PERFORMANCE APPRAISAL SYSTEM

DEFINITION:

Employee’s performance evaluation is a key part of the function of staffing, as the

evaluation serves as a basis for judging the contributions and weakness of employees so
that continuing efforts can be made to build a stronger and more effective organization.

Performance appraisal is the process of reviewing an individual’s performance and

progress in a job and assessing his potential. It is a systematic method of obtaining,
analyzing a recording information about a person doing a specific job, rather than
assessing the job itself as in the case of job analysis.

Performance appraisal is the assessment of the real and relative worth of the employees in
a systematic and subjective way. The competence of the employee should be measured
with reference to the established standard of the task assigned.

Performance appraisal can be seen as an objective method of judging the relative worth
or ability of an individual employee in performing his tasks.

CHARACTERSTICS:

The system must be bias-free:

The evaluator must be objective and the methods of appraisal must be fair and equitable.
The atmosphere must be that of confidence and trust.

It must be relevant:

It should only measure behavior that are relevant to the successful job performance and
not any other personal traits.

It should be acceptable to all:

The performance standards as well as the appraisal methods should be developed by joint
participation and joint collaboration.

It should be reliable; dependable; stable and consistent:

High reliability is essential for correct decision-making and validation studies. It should
be sufficiently scientific, so that if an employee is evaluated by two different evaluators,
then the result should be significantly the same.
It must be able to objectively differentiate between a good employee and an
ineffective employee:

Rating an employee average does not adequately indicate the degree of effectiveness. So,
the technique must be sufficiently sensitive to pick up the difference between an effective
and an ineffective employee.

It must be practical, sound, clear and unambiguous so that all parties concerned
understand all its implications.

PROCESS:

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. In case the performance of the employee cannot be measured, great
care should be taken to describe the standards.

COMMUNICATING THE STANDARDS

Once set, it is the responsibility of the management to communicate the standards to all
the employees of the organization. The employees should be informed and the standards
should be clearly explained to the employees. 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 most difficult part of the Performance appraisal process 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 and providing assistance rather than interfering in an employees
work.
COMPARING ACTUAL PERFORMANCE WITH DESIRED PERFORMANCE

The actual performance is compared with the desired or the standard performance. The
comparison tells the deviations 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 depicting a negative
deviation in the organizational performance. It includes recalling, evaluating and analysis
of data related to the employees’ performance.

DISCUSSING RESULTS (FEEDBACK)

The result of the appraisal is 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 and the possible solutions are discussed with the aim of problem solving
and reaching consensus. The feedback should be given with a positive attitude as this can
have an effect on the employees’ future performance. Performance appraisal feedback by
managers should be in such way helpful to correct mistakes done by the employees and
help them to motivate for better performance but not to demotivate. Performance
feedback task should be handled very carefully as it may leads to emotional outburst if it
is not handing properly. Sometimes employees should be prepared before giving them
feedback as it may be received positively or negatively depending upon the nature and
attitude of employees.

INITIATE CORRECTIVE MEASURES

The final step in the appraisal process is the initiation of corrective action when it is
necessary. The areas needing improvement are identified and then, the measures to
correct or improve the performance are identified and initiated.
The corrective action can be of two types. One is immediate and deals predominantly
with symptoms. This action is often called as “putting out fires.” The other is basic and
delves into causes of deviations and seeks to adjust the difference permanently.
This type of action involves time to analyze deviations. Hence, managers often opt for the
immediate action, or say, “put out fires”. Training, coaching, counselling, etc. is the
common examples of corrective actions that managers initiate to improve the employee
performance.
LIMITATIONS:

Hallo effect:

It is a tendency to influence the evaluation of other traits by the assessment of one trait.
Hallo is a circle of light around the sun or moon causes by refraction. A person may be
good in one trait on which he is good is valued by his supervisor. Hallo effect takes place
when traits are not clearly defined and are unfamiliar.

Criterion problem:

A criterion is the standard of performance, the manager desires of his subordinates and
against which he compares their actual performance. This is the weakest point in
appraisal procedure. Criteria are hard to define in measurable, or even objective terms.
Ambiguity, vagueness and generality of criteria are difficult hurdles for any process to
overcome. Traits too present ambiguity. A particular trait is hard to define and variations
of interpretation easily occur among different managers using them.

Frustration:

Employees who are rated better are not rewarded accordingly and therefore, they feel
frustrated and their morale goes down.

Lack of cooperation:

Rating will be inaccurate and difficult to appraise the personnel in the right perspective if
the rater is biased or he does not have adequate information about job and employees and
full cooperation of management and subordinates.
 METHODS
MBO
It stands for Management by Objective. It is that appraisal method where managers and
employee together plan, identify, organize and communicate objectives. After setting
them, managers and the employees periodically discuss the progress and finally discuss
what all has to be done to achieve the expected goals.

The objectives established are in line with the SMART method i.e., it should be specific,
measurable, achievable, realistic and time bounded.

At the end of the review period, employees are judged by their performance. Success is
rewarded with a promotion and a salary hike whereas, failure is coupled with a training to
improve in the next review period.

MBO is not just an performance appraisal method but it is the tool that manages the
whole organization.

