations, as well as the increasing use of teams and group accountability, peers are often the most relevant evaluators of their colleagues performance. Peers have a unique perspective on a co-workers job performance and employees are generally very receptive to the concept of rating each other. Peer ratings can be used when the employees expertise is known or the performance and results can be observed. d) Subordinates An upward-appraisal process or feedback survey (sometimes referred to as a SAM, for Subordinates Appraising Managers) is among the most significant and yet controversial features of a full circle performance evaluation program. Both managers being appraised and their own superiors agree that subordinates have a unique, often essential, perspective. The subordinate ratings provide particularly valuable data on performance elements concerning managerial and supervisory behaviors. e) Customers Setting Customer Service Standards, requires agencies to survey internal and external customers, publish customer service standards, and measure agency performance against these standards. Internal customers are defined as users of products or services supplied by another employee or

group within the agency or organization. External customers are outside the organization and include, but are not limited to, the general public. Process of Performance Appraisal 1. 2. 3. 4. 5. 6. 7. Setting performance standards Communicating standards set to Measuring performance Comparing performance with standard Discussing result Collective action Implementation and review

the

employee

1. Setting performance Standards In this very first step in performance appraisal the HR department decides the standards of performance i.e. they decide what exactly is expected from the employee for each and every job. Sometimes certain marking scheme may be adopted eg. A score 90/100 = excellent performance, a score os 80/100 = good. And so on. 2. Communicating Standards set to the employee Standards of performance appraisal decided in 1st step are now conveyed to the employee so that the employee will know what is expected from him and will be able to improve his performance. 3. Measuring Performance The performance of the employee is now measure by the HR department, different methods can be used to measure performance i.e. traditional and modern method. The method used depends upon the companys convenience. 4. Comparing Performance with Standards The performance of the employee is now judged against the standard. To understand the score achieved by him. Accordingly we come to know which category of performance the employee falls into i.e. excellent, very good, good, satisfactory etc. 5. Discussing Results The results obtained by the employee after performance appraisal are informed or conveyed to him by the HR department. A feedback is given to the employee asking him to change certain aspects of his performance and improve them.

6. Collective Action The employee is given a chance or opportunity to improve himself in the areas specified by the HR department. The HR department constantly receives or keeps a check on the employees performance and notes down improvements in performance. 7. Implementation and Review The performance appraisal policy is to be implemented on a regular basis. A review must be done from time to time to check whether any change in policy is required. Necessary changes are made from time to time. Barriers of Performance Apparaisal Managers commit mistakes while evaluating employees and their performance. Biases and judgment errors of various kinds may spoil the performance appraisal process. Bias here refers to inaccurate distortion of a measurement. These are: 1. First Impression (primacy effect): Raters form an overall impression about the ratee on the basis of some particluar characteristics of the ratee identified by them. The identified qualities and features may not provide adequate base for appraisal. 2. Halo Effect: The individuals performance is completely appraised on the basis of a perceived positive quality, feature or trait. In other words this is the tendency to rate a man uniformly high or low in other traits if he is extra-ordinarily high or low in one particular trait. If a worker has few absences, his supervisor might give him a high rating in all other areas of work. 3. Horn Effect: The individuals performance is completely appraised on the basis of a negative quality or feature perceived. This results in an overall lower rating than may be warranted. He is not formally dressed up in the office. He may be casual at work too!. 4. Stereotyping: stereotyping is mental picture that an individual holds about a person because of that persons age, gender, religion, caste etc. By generalizing behavior on the basis of such blurred images the rater grossly overestimates or underestimates a persons performance. It is over simplification of people. For eg: women are rated more negative than men. 5. Excessive Stiffness or Lenience: Depending upon the raters own standards, values and physical and mental makeup at the time of appraisal, ratees may be rated very strictly or leniently. Some of the managers are likely to take the line of least resistance and rate

people high, whereas others, by nature, believe in the tyranny of exact assessment, considering more particularly the drawbacks of the individual and thus making the assessment excessively severe. The leniency error can render a system ineffective. If everyone is to be rated high, the system has not done anything to differentiate among the employees. 6. Central Tendency: Appraisers rate all employees as average performers. That is, it is an attitude to rate people as neither high nor low and follow the middle path. For example, a professor, with a view to play it safe, might give a class grade near the equal to B, regardless of the differences in individual performances. 7. Personal Biases: The way a supervisor feels about each of the individuals working under him - whether he likes or dislikes them - as a tremendous effect on the rating of their performances. Personal Bias can stem from various sources as a result of information obtained from colleagues, considerations of faith and thinking, social and family background and so on. 8. Spillover Effect: The present performance is evaluated much on the basis of past performance. The person who was a good performer in distant past is assured to be okay at present also. 9. Recency Effect: Rating is influenced by the most recent behaviour ignoring the commonly demonstrated behaviours during the entire appraisal period. 10. False Attribution: It is the tendency to attribute bad performance to internal causes and good performance to external causes. In other words, if an employee performs well, its because the employee had help, such a good leader, and if employee performs badly, its because the employee did something wrong or do not have the capability. 11. Poor Appraisal Form: The appraisal process might also be influenced by the following factors relating to the forms that are used by the rater: a) b) c) d) The rating scale may be quite vague and unclear The rating form may ignore important aspects of job performance. The rating forms may contain additional, irrelevant performance dimensions. The forms may be too long and complex.

12. Lack of rater preparedness: the raters may not be adequately trained to carry out the performance management activities. This becomes a serious limitation when the technical competence of a rate is going to be evaluated by the rater who has limited functional specialization in that area. The raters may not have sufficient time to carry out appraisals systematically and conduct through feedback sessions. Sometimes the raters may not be competent to the evaluation owing to a poor self image and lack of self confidence.

Overcoming Barriers to Performance Appraisal 1. Job relatedness: the appraisal technique should measure the performance and provide information in job related activities and areas. 2. Technique viability: the technique should b practically viable to administer, possible to implement and economical. 3. Reliability and variability: appraisal system should provide consistent, reliable and valid information and data, which can be used to defend the organization even in legal challenges. The techniques used by the organization should satisfy the conditions of inter rater reliability. Appraisals must also satisfy the conditions of validity, by measuring what they are supposed to measure, 4. Senior management: should show commitment- the process of performance appraisal lacks participation and benefits without active senior management support and leadership. 5. Benchmarking: effective performance appraisal can only be sustained when the performance are compared with the standards set in the organization on continuous basis, this leads to improvement of performance and brings it closure to the benchmark set by the organization. 6. Employees resistance should be kept minimal: performance is only going to be effective when employees understand the importance of performance appraisal system in their own carrier. 7. 3rd axis measurement: a performance is measured on two axis system, organizational goals and employees performance for these goals respectively, their third axis also need to be measured which is employees personal goal.