PERFORMANCE APPRAISAL SYSTEMS

Performance Appraisal is a process of evaluating an employees worth in terms of his requirements on the jobs Its systematic evaluation of a workers performance and potential for development Its systematic assessment of an individual measurement of performance in terms of job knowledge, quality, quantity of output, initiative leadership abilities, health, supervision, dependability, cooperation, judgement etc

 PA does not confine to measurement of past performance alone PA measures the potential of employees for future performance. PA informs the employees how well they are doing and how they improve their work PA in other words It distinguishes between those who are working well and who are not.

Definition
As per Yoder Performance Appraisal refers to all formal procedures used in working organizations to evaluate personalities and contributions and potential of group members

Objectives of Performance Appraisal

1) To improve job performance: Improve Job performance and identify potentialities. 2) For Training and development programmes: PA is guide, it helps to identify the deficiencies of skills ,need to develop. Used for pay raises or promotions 3) For promotion and transfers: PA will help in decision making on promotions and transfers 4) For compensation decisions: PA serves the purpose pay raise, based on merit.

5) To reduce the Grievances: As the criteria is available 6)To help Placement: PA identify the potential and suitability. 7)Personal development: PA can help to reveal the causes of good and poor performance of the employee. 8)Decisions:Salary fixation, confirmation, promotion,transfer and demotion

 9)Feed back Information: Level of achievement and behaviour of subordinate for rectifying deficiencies and to set new standards of work. 10) Provide information to counsel the subordinate 11) To create a satisfactory level of performance 12) for decisions regarding lay-off, retrenchment etc 13) To ensure organizational effectiveness

Process of Performance Appraisal

1) Setting of Performance Standards: Set the standards as to the content of job. The characterstics include work quality, honesty, reliability, cooperation, team work, job knowledge, initiative, leadership, safety consciousness, attendance, learning ability, adaptability, judgement, sense of responsibility, health and phisical conditions.

2)Communicating Standards: Employees should know what is expected of them. Reaction and rectification can also take place 3)Measuring Performance: Means personal observations, written reports, face to face to contact. Employ right technique. 4)Comparing the Actual with the standards: Deviations are observed positive or negative.

 Discussing the Appraisal: The result is discussed with the employee to enable him to know his strengths and weaknesses. Corrective Action: Steps to improve performance are identified and initiated. Training, Coaching, counselling etc are taken up.

Other terms for performance evaluation:

Performance review Personnel rating Merit rating Performance appraisal Employee appraisal Employee evaluation

Performance management is:

The process by which executives, managers, and supervisors work to align employee performance with the firms goals

An effective performance management process:

Has a precise definition of excellent performance Uses measurements of performance Provides feedback to employees

 Not all measures are easy to develop

Measurement of tangible outcomes (television sets) can be done with precision Intangible outcomes (teaching) are difficult to measure

Performance evaluation determines the extent to which an employee performs work efficiently

Types
Many organizations have two evaluation systems: formal and informal
Thinking about how well employees are doing is an informal system A formal system is set up by the organization to regularly and systematically evaluate employee performance

Political and interpersonal processes influence the informal system

Employees who are liked better have an advantage

Recommendations for a legally defensible appraisal system:

Procedures must not differ because of race, sex, national origin, religion, or age Use objective, non-rated, uncontaminated data A formal system of review or appeal should be available for disagreement over appraisals Use more than one independent evaluator Use a formal, standardized system for evaluation Avoid ratings on traits, such as dependability, drive, aptitude, and attitude

 Performance data should be empirically validated Communicate specific performance standards Provide raters with written instructions Evaluate employees on specific work dimensions rather than an overall or global measure Require behavioral documentation for extreme ratings Allow employees to review their appraisals

Who Evaluates, When, and How Often

Most organizations evaluate on an annual basis
Performance evaluations are often scheduled for arbitrary dates, such as the date of hire Alternatively, all employees may be evaluated on or near a single calendar date

It makes more sense to schedule the evaluation after a task cycle

For those without a task cycle based on dates, goals should be established that allow a beginning and end The evaluation can be at the end of the task cycle

Who Should Evaluate the Employee?

