WHAT IS “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. Human resource management (HRM) conducts performance management.
Performance management systems consist of the activities and/or processes embraced by
an organization in anticipation of improving employee performance, and therefore,
organizational performance. Consequently, performance management is conducted at the
organizational level and the individual level. At the organizational level, performance
management oversees organizational performance and compares present performance
with organizational performance goals. The achievement of these organizational
performance goals depends on the performance of the individual organizational members.
Therefore, measuring individual employee performance can prove to be a valuable
performance management process for the purposes of HRM and for the organization.
Many researchers would argue that "performance appraisal is one of the most important
processes in Human Resource Management".

WHEN TO CONDUCT A PERFORMANCE APPRAISAL?

Performance appraisal in any organization will be done at a specific period, like

annually or half yearly or quarterly or maybe regularly. It all depends upon the nature or
size of the organization, and sometimes necessity of the managers decides the period of
performance appraisal of their employees. Most of organizations are insisting employee
appraisal should be a continuous process and should not be limited to a formal review
once a year.

THE PURPOSE OF PERFORMANCE APPRAISAL

 The major purpose of performance appraisal is to evaluate how good employees
have conducted their duty. Performance appraisal helps to keep a record of each
employee’s job performance, including what efforts they have made and what have they
achieved. Evaluation differentiates employees on the basis of their job performance,
along with other factors like personality, behavior, etc.

 Provide continuous feedback

It is essential for the employers to know what performance and achievements have
been made by their employees. But, it is also equally important for an employee to know
where they stand, where they are going and how they are going to get there. Thus, giving
feedback to employees is also a major purpose of performance appraisal.

 Measure performance accurately

Every company has to set mutually acceptable criteria or performance standards so

that it could compare employee’s performance with it. This helps in accurate
measurement of employee’s job performance which is necessary for the company to
know where it is heading towards.

 Provide clarity of expectation and actual result

Every employee wants them to be told about their duties; what the organization really
wants them to do. However, this is not enough to get good output from them. They
should also be told how well they have done their duties and how can they improve their
performance. They should be made clear about how near they are to do their expectation.
  Identify area of weakness of employees

All employees may not be an all-rounder. Some employees may have weak points as
well, which if not sorted out in time, might be a liability for the company. Performance
appraisal helps in identifying such weak points.

 Determine training and developmental needs

Only determining weak points is not enough. A company should also make efforts to
abolish them. A properly carried out performance appraisal is a tool to determine what
necessary steps are to be taken in order to help the employees in improving their
performance. The increment in skills and knowledge develop an overall personality,
attitude and behavior of the employees.

 Provide career path

Performance appraisal works as a mirror to employees and it clearly shows what they
are professionally and where they stand.
On the other hand, it helps the company in recognizing employees with potential.
Companies provide career development opportunities to such employees and pave their
way to a successful and stable career.

 Determine promotion of employees

Performance appraisal helps in charting progress of employees. Such charts can be

used by the employers to determine whether or not to promote their employees. They also
help in identifying the employees who most deserves to be promoted.
  Take corrective actions

Performance appraisal distinguishes excellent and poor performing employees.

Results of performance appraisal help the employers in taking corrective actions. Such
actions may be counseling or warning the poor performers to improve performance and
to prevent the occurrence of undesirable results.

 Decide retention and termination of employees

Progress report of employees does not only help in determining promotion but also in
determining termination. Employees, with poor reports, are at first consulted. But, if the
supervisors don’t find any growth, they will be forced to take severe action like
termination.

 Evaluate effectiveness of HRM functions

Recruitment, selection, employee training, rewarding, etc. are some functions of

human resource management whose effectiveness can only be analyzed when the
performance of employees is appraised.

 Decide salary and rewards

Performance appraisal of employees helps the supervisors in knowing their job

performance and the right amount to pay them. The employees will receive wages as per
the contribution they have made. The impressive contributors are also rewarded by the
company as per the organization’s policy.

 Reduce grievances

Grievances may occur in the company when employees feel unfairly treated or biased.
For an instance, an employee might feel that his co-worker is being paid more by the
company even though both of them are posted at the same job level. During such
situation, employers can use the reports of performance appraisal to clarify the employees
that they are being paid on the basis of their job performance, rather than the position
they hold.

 Keep communication lines open

The complete process of performance appraisal includes continuous feedback from

the supervisors. This way, performance appraisal works as a bridge of communication
between the employers and employees. Also, open communication helps in strengthening
the employer-employee relationship or superior-subordinate relationship.

 Motivate superior performance

When performances of employees are timely appraised, they are motivated to make
the superior performance. It is because #1 they want to enjoy the perk of being an
excellent employee or #2 they fear negative reactions from the supervisors. When
employees know that they are heading in right direction, it develops a sense of
satisfaction in them.

