Developing a performance appraisal system

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I. Contents of getting developing a performance appraisal

system
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Performance is the true litmus test for survival in the marketplace. High-performing employees
contribute superior performance, giving the companies they work for a competitive advantage -and their extra effort differentiates great organizations from merely good ones.
An effective system should encourage collaboration, teamwork, and communication.
It's crucial for businesses to have systems in place to identify, recognize, reward, and retain their
top performers to achieve sustainable growth. Most companies understand this and spend
enormous sums acquiring a performance management system to help ensure their success. Yet
wide variation in employee performance persists despite this investment.
To investigate why this variance occurs, we reviewed employee engagement data from one of the
most significant emerging economies -- India. Our analysis included data from more than 50,000
employees working in 10 major industry sectors in 22 global companies.
We learned that more than half of the employees (54%) felt that their company's performance
management system was not effective. This perception is likely to demotivate employees,
creating feelings of anguish or frustration that negatively affect their performance, which
ultimately defeats the whole purpose of designing and setting up an effective system in the first
place.

We also wanted to discover why the same system was viewed differently by different employees
-- and why some found the system to be effective while others didn't. To determine the elements
of an effective performance management system, we asked members of the human resources
function in the 22 companies: "What makes an effective performance management system?"
From their responses, five common themes emerged, as shown in the graphic below.
Elements of an effective performance management systemAn effective performance
management system starts with a thorough goal-setting process, followed by regular feedback
and reviews/appraisals. It also identifies employees' developmental needs and includes robust
reward and recognition practices. The system also should encourage collaboration, teamwork,
and communication.
The manager's effect on a performance management system
Fundamentally, a performance management system is composed of process and people elements.
The process element includes items such as job descriptions, rating criteria, the time period of
performance appraisal discussions, and reward and recognition systems. The key component of
the people element is the manager, who drives the system by setting expectations,
communicating plans, encouraging development, and giving and receiving feedback.
Our analysis revealed that most companies invest in world-class processes for their performance
management system, but they overlook the importance of the people element. And because
managers have the greatest impact on that element, we decided to investigate whether managerial
ability was responsible for the variance in employee experience with the system.
To determine the manager's effect on the performance management system, we conducted
research with the same participants from our initial study. To gain a sense of managerial ability,
we asked each employee to rate his or her manager to determine how much managers:

helped employees feel empowered

recognized or praised employees' achievements
cared about their employees
had regular discussions with employees

Those who received top scores were considered "best" managers, while those who received the
lowest rating were considered "below average."
Next, we looked at how satisfied these same employees were with their company's performance
management system. Employees were asked to rate the system by indicating their agreement
with the statement "My company's performance management system clearly differentiates the

good performers from the poor performers in my company." A high score earned the system a
rating of "very good," while the lowest ratings earned the system a score of "poor."
Our analysis revealed that employees who gave their managers "best" ratings found the
performance management system to be much more effective than did employees who gave their
managers "below average" ratings.

==================

III. Performance appraisal methods

1. Essay Method
In this method the rater writes down the employee
description in detail within a number of broad categories
like, overall impression of performance, promoteability
of employee, existing capabilities and qualifications of
performing jobs, strengths and weaknesses and training
needs of the employee. Advantage It is extremely
useful in filing information gaps about the employees
that often occur in a better-structured checklist.
Disadvantages It its highly dependent upon the writing
skills of rater and most of them are not good writers.
They may get confused success depends on the memory
power of raters.

2. Behaviorally Anchored Rating Scales

statements of effective and ineffective behaviors
determine the points. They are said to be
behaviorally anchored. The rater is supposed to
say, which behavior describes the employee
performance. Advantages helps overcome rating
errors. Disadvantages Suffers from distortions
inherent in most rating techniques.

3. Rating Scale
Rating scales consists of several numerical scales
representing job related performance criterions such as
dependability, initiative, output, attendance, attitude etc.
Each scales ranges from excellent to poor. The total
numerical scores are computed and final conclusions are
derived. Advantages Adaptability, easy to use, low cost,
every type of job can be evaluated, large number of
employees covered, no formal training required.
Disadvantages Raters biases

4. Checklist method
Under this method, checklist of statements of traits of
employee in the form of Yes or No based questions is
prepared. Here the rater only does the reporting or
checking and HR department does the actual evaluation.
Advantages economy, ease of administration, limited
training required, standardization. Disadvantages Raters
biases, use of improper weighs by HR, does not allow
rater to give relative ratings

5.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
Employees are ranked according to their
performance levels.
It is easier to rank the best and the worst
employee.
Limitations of Ranking Method
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.
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.
When a large number of employees are working,
ranking of individuals become a difficult issue.
There is no systematic procedure for ranking
individuals in the organization. The ranking system does
not eliminate the possibility of snap judgements.

6. Critical Incidents Method

The approach is focused on certain critical behaviors of

employee that makes all the difference in the
performance. Supervisors as and when they occur record
such incidents. Advantages Evaluations are based on
actual job behaviors, ratings are supported by
descriptions, feedback is easy, reduces recency biases,
chances of subordinate improvement are high.
Disadvantages Negative incidents can be prioritized,
forgetting incidents, overly close supervision; feedback
may be too much and may appear to be punishment.

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