Performance appraisal is the process of obtaining, analyzing & recording information about

the relative worth of an employee. The focus of the performance appraisal is measuring &
improving the actual performance of the employee and also the future potential of the
employee. Performance appraisal is a systematic way of reviewing & assessing the
performance of an employee during a given period of time and planning for his future.
Flippo says, a prominent personality in the field of Human resources, "performance appraisal
is the systematic, periodic and an impartial rating of an employee’s excellence in the matters
pertaining to his present job and his potential for a better job."
It is a powerful tool to standardize, refine and reward the performance of the employee. It
helps to analyze his achievements and evaluate his contribution towards the achievements of
the overall organizational goals.
The other terms used for performance appraisal are: performance rating, employee
assessment, employee performance review, personnel appraisal, performance evaluation,
employee evaluation, and merit rating.

Performance Appraisal’s Objectives

a. To review the performance of the employees over a given period of time.

b. To judge the gap between the actual and the desired performance.
c. To help the management in exercising organizational control.
d. Helps to strengthen the relationship and communication between superior –
subordinates and management – employees.
e. To effect promotions based on competence and performance.
f. To confirm the services of probationary employees upon they’re completing the
probationary period.
g. To diagnose the strengths and weaknesses of the individuals so as to identify the
training and development needs of the future.
h. To assess the training and development needs of employees.
i. To provide feedback to the employees regarding their past performance.
j. To decide upon a pay raise where regular pay scales have not been fixed.
k. Provide information to assist in the other personal decisions in the organization.
l. Provide clarity of the expectations and responsibilities of the functions to be
performed by the employees.
m. To let the employees know where they stand in so far as their performance is
concerned and to assist them with constructive criticism and guidance for the purpose
of their development.
n. To judge the effectiveness of the other human resource functions of the organization
such as recruitment, selection, training and development.
o. To improve communication, Performance appraisal provides a format for dialogue
between the superior and the subordinate, and improves understanding of personal
goals and concerns.
p. To reduce the grievances of the employees.

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 q. Performance appraisal can be used to determine whether human resource
programmers such as selection, training, and transfers have been effective or not.

Purpose of Performance Appraisal According to Survey

According to a recent survey, the percentage of organisations (out of the total organisations
surveyed i.e. 50) using performance appraisal for the various purposes are as shown in the
diagram below:

90%
Where;

a. Making payroll and compensation decisions – 80%

b. Training and development needs – 71%
80%
80%
c. Identifying the gaps in desired and actual performance and its cause – 76%
d. Deciding future goals and course of action – 42%
e. Promotions, demotions and transfers – 49%
f. Other purposes – 6% (including job analysis and providing superior support,
assistance and counselling)

Processes of Performance Appraisal

70%
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Establishing Performance
Standards

The first step in the process of

performance appraisal is the setting
up of the standards which will be
used to as the base to compare the
actual performance of the
employees. This step requires setting
the criteria to judge the performance
of the employees as successful or
unsuccessful and the degrees of their
contribution to the organizational
goals and objectives. The standards
set should be clear easily
understandable and in measurable
terms.

Communicating the Standards and Expectations

The second step in the process of performance appraisal is the responsibility of the
management to communicate the standards to all the employees of the organization. This
will help them to understand their roles and to know what exactly is expected from them.
The standards should also be communicated to the appraisers or the evaluators and if
required, the standards can also be modified at this stage itself according to the relevant
feedback from the employees or the evaluators.

Measuring the Actual Performance

The third step in the process of performance appraisal is measuring the actual performance
of the employees that is the work done by the employees during the specified period of time.
It is a continuous process which involves monitoring the performance throughout the year.
This stage requires the careful selection of the appropriate techniques of measurement,
taking care that personal bias does not affect the outcome of the process.

Comparing with Standards

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The forth step in the process of performance appraisal is comparing with the standard
performance. The comparison tells the differences in the performance of the employees from
the standards set. The result can show the actual performance being more than the desired
performance or, the actual performance being less than the desired performance describing a
negative difference in the organizational performance.

Discussing Results (Providing Feedback)

The fifth step in the process of performance appraisal is the appraisal’s results are
communicated and discussed with the employees on one-to-one basis. The focus of this
discussion is on communication and listening. The results, the problems & the possible
solutions are discussed with the aim of problem solving and reaching consensus.