 Improve decision making ability

It becomes easier for the organization to take right decision when it has complete
knowledge about what’s going on in their company. Performance appraisal works as a
helping hand to the company in making the right decision as it is a source of the
company’s complete statistical data.
OBJECTIVES OF PERFORMANCE APPRAISAL
Performance Appraisal can be done with following objectives in mind:

 To maintain records in order to determine compensation packages, wage structure,

salaries raises, etc.
 To identify the strengths and weaknesses of employees to place right men on right
job.
 To maintain and assess the potential present in a person for further growth and
development.
 To provide a feedback to employees regarding their performance and related
status.
 To provide a feedback to employees regarding their performance and related
status.
 It serves as a basis for influencing working habits of the employees.
 To review and retain the promotional and other training programmed.

TYPES OF PERFORMANCE APPRAISAL SYSTEM

Appraisal does not only involve managers. It is more like an exponentially
growing curve – each vertex is like self, peers, manager on the graph who add value to
the employee appraisal process and help them grow along the curve. Simply say, take a
look at the following types.

 General Appraisal
It is an ongoing communication between the manager and the employee throughout
the year. End of the year, they will determine if the pre-set goals and objectives were met,
provide feedback and set new goals.
  360-Degree Appraisal
It allows other employees to provide feedback about their experience with a specific
employee. This feedback of peers can be reviewed by manager and considered for
appraisal process.

 Technological Performance Appraisal

It assesses technical expertise/capabilities of an employee. It figures out employee
throughput and identifies how sound he/she is technically.

 Employee Self-Assessment
The employee assesses himself/herself and it is finally compared with the manager’s
completed assessment results. It is followed by discussions and if there are differences,
manager speaks to the employee about it.

 Manager Performance Appraisal

In this type, managers go through the appraisal process. It is the role of the manager
that is very crucial handling both the team and the client. Manager has to satisfy the
clientele without disrupting the (team’s) employee morale. Most often manager appraisal
process involves feedback from the respective team members and sometimes from the
client as well.

 Project Evaluation Review

This is one of the best ways to identify how good an employee is at work. Rather than
to wait to review an employee end of the year, it helps evaluating employees end of each
project.

 Sales Performance Appraisal

A sales person is judged by the goals he/she has set versus his/her results. Salesmen
are closely held to the financial goals of any organization. The manager and salesperson
must find out ways to achieve goals prior to which they must set realistic goals.
Advantages of Performance Appraisal

It is said that performance appraisal is an investment for the company which can be
justified by following advantages:

 Promotion

Performance Appraisal helps the supervisors to chalk out the promotion programs for
efficient employees. In this regards, inefficient workers can be dismissed or demoted in
case.

 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.

 Employees Development

The systematic procedure of performance appraisal helps the supervisors to frame

training policies and programs. It helps to analyze strengths and weaknesses of
employees so that new jobs can be designed for efficient employees. It also helps in
framing future development programs.

 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.
  Motivation

Performance appraisal serves as a motivation tool. Through evaluating performance

of employees, a person’s 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.

 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:

1. Through performance appraisal, the employers can understand and accept

skills of subordinates.
2. The subordinates can also understand and create a trust and confidence in
superiors.
3. It also helps in maintaining cordial and congenial labor management
relationship.
4. It develops the spirit of work and boosts the morale of employees.

Disadvantages of Performance Appraisal

 If the factors being used in the performance appraisal are incorrect or not relevant, the
appraisal will fail to provide any useful or effective data.

 Sometimes, equal weightage is not given to important factors when performing an

appraisal.
 Some objective factors are very vague and difficult to gauge like attitude and
initiative. There is no scientific method to measure these factors.

 Managers are sometimes not qualified enough to correctly assess the employees and
their abilities. Thus, these mistakes can be very detrimental to the growth of the
company.

BENEFITS OF PERFORMANCE APPRAISAL

 Employee recognition and rewards

Appraisals provide the opportunity to recognize and reward employees and to ensure
they feel valued for the work that they do. By monitoring performance and progress
against objectives employers can assess whether to reward staff with salary increases,
promotions or bonuses. It’s also a chance to say thank you and to provide verbal
feedback and praise. Rewarding any successes highlighted doesn’t have to be financial.
Although money still holds considerable importance, and salaries should be regularly
reviewed to ensure they remain competitive and in line with performance, simple and
sincere acknowledgements still go a long way towards maintaining employee
engagement.

 New challenges and clear objectives

Organizations with a great workplace culture are ones where employees feel a real
sense of belonging. They understand what the organization is trying to achieve, are
inspired by its mission and values and recognize how their role plays a part in achieving
overall success. The discussions which take place during appraisal meetings will help
employees to understand how the individual objectives set for them will play a part in
the wider business plan. This helps to give employees a sense of ownership within the
collective vision and to empower them to achieve the results needed. It’s also a great
opportunity to regularly review objectives and to provide ongoing challenges to ensure
employees remain motivated by new goals and experiences.

 Continued progression and development

Organizations which provide clear progression opportunities are attractive to new

recruits and are more likely to be able to retain talented employees by mapping out a
career path for them. Regularly looking at performance will help to identify when
employees are ready to take on more responsibility. Setting aside the time to discuss an
employee’s individual ambitions will also help organizations to spot and develop
potential talent and build a strong succession pipeline.

