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Performance appraisal is a method of evaluating the

behaviour of employees in the workspot , normally

including both the quantitative and qualitative aspects
of job performance.

It is a systematic and objective way of evaluating both

work-related behaviour and potential of employees.

It is a process that involve determining and

communicating to an employee how he or she is
performing the job and ideally, establishing a plan of
The appraisal is carried out periodically, according to a

definite plan.

It tries to find out how well the employee is performing the

job and tries to establish a plan for further improvement.

It refers to how well someone is doing an assigned job.

It is a future oriented activity showing employees where

things have gone wrong , how to set everything in order,

and deliver results using their potential in a proper way.

Performance appraisal is not limited to calling the fouls.

Its focus is on employee development.

Appraisal of employees serves useful
purposes in:
Compensation Decisions

Promotion Decisions

Training and Development Programmes


Personal Development
In most Indian organizations, people earn promotions on the basis

of their past performance. The past performance is considered a good

indicator of future job success. This could be true, if the job to be

performed by the promotee is similar.

However, in actual practice, the roles that a person played in the

past may not be the same as the one(s) he is expected to play if he is

assigned a different job after his transfer or promotion to a new

position. Past performance, therefore, may not be a good indicator of

the suitability for a higher role.

To overcome this inadequacy, organizations must think of a new

system called potential appraisal. The objective of potential appraisal

is to identify the potential of a given employee to occupy higher

Every organization has to decide upon the content to be

appraised before the programme is approved.

The appraiser may be any person who has thorough

knowledge about the job content, contents to be appraised,

standards of contents and who observes the employee while

performing a job.

Informal appraisals are conducted whenever the supervisor

or personal managers feel it is necessary. However,

systematic appraisals are conducted on a regular basis, say,

for example, every six months or annually.

Performance appraisal is planned, developed and implemented
through a series of steps:
Establish Performance Standards: Appraisal systems
require performance standards, which serve as benchmarks
against which performance is measured. To be useful, standards
should relate to the desired results of each job. Performance
standards must be clear to both the appraiser and the appraise.
For example, the regional sales officer may be asked: The sales
of colour television sets in Ghaziabad must increase by 1000 per
month in the next six months and the budget toward
promotional expenses would Rs 5,000 per month.
Communicate The Standards
Performance appraisal involves at least two parties;
the appraiser who does the appraisal and the
appraisee whose performance is being evaluated.
Both are expected to do certain things. As pointed out
by De Cenzo and Robbins, too many jobs have vague
performance standards and the problem is
compounded when these standards are set in
isolation and do not involve the employee.
Measure Actual Performance
After the performance standards are set and
accepted, the next step is to measure actual
performance. This requires the use of
dependable performance measures, the ratings
used to evaluate performance. Performance
measures- to be helpful- must be easy to use,
reliable, and report on the critical behaviours
that determine performance. Performance
Compare Actual Performance With Standards And

Discuss The Appraisal

Actual performance may be better than expected and sometimes it

may go off the track. Whatever be the consequences, there is a way

to communicate and discuss the final outcome.

Taking Corrective Action, If Necessary

Corrective action is of two types: one puts out the fires immediately,

while the other destroys the root of the problem permanently. . Basic

corrective steps seek to find out how and why performance deviates.
Appraisal methods can be broadly classified
into two groups:


Easy Appraisal Method

Straight Ranking Method

Paired Comparisons

Field Review

Forced Distribution

Check List Method

Critical Incident Method

Graphic Ratings Scale


Assessment Centre

Human Resource Accounting

Behaviourally Anchored Rating

Scales (BARS)
Management by Objectives (MBO)

360 Degree Performance

Easy Appraisal Method
This is a traditional form of appraisal. It is also
known as Free Form method It 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.
Straight Ranking Method

This is one of the oldest and simplest

techniques of performance appraisal.
In this method, the appraiser ranks
the employees from the best to the
poorest on the basis of their overall
It is quite useful for a comparative
Paired Comparisons

This is 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 are done
then the employees are given the final
Field Review
In this method, a senior member of the
Human Resource 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.
Forced Distribution

To eliminate the element of bias from

the raters ratings, the evaluator is
asked to distribute the employees in
some fixed categories of ratings like on a
normal distribution curve.
The rater chooses the appropriate fit
for the categories on his own discretion.
Check List Method

The rater 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 rater
describes the on the job performance of
the employees.
Critical Incident Method
In this method, the evaluator rates the
employee on the basis of critical events and
how the employee behaved during those
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 behavior as and
when they occur.
Graphic Ratings Scale
In this method, an employees 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 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.
Assessment Centre
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 observe and evaluate
employees as they perform the assigned jobs
and are evaluated on job related
Human Resource Accounting
Human resources are valuable assets for every organization.
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 (in monetary terms).

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.
Behaviourally Anchored Rating
Scales (BARS)

This is a relatively new technique which

combines the graphic rating scale and critical
incidents method.
It consists of predetermined critical areas of
job performance or sets of behavioral statements
describing important job performance qualities
as good or bad.
In this method, an employees actual job
behavior is judged against the desired behavior
360 Degree Performance
360 degree feedback, also known as 'multi-rater
feedback', is the most comprehensive appraisal where
the feedback about the employees performance comes
from all the sources that come in contact with the
employee on his job.

360 degree appraisal has four integral components:

1. Self appraisal

2. Superiors appraisal

3. Subordinates appraisal

4. Peer appraisal