Decision Making – taking corrective actions

The last but not least step in the process of performance appraisal to take decisions which
can be taken either to improve the performance of the employees, take the required
corrective actions, or the related HR decisions like rewards, promotions, demotions, transfers
etc.
[Source: http://appraisals.naukrihub.com/process.html]

Pre-Requisites for Effective & Successful Performance Appraisal

The essentials of an effective performance system are as follows:

Documentation – means continuous noting & documenting the performance. It also helps
the evaluators to give a proof and the basis of their ratings.
Standards/Goals – the standards set should be clear easy to understand, achievable,
motivating, time bound and measurable.
Practical and Simple Format - The appraisal format should be simple, clear, fair and
objective. Long and complicated formats are time consuming, difficult to understand, and do
not elicit much useful information.
Evaluation Technique – An appropriate evaluation technique should be selected; the
appraisal system should be performance based and uniform. The criteria for evaluation
should be based on observable and measurable characteristics of the behaviour of the
employee.

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Communication – Communication is an essential part of the Performance Appraisal
process. The desired behaviour or the expected results should be communicated to the
employees as well as the evaluators. Communication also plays an important role in the
review or feedback meeting. Open communication system motivates the employees to
actively participate in the appraisal process.
Feedback – The purpose of the feedback should be developmental rather than judgmental.
To maintain its utility, timely feedback should be provided to the employees and the manner
of giving feedback should be such that it should have a motivating effect on the employees’
future performance.
Personal Bias – Interpersonal relationships can influence the evaluation and the decisions in
the performance appraisal process. Therefore, the evaluators should be trained to carry out
the processes of appraisals without personal bias and effectively.

Challenges of Performance Appraisal

An organization faces various problems & challenges of Performance Appraisal in order to

make a PA system effective & successful. The main PA system challenges are following:

Determining the Evaluation Criteria

Identification of the appraisal criteria is one of the biggest problems faced by the top
management. The performance data to be considered for evaluation should be carefully
selected. For the purpose of evaluation, the criteria selected should be in quantifiable or
measurable terms.

Create a Rating Instrument

The purpose of the Performance appraisal process is to judge the performance of the
employees rather than the employee. The focus of the system should be on the development
of the employees of the organization.

Lack of Competence

Top management should choose the evaluators carefully. They should have the required
expertise and the knowledge to decide the criteria accurately. They should have the
experience and the necessary training to carry out the appraisal process objectively.

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Errors in Rating and Evaluation

Many errors based on the personal bias like stereotyping, etc. may slower the appraisal
process. Therefore the evaluator should exercise objectivity and fairness in evaluating and
rating the performance of the employees.

Resistance

The appraisal process may face resistance from the employees & the trade unions for the fear
of negative ratings. Therefore, the employees should be communicated & clearly explained
the purpose as well the process of appraisal. The standards should be clearly communicated
and every employee should be made aware that what exactly is expected from him/her.

Methods of Under Taking the Performance Appraisal

There are two types of methods which are normally considered by organizations for under
taking successful & effective performance appraisal:
a. Traditional Methods
b. Modern Methods
Now we will discuss these methods more precisely.

Traditional Methods

Traditional performance appraisal methods have been used for determining & justifying the
salaries of the employees. Than it began to be used a tool for determining rewards for
example pay rise or pay cut for the past performance of the employees.
There are penalty of different ways to conduct performance appraisal under Traditional
Methods so now we’ll discuss them one by one.

Essay Appraisal Method

This traditional form of appraisal also known as "Free Form method" involves a description
of the performance of an employee by his superior. The description is an evaluation of the
performance of any individual based on the facts and often includes examples and evidences
to support the information. A major drawback of the method is the inseparability of the bias
of the evaluator.

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Straight Ranking Method

In this method the evaluator ranks the employees from the best to the poorest on the basis of
their overall performance. It is quite useful for a comparative evaluation.
Paired Comparison

A better technique of comparison than the straight ranking method, this method compares
each employee with all others in the group, one at a time. After all the comparisons on the
basis of the overall comparisons, the employees are given the final rankings.

Critical Incidents Methods

In this method the evaluator rates the employee on the basis of critical events and how the
employee behaved during those incidents. It includes both negative and positive points. The
drawback of this method is that the supervisor has to note down the critical incidents and the
employee behaviour as and when they occur.

Field Review

In this method a senior member of the HR department or a training officer discusses and
interviews the supervisors to evaluate and rate their respective subordinates. A major
drawback of this method is that it is a very time consuming method. But this method helps to
reduce the superiors’ personal bias.

Checklist Method

The evaluator is given a checklist of the descriptions of the behaviour of the employees on
job. The checklist contains a list of statements on the basis of which the evaluator describes
the on the job performance of the employees.