 Culture of trust and openness

In today’s fast paced business world, it’s more important than ever to maintain a
meaningful, two-way dialogue with employees to help keep talented people within your
organization. One of the key enablers for achieving employee engagement is to ensure
that employees have a voice and appraisal and performance review meetings can help to
fuel discussion and empower staff to share their opinions. They will feel encouraged to
influence innovation by feeding ideas upwards and the relationship which develops
from open communication within appraisal systems will help employees to feel more
able to approach and discuss any ideas or issues outside of these meetings as well.

 Support and training

Open discussions on performance can help to identify any problems early and
provides the opportunity to explore positive solutions. Managers can look at what
additional training and support could be provided to enable the employee to achieve
results which they would feel proud of. High performing employees can be supported
with further training to help them to progress to the next level in their careers.
  Prevention of long-term dissatisfaction

Issues can usually be nipped in the bud before they escalate to the point of someone
leaving if they can be raised through appraisal meetings. It is a great opportunity for an
employee to raise any worries or concerns, or to discuss any barriers which they feel are
holding them back. Taking the time to listen to employees and address any concerns
helps to create a happier workforce and will continue to fuel a culture of openness and
trust.

 Supporting staff to deliver an effective appraisal system

For appraisals and performance communications to work to best effect, managers

need to feel effectively equipped to provide regular feedback and ongoing performance
management. Investing in training for managers to able to deliver effective performance
appraisals with an authentic approach is a worthwhile investment. Maintaining a natural
management style will help them to foster the trust and respect needed to build open
and transparent relationships and developing skills such as active listening and
performance assessment will help to ensure a constructive appraisal system is in place.

COMMON PROBLEMS WITH PERFORMANCE

APPRAISALS

 Performance Appraisals Are Annual

Start with the fact that performance appraisals are usually annual. Employees need
feedback and goal planning much more frequently than annually. Employees need
weekly, even daily, performance feedback. This feedback keeps them focused on their
most important goals. It also provides them with developmental coaching to help them
increase their ability to contribute. The feedback also recognizes them for their
contributions. Employees need and respond best to clear expectations from their
manager. Feedback and goal setting annually just doesn't cut it in the modern work
environment. In this environment, goals are constantly changing. Work is under constant
evaluation for relevance, importance, and contribution. Customer needs change with such
frequency that only the nimble respond in a timely manner. It is what performance
feedback needs to do—respond nimbly and with serious responsiveness in a timely
manner.

 Performance Appraisal as a Lecture

Managers, who don't know any better, make performance appraisals into a one-way
lecture about how the employee did well this year and how the employee can improve. In
one example, employees reported to HR that they thought that the performance
development planning meeting was supposed to be a conversation. Their manager was
using 55 of the 60 minutes to lecture his reporting staff members about their
performance—both good and bad. The employees' feedback was relegated to less than
five minutes. It is not the point of a performance appraisal discussion. Additionally, once
a manager tells an employee about problems with their work or a failure in their
performance, employees tend not to hear anything else the manager has to say that is
positive about their performance. So, the feedback sandwich in which managers praise an
employee, then give the employee negative feedback that is followed, once again, by
positive feedback is an ineffective approach to providing needed feedback. So, it’s a
combination problem. The best performance appraisals are a two-way discussion and
focus on the employee assessing his or her own performance and setting his or her own
goals for improvement.

 Performance Appraisal and Employee Development

Performance appraisals rarely focus on developing the employee’s skills and abilities.
They do not provide commitments of time and resources from the organization about
how they will encourage employees to develop their skills in areas of interest to the
employee. The purpose of performance evaluation is to provide developmental feedback
that will help the employee continue to grow in their skills and ability to contribute to the
organization. It is the manager's opportunity to hold a clear exchange about what the
organization expects and most wants and needs from the employee. What a lost
opportunity if a manager uses the meeting in any other way.

 Performance Appraisals and Pay

In a fourth way that performance appraisals often go astray, employers connect

performance appraisals with the amount of pay raise an employee will receive. When the
appraisal is a deciding factor in employee raises, it loses its ability to help employees
learn and grow. You will train employees to hide and cover up problems. They will set
their manager up to be blindsided by problems or an issue in the future. They will bring
only positives to the appraisal meeting if they are a normal employee. Don’t ever expect
an honest discussion about improving an employee's performance if the outcome of the
discussion will affect the employee’s income. Doesn't this make perfect sense? You know
it does, so why go there? It should be one component of your salary setting system. Let
your employees know that you will base raises on a wide range of factors—and tell them
what the factors are in your company annually. Employees have short memories, and you
need to remind them every year about how you will make your decisions about merit
increases. If your company has a company-wide approach—and many companies do
these days—even better. You will have support and backup as all employees will receive
the same message. Your job will be to reinforce the message during the performance
appraisal meeting. Connecting the appraisal to an employee's opportunity for a salary
increase negates the most important component of the process—the goal of helping the
employee grow and develop as a result of the feedback and discussion at the performance
appraisal meeting. If you can influence these four big problems in performance appraisal,
you will go a long way toward having a useful, developmental system in which the
employee's voice plays a prominent role.