The immediate supervisor conducts most appraisals Other options:
Rating by a committee of several supervisors Rating by the employees peers (co-workers) Rating by the employees subordinates Rating by someone outside the immediate work situation Self-evaluation Rating by a combination of approaches

360-degree Feedback
Many organizations now use some form of 360-degree feedback program
Upward and peer feedback can have positive effects on behavior These effects are sustainable over time Almost 90 percent of companies using 360-degree programs use the information for such decisions as pay increases and promotions Introducing a 360-degree system into a culture not prepared for it can have disastrous effects

 Positive features of a 360-degree system:

Multiple perspectives of a persons performance Raters base evaluations on contact and observation Feedback is provided from multiple directions above, below, peer Anonymous upward feedback, which results in full participation Learning about weaknesses and strengths is motivational

 Negative features of a 360-degree system:

Feedback from all sources can be overwhelming Rater can hide in a group of raters and provide harsh evaluations Conflicting ratings can be confusing and frustrating Providing feedback that is constructive requires a plan and well-trained raters

Selected Evaluation Techniques

Ways of evaluating employees can generally be divided into two categories:
Methods that evaluate employees individually Multiple-person evaluations

Individual Evaluation Methods

Graphic rating scale
The rater is presented with a set of traits The employee is rated on the traits Ratings are assigned points, which are then computed Raters are often asked to explain each rating with a sentence or two

 Forced choice:
Was developed because graphic rating scales allowed supervisors to rate everyone high The rater must choose from a set of descriptive statements about employee Supervisors check the statements that describe the employee, or they rank the statements from most to least descriptive Forced choice can be used by superiors, peers, subordinates, or a combination of these

 Essay Evaluation
The rater is asked to describe the strong and weak aspects of the employees behavior It can be used by superiors, peers, or subordinates Essay evaluations are flexible; an evaluator can specifically address the ratees skill in any area Comparing essays is difficult

Skilled writers can paint a better picture

 Critical Incident Technique

Raters maintain a log of behavioral incidents that represent effective and ineffective performance for each employee Two factors determine the success of this technique:

The supervisor must have enough time to observe subordinates during the evaluation period The supervisor must record incidents as they are seen
Logs can help avoid common rating errors and facilitate discussions about performance improvement

 Checklists
In its simplest form, the checklist is a set of objectives or descriptive statements
If the rater believes that the employee possesses a listed trait, the item is checked A rating score equals the number of checks

 Behaviorally Anchored Rating Scales

Smith and Kendall developed the behaviorally anchored rating scale (BARS), or the behavioral expectation scale (BES) The BARS approach uses critical incidents to anchor statements on a scale The rater reads the anchors and places an X at some point on the scale for the ratee

 A BARS usually contains these features:

Six to 10 performance dimensions identified and defined by raters and ratees The dimensions are anchored with positive and negative critical incidents Each ratee is then rated on the dimensions Ratings are fed back using the terms on the form

 Behavioral Observation Scales (BOS)

Developed by Latham and associates Like BARS, the BOS uses critical incidents Instead of identifying which behaviors occurred, the rater identifies how they occurred The hope was that BARS and BOS would yield more objective ratings than other scale formats Most researchers find that the format of the rating scale has little effect on the quality of a performance appraisal system

Sample BOS Items

For 5

c r r r r r r s r s r s r s r s

ior list ts 5 ts 5 ts 5 ts 5 ts r ri

s t % of t % of t % of t % of t % of t cost r

followi ti ti ti ti ti

Is cc r t i l ost never

orts for Johnson roject crew. 5 l ost lways

ractices sound ener y conservation in supervising project crews. l ost never 5 l ost always Is available for technical consultation when needed. l ost never 5 Develops fair and equitable work schedule. l ost never 5 l ost always l ost always

Multiple-Person Evaluation Methods

Ranking
A supervisor is asked to rank subordinates in order on some overall criterion It is easier to rank the best and worst employees than average ones Alternative rankings can help with this difficulty Pick the top employee first, then the bottom one The second best is chosen, then the second worst Follow this process until everyone has been ranked

 Paired Comparison
The supervisor reviews a series of cards; each contains two subordinates names The higher performer in each pair is chosen Final ranking is made by counting how many times a given employee was chosen as the better performer A major limitation is the number of paired comparisons that must be made
With only 10 subordinates, a supervisor would have 45 pairs of names

 Forced Distribution
Employees are rated on a pre-existing distribution of pre-determined categories The predetermined distribution must be followed, regardless of how well the employees performed A supervisor with all exceptional subordinates will be forced to rate some poorly

A supervisor with mediocre subordinates must rate some highly

 Point allocation technique (PAT)

A variation of forced distribution Each rater is given a number of points per employee The points must then be allocated on a criterion basis The total number of points cannot exceed the number of points per employee times the number of employees evaluated

Why Performance Appraisal ?