Graphic Rating Scale

In this method an employee’s quality and quantity of work is assessed in a graphic scale
indicating different degrees of a particular trait. The factors taken into consideration include
both the personal characteristics and characteristics related to the on the job performance of
the employees. For example a trait like Job Knowledge may be judged on the range of
average, above average, outstanding or unsatisfactory.

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Forced Distribution

To eliminate the element of bias from the evaluator’s ratings, the evaluator is asked to
distribute the employees in some fixed categories of ratings like on a normal distribution
curve. The evaluator chooses the appropriate fit for the categories on his own discretion.

Modern Methods

The modern methods have made the performance appraisal process more formal and
structured. Now the performance appraisal is taken as a tool to identify better performing
employees from others, employees’ training needs, career development ways, rewards &
bonuses and their promotions to the next levels. Appraisals have become a continuous and
periodic activity in the organizations. The results of performance appraisals are used to take
various other HR decisions like promotions, demotions, transfers, training and development,
reward outcomes. The modern methods to performance appraisals include a feedback
process that helps to strengthen the relationships between superiors and subordinates and
improve communication throughout the organization.
The modern methods to Performance appraisal are future oriented approach and are
developmental in nature. This recognizes employees as individuals and focuses on their
development.
There are different ways to conduct modern performance appraisal which are normally
considered by organizations for under taking successful & effective performance appraisal:
a. Assessment Centres
b. Behaviourally Anchored Rating Scales
c. Human Resource Accounting Method
d. Personnel Record Review (PRR)
e. Management by Objective (MBO) Method
f. 360-Degree-Performance-Appraisal Method

Assessment Centres

An assessment centre typically involves the use of methods like social/informal events, tests
and exercises, assignments being given to a group of employees to assess their competencies
to take higher responsibilities in the future. Generally, employees are given an assignment
similar to the job they would be expected to perform if promoted. The trained evaluators

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observe & evaluate employees as they perform the assigned jobs and are evaluated on job
related characteristics.
The major competencies that are judged in assessment centres are interpersonal skills,
intellectual capability, planning and organizing capabilities, motivation, career orientation
etc. assessment centres are also an effective way to determine the training and development
needs of the targeted employees.

Behaviourally Anchored Rating Scales

This is a relatively new technique which combines the graphic rating scale & critical
incidents method. It consists of predetermined critical areas of job performance or sets of
behavioural statements describing important job performance qualities as good or bad (for
e.g. the qualities like inter personal relationships, adaptability and reliability, job knowledge
etc). These statements are developed from critical incidents.
In this method, an employee’s actual job behaviour is judged against the desired behaviour
by recording and comparing the behaviour with BARS. Developing and practicing BARS
requires expert knowledge.

Human Resource Accounting Method

Human resource accounting method tries to find the relative worth of these assets in the
terms of money. In this method the Performance appraisal of the employees is judged in
terms of cost and contribution of the employees. The cost of employees include all the
expenses incurred on them like their compensation, recruitment and selection costs,
induction and training costs etc whereas their contribution includes the total value added.
The difference between the cost and the contribution will be the performance of the
employees. Ideally, the contribution of the employees should be greater than the cost
incurred on them.

Personnel Record Review (PRR)

The Personnel Records Review

(PRR) process provides a
systematic way of thoroughly and
fairly reviewing each employee’s
work history to assess many of the

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"will do" attributes that are so important to successful managerial performance. PRR
normally used to assess & measure police performance. The PRR uses many of the
measurement principles that have made the assessment centre method so successful:
evaluation of job-related dimensions, reliance of behavioural evidence, multiple evaluators
consulting multiple sources, and a systematic process of integrating information which
delays decision making, avoids rating errors, and balances multiple inputs.

Job Related Dimensions

The PRR begins with a careful job analysis of the key elements of success in the target job.
Most police jurisdictions already have a sound job description of target jobs, so the
dimensions to be evaluated are probably already known. Other jurisdictions may need to do a
new job analysis. One jurisdiction decided to use the following dimensions for the sergeant's
examination:
Supervisory-Related Education and Experience - This includes any formal or informal
education that was related to the job, including external and internal coursework, workshops,
and experience inside and outside the organization, e.g., participation in community
leadership roles.
Disciplined Behaviour - any information about sustained discipline and recorded incidents
displaying poor performance or violating regulations; in addition, evidence of
demonstrations of good discipline is evaluated favourably.
Commendatory Behaviour - formal commendations within the agency and letters from
citizen groups.
Reliability - Negative evidence might involve unauthorized absence, failure to meet court
date, tardiness, failure to meet department standards; positive evidence includes completing
tasks on time, volunteering for extra assignments.
Each of these dimensions was defined thoroughly, along with examples of behaviours
illustrating good and poor performance. Candidates were informed that these dimensions
would be evaluated, and panellists were trained to recognize relevant behaviours.

How to obtain up given information?

The following sources of information can be obtained from target job department:
Personnel File with Performance Evaluations - The personnel jacket is examined for
behaviour relevant to all of the dimensions.

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Supervisory situation record (SSR) - This is a daily log kept by the immediate supervisor
in the candidate's work area; it might include notes on effective performance that does not
rise to the level of a commendation, or ineffective performance that does not result in
disciplinary action. These entries are like critical incidents, and this source may provide
behavioural evidence relevant to all dimensions.
Commendation History - These records are kept in the department and list the formal forms
of recognition such as awards and citizen letters.
Professional History Form - Completed by the candidate, this form allows each person to
present any evidence related to the dimensions and explain any entries in the disciplinary
record or SSR; this "brag sheet" provides the candidate with the opportunity to make sure all
behaviour relevant to the assessed dimensions is presented to the panel.
[Source: http://www.entrepreneur.com/tradejournals/article/73555060_1.html]

Management by Objective (MBO) Method

‘Management by Objectives’ (MBO) was first given by Peter Drucker in 1954. It can be
defined as a process whereby the employees and the superiors come together to identify
common goals, the employees set their goals to be achieved, the standards to be taken as the
criteria for measurement of their performance and contribution and deciding the course of
action to be followed.
According to Drucker managers should "avoid the activity trap" get so involved in their daily
activities that they forget their main purpose or objective? All managers should following
two key points excluding some top managers:
a. participate in the strategic planning process, in order to improve the implementability
of the plan
b. implement a range of performance systems, designed to help the organization stay on
the right track
The essence of MBO is participative goal setting, choosing course of actions and decision
making. An important part of the MBO is the measurement and the comparison of the
employee’s actual performance with the standards set. Ideally, when employees themselves
have been involved with the goal setting and the choosing the course of action to be followed
by them, they are more likely to fulfil their responsibilities.

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The MBO Processes

The principle behind Management by

Objectives (MBO) is to create empowered
employees who have clarity of the roles and
responsibilities expected from them,
understand their objectives to be achieved and
thus help in the achievement of organizational
as well as personal goals.

Advantages of MBO

Some of the important features and advantages of MBO are:

Motivation – Involving employees in the whole process of goal setting and increasing
employee empowerment increases employee job satisfaction and commitment.
Better Communication and Coordination – Frequent reviews and interactions between
superiors and subordinates helps to maintain good relationships within the enterprise and
also solve many problems faced during the period.
Clarity of Goals – With MBO come the concept of SMART goals where:
a. S = Specific
b. M = Measurable
c. A = Achievable
d. R = Relevant
e. T = Time bound
The goals thus set are clear, motivating and there is a linkage between organizational goals
and performance targets of the employees. The focus is on future rather than on past. Goals
and standards are set for the performance for the future with periodic reviews and feedback.

The Use of MBO

The MBO is useful for the following purposes:

a. Knowledge-based enterprises (when staff is competent)
b. Where you wish to build employees management and self-leadership skills and tap
their creativity, tacit knowledge and initiative.
c. Chief Executives of multinational corporations can use for their country managers
abroad

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Limitations of MBO

There are several limitations of using MBO given below:

a. It exaggerates the setting of goals over the working of a plan as a driver of outcomes.
b. It underemphasizes the importance of the environment & context in which the goals
are set.
c. Companies evaluated their employees by comparing them with the "ideal" employee.
[Source: http://appraisals.naukrihub.com/mbo.html]
[Source: http://www.1000ventures.com/business_guide/mgmt_mbo_main.html]

360-Degree-Performance-Appraisal Method

360-degree appraisal is a multi-evaluator appraisal and

feedback system, where an employee is assessed by a number
of assesses including superiors, subordinates, peers, internal
customers, and external customers. The concerned persons do
the appraisal anonymously and the final assessment is
collected by the HRD.
These people fill out an anonymous feedback form that asks
questions covering a broad range of workplace competencies. The feedback forms include
questions that are measured on a rating scale and also ask evaluators to provide written
comments. The person receiving feedback also fills out a self-rating survey that includes the
same survey questions that others receive in their forms.
360-Degree-Performance-Appraisal Method use to get a better understanding of employees
strengths and weaknesses. It can also be a useful development tool for people who are not in
a management role. A non-manager 360-Degree-Performance-Appraisal Method is not
measuring feedback from 360-Degree-Performance-Appraisal Method since there are no
direct reports, but the same principles still apply. 360 Feedback for non-managers is useful to
help people be more effective in their current roles, and also to help them understand what
areas they should focus on if they want to move into a management role.