Why?
Reward good performance Feedback to employees Employee development Documentation for future managers, legal purposes

What Makes Good Performance Appraisal?

PA should be based on job performance alone PA also should be an ongoing process, not a once-a-year ritual 6 characteristics of effective PA
Subordinate participation Subordinate acceptance Goal setting Discussing problems with performance Minimal criticism (defensiveness) Subordinate voice

Defining Performance
Objective vs. subjective What can the individual control? Job related vs. organization related behaviors Dimensions to rate on

Who Evaluates Performance?

Supervisor Self Subordinate Peers Customers

Appraisal Formats
Trait ratings Rankings Outcome measures Dimensional scales BARS MBO

Trait Ratings
Traits (i.e., industrious) mean different things to different people
Lack of reliability

Not specific enough for useful feedback

What, specifically, does the employee need to do to be industrious?

Still used, though...... Its quick and easy, and appealing to managers (looks good)

Rankings and Forced Distribution

Currently popular
Managers required to rate a certain proportion of employees in each category General Electric (Rank-and-Yank)

However.
All employees may be equally good or bad, so forced distribution isn't the answer May be comparing apples and oranges, if employees in different jobs No anchor points (The employee on the bottom of the list may be satisfactory, but all of the others are simply better) Not specific enough, in terms of areas and specific behavior, for useful feedback

Outcome Measures
Nothing wrong with measuring outcomes.. Need to chose correct outcomes Focus on results not always helpful in showing employees what to do to get results Outcomes may not be under employees control

Behaviorally Anchored Rating Scales (BARS)

Format:
Scales for different areas or dimensions (usually 8-10 scales per job) Each scale has 9 points or levels At least three levels are anchored or defined with representative behaviors, describing superior, average, and below average levels of performance

The supervisor:
Responds to the question This is the type of employee who would... Rates the employee from 9 (best) to 1 (worst), for each scale

Management by Objectives (MBO)

About goals
Goals must be challenging, yet reachable Must have meaningful employee participation

Three steps in process:

Employee and manager agree on goals Progress toward goals monitored during appraisal period At end of period, employee and supervisor meet again to determine if goals met

Systematic Problems With Performance Appraisal

No performance appraisal or performance appraisal as a ritual only Lack of top management support for performance appraisal or for meaningful appraisal Appraisal should be (but too often isnt) an ongoing process of feedback

Problems in the Appraisal Interview

Disagreement (between employee and manager) Defensiveness (when employee is given bad news in a non-constructive manner) Managers unwillingness to confront problem employees One-way communication (top-down only; employee has no opportunity to respond)

Rater Errors (I)

Systematic errors/biases; normally, rater is unaware of these Errors in rating process
Irrelevant information

Errors in observation
Stereotypes Employee similar/not similar to rater Pattern of performance (improve/decline) Variability of performance

Rater Errors (II)

Errors in storage and recall
Trait recall Memory decay

Errors in actual evaluation

Political goals Forced distribution/limited pot of money Fear of confronting problem employees Desire to look good

      

Contrast Error First and Last Impressions Halo Effect Stereotyping Similar-to-Me Effect Central Tendency Error Negative and Positive Leniency

360 Appraisal
Also called multisource feedback Gather information on performance from multiple sources
Supervisor Peers Subordinates Self Customers

MANAGEMENT BY OBJECTIVES(MBO)/RESILUTS(MBR)

 Management By Objectives term was first popularized by Peter Drucker in 1954 in his 53 book 'The Practice of Management'.  MBO is a system in which specific performance objectives are jointly determined by subordinates and their superiors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of this progress.  MBO involves subordinate managers participation in planning and controlling activities. It is a fact that more of their involvement will result in more commitment, which will lead to more and better results.  Main purpose of MBO is that instead of just few top managers, all managers of the firm should