Components of 360-Degree-Performance-Appraisal Method

360-Degree-Performance-Appraisal Method has four components:

a. Self appraisal
b. Superior’s appraisal
c. Subordinate’s appraisal
d. Peer appraisal

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Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses,
achievements, and judge performance. Superior’s appraisal forms the traditional
component of 360-Degree-Performance-Appraisal Method where the employees’
responsibilities and actual performance is rated by the superior. Subordinate’s appraisal
uses to judge the employee on the parameters like communication and motivating abilities,
and leadership qualities etc. Peer appraisal can help to find employees abilities to work in a
team, co-operation and sensitivity towards others.
Upward appraisal occurs when employees give information on a manager's performance.
360-Degree-Performance-Appraisal Method is alternative of upward appraisal, and extends
the use of appraisers to include people from all around the manager, rather than just
reporting staff.
[Source: http://appraisals.naukrihub.com/360-degree-performance-appraisal.html]

Phases of 360-Degree-Performance-Appraisal Method

360-Degree-Performance-Appraisal Method involves following main phases to appraise the

employees.
a. Participants Orientation and Modalities of the Exercise
b. Questionnaire Distribution
c. Monitoring and Follow-up
d. Data Feeding Reports and Analysis
e. Workshop

Uses of 360-Degree-Performance-Appraisal Method

Organizations typically use a 360-Degree-Performance-Appraisal Method in one of two

ways:
360-Degree-Performance-Appraisal Method as a Development Tool to Help Employees
Recognize Strengths, Weaknesses and become more Effective

360-Degree-Performance-Appraisal Method is highly effective as a development tool. The

appraisal process gives people an opportunity to provide anonymous feedback to a co-
worker that they might otherwise be uncomfortable giving. 360-Degree-Performance-
Appraisal Method gives an opportunity to appraise to adjust behaviours and develop skills
that will help them to improve at their jobs.

360-Degree-Performance-Appraisal Method Tool to Measure Employee Performance

Using a 360-Degree-Performance-Appraisal Method is a common practice but not always a

good idea. It is difficult to properly structure a 360 feedback process that creates an

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atmosphere of trust when you use 360 evaluations to measure performance. These things are
most appropriately addressed by an employee and his/her manager as part of an annual
review and performance appraisal process.
[Source:http://www.custominsight.com/360-degree-feedback/what-is-360-degree-feedback.asp]
Pros and Cons of 360-Degree-Performance-Appraisal Method

Benefits

a. The combination of opinions can approximate to an 'accurate' view

b. Comments expressed by several colleagues tend to carry weight
c. Some skills are best judged by peers and staff, not by manager alone
d. Feedback be motivating for people who undervalue themselves
e. The wider involvement help to engender a more honest organizational culture

Problems

a. Can be administratively burdensome

b. Results can be difficult to interpret
c. Feedback can be damaging unless handled carefully and sensitively
d. Can generate an environment of suspicion and cynicism if not managed openly and
honestly

Conclusion

With the extensive research about performance appraisal, I came to know how it’s helpful in
organizations to maintain the quality. This will help conclude about future of the employee
in an organization by obtaining, analyzing & recording information. Basically, there are two
types of performance appraisal methods been used by employers? Such as Traditional
Methods (Essay Appraisal Method, Straight Ranking Method, Paired Comparison, Critical
Incidents Methods, Field Review, Checklist Method, Graphic Rating Scale, Forced
Distribution) and Modern Methods (Assessment Centres, Behaviourally Anchored Rating
Scales, Human Resource Accounting Method, Management by Objective, 360-Degree-
Performance-Appraisal Method).
Traditional Methods been used in the past, which focused only on the past performance of
the employees, so with these methods we can not consider the developmental aspects of the
employee performance such as; training & development needs.
But now a days the more likely performance appraisal method by organizations specially
360-degree-performance-appraisal method, because its multi ratter by which you can get
information form all concern bodies even by employee him/her self and customers as well.
So, a 360-degree-performance-appraisal method helps to maintain quality of organization’s
objectives, employees and customer needs and wants.

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Performance Appraisal Forms

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