FEATURES of MBO
54

MBO is an approach and philosophy to Mgt. It provides new thinking line and new techniques MBO emphasizes setting goals that are tangible verifiable and measurable. MBO focuses attention on what must be accomplished (goal) rather than how it is accomplished (method). MBO by concentrating on key results area translates the abstract philosophy of

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MBO is a systematic and rational technique that allows managements to attain maximum results from available resources by focusing on achievable goals. It allows the subordinates plenty of room to make creative decision on their own. It calls for the participation of concerned managers in objective setting and performance review. It takes periodic review of performance.

PROCESS OF MBO Step 1. Setting of organizational purposes and objectives 56

 Usually objectives setting at top level with the following sequence: 1.Defining the purpose of the organization 2.Setting long range and strategic e.g. questions like whether to achieve growth through expansion or diversification etc. 3.Setting short term organizational objectives 4.Setting divisional / departmental / sectional objectives

PROCESS OF MBO Step 2 : Identifying Key Result Areas (KRA)

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 The organizational objectives and planning come together to define KRA. KRAs are derived from different stake holders.  KRA indicate
 priorities of organizational performance.  Present state of health of an organization  Top Managements perspective.

 Examples of KRA are:  Profitability, market standing, innovation, productivity, managers and workers performance, financial and physical resources, public responsibility.

PROCESS OF MBO Step 3: Setting subordinates Objectives

58

All middle level managers are both superior and subordinate except the top and lowest level. Organizational objectives are achieved through individuals Hierarchy of setting objectives
Superiors recommendation to subordinates Subordinates in turn states his own objectives Setting of final objectives of subordinates in consultation Bridging the gap between the objectives set by superiors and stated by the individual subordinate

PROCESS OF MBO Step 4. Matching of resources with objectives

59

 Once the objectives are set carefully they indicate resource requirement.  Proper allocation of resources ensures the achieving of objectives.  Need and economy of resources can be viewed in a better way because of the matching of objetives with resources.

PROCESS OF MBO Step 5: Appraisal

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Appraisal (assessment / evaluation) is an on going process with a view to find out any deficiency in the working and also to remove promptly. It is a system which checks that everything goes smoothly as per the plan.

PROCESS OF MBO Step 6: Recycling

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Objective setting is a joint process which occurs through the interaction between superiors and Subordinates. The change at any level affects the other levels. Hence there is a requirement of objective recycling Three aspects of Action Planning recycling are Performance Review

Objective setting

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 MBO is often achieved using set targets.  MBO introduced the SMART method for checking the validity of the objectives which should be SMART
Specific Measurable, Agreed Realistic, and Time-Specific or Time related

BENEFITS OF MBO  Better management & utilization of resources  Aid in Planning 63  Development of personnel/satisfaction  Better Team Work  Concentration on Key Result Areas  Objective Evaluation  MBO is Result Oriented  Sound Organizational Structure DISADVANTAGES OF MBO  Time & Cost, Failure to teach MBO Philosophy, Problems in Objective setting, Emphasis on shortterm objectives, Inflexibility, Frustration

CAREER PLANNING
CP is helping employees to plan their career in terms of their capacities within the context of organizational needs. Its a organizational system of career movement and growth opportunity. Its a management technique for mapping out entire career of young employees in higher skilled, supervisory, and managerial positions CP provides an answers to his question as to where he will be in the company after five years and beyond.

Need for career Planning

Natural that every employee has desire to grow and scale new heights in his work place He feels highly motivated if has opportunities and organization shows him clear path. Good employees wish to seek careers rather than short duration jobs.

Need for Career Planning

To attract competent persons and retain them in organization To provide suitable opportunities To enable the employee to develop and make them ready to meet future challenges To correct employee placement To reduce employee turn over and dissatisfaction

Principles of effective career planning

Top management Support: Top mgt must develop enthusiasm among executives for the purpose Focus on expansion: CP is possible in growing Organization Clear Goals Motivated and Hardworking staff Proper selection

 Fair Promotion Policy: Equitable policy for promoting employees Career stress Management: Internal Publicity: Career plan should be given wide publicity Continuity: To be carried out in on continuity basis