PROCESS:

Review company’s goals.

Set employee objectives.
Monitor the progress
Evaluate the performance.
Provide feedback
Performance Appraisal

ADAVNTAGES:

It helps build relationship between managers and employees.

It builds a comfortable climate in the workplace.
It is fair, easy and quick.

LIMITATIONS:

Lack of support from the top management.

Resistance from employees.
Problems in setting goals and objectives.
Majorly the emphasis is laid on short term goals.
360° Feedback
360-degree feedback is a feedback process where not just your superior but your peers
and direct reports and sometimes even customers evaluate you. You receive an analysis
of how you perceive yourself and how others perceive you.

It is a multi-dimensional performance appraisal technique.

To collect feedback on the particular employee, structured questionnaires are answered

by different parties involved; the employee also provides a feedback on himself by
answering the questionnaire. Based on all feedbacks, the employee is appraised positively
or negatively.

PROCESS:

Selecting people who will provide the feedback.

Communicating 360 process
Preparing the customized questionnaire
Distributing and collecting the filled questionnaires.
Preparing and producing reports.
Providing feedbacks.
Constructing the development plan

ADVANTAGES:

It evaluates the overall performance of the employee.

Self Awareness
Biasness is removed.

DISADVANTAGES:

Ignores the performance in terms of reaching goals.

Unfair feedback from some people can affect the main report.
It mainly provides qualitative feedback and lacks quantitative part.
Time taking process.
GRAPHIC RATING SCALE
Graphic Rating Scale is a type of performance appraisal method. In this method
traits or behaviors that are important for effective performance are listed out and
each employee is rated against these traits. The rating helps employers to
quantify the behaviors displayed by its employees.

ADVANTAGES:

The method is easy to understand and is user friendly.

Standardization of the comparison criteria’s
Behaviors are quantified making appraisal system easier

DISADVANTAGES:

Judge mental error

Difficulty in rating
Perception issues
They are good at identifying the best and poorest of employees. However, it does
not help while differentiating the average employees.
Not effective in understanding the strengths of employees. Different employees
have different strong characteristics and these might quantify to the same score.

RANKING METHOD
It is the oldest and simplest formal systematic method of performance appraisal in which
employee is compared with all others for the purpose of placing order of worth. The
employees are ranked from the highest to the lowest or from the best to the worst.

ADVANTAGES:

Graphic rating scales are less time consuming to develop.

They also allow for quantitative comparison.

DISADVANTAGES:

It does not tell that how much better or worse one is than another.
The task of ranking individuals is difficult when a large number of employees are rated
 ROLES IN PERFORMANCE APPRAISAL PROCESS
REPORTING MANAGER

Give input to the reviewer/HOD on the representatives' social qualities showed in the
PMS Policy Manual.
Guarantees that representative knows about the standardization/execution appraisal
measure.
Address worker’s concerns/questions on appraisal rating, in discussion with the reviewer.

REVIEWER

Consult with the reporting managers on the social qualities of the representatives.
Wherever required, autonomously survey workers for the said conduct characteristics;
such evaluations may require gathering information legitimately from other important
representatives.

HOD

Submit the proposed Performance Rating for each representative of his/her capacity to
the Normalization council.
He is also a part of the Normalization Council.
Claims the performance rating of each representative in the department.

HR HEAD

He/ She is the secretary of the Normalization Council.

Helps HOD's/Reporting Managers in conveying the performance rating of the
representatives.
 KEY CONCEPTS IS PERFORMANCE APPRAISAL
SYSTEM
KRA:

KRA stands for Key Responsibility Areas. It refers to the general metrics or parameters
which the organization has fixed for a specific role.

It broadly defines the job profile for the employee and enables them to have better clarity
of their role. KRAs should be well-defined, quantifiable, and easy to measure. It also
helps employees to align their role with that of the organization.

BEHAVIORAL TRAITS:

A portion of the qualitative parts of a representatives' performance joined with the overall
behavioral traits showed by the representative during a year comprises his behavioral
traits. A worker is appointed the rating based on the force of the conduct showed by him.
They assume a significant job in the choosing the last presentation rating for a worker as
is even fit for moving the rating one level upwards/downwards.

PERFORMANCE RATING PROCESS:

The rating process tries to explain the four different types of rating that an employee can
achieve i.e. Exceptional Contribution, Significant Contributor, Contributor and Partial
Contributor. It also explains the criteria, which is considered for awarding any of these
ratings to the employee.

PROMOTION AND RATING DISTRIBUTION GUIDELINES:

The promotion and normal distribution guidelines provide the framework within which
the performance appraisal process has to work. It is very important that the HR
department pays due attention to these guidelines while preparing the bell curves for
various functions and the consolidated bell curve for all the functions. These guidelines
also help in deciding upon the promotion cases in a year.
Key result areas
KRA’s is an acronym for ‘Key Results Area’.
Having clearly defined Key Results Areas enables you to take ownership of your
job and to accept responsibility for those areas in which achieving results are
your responsibility.

Key Results Areas enable you to:

• Have clearly defined and achievable goals.
• Measure your progress during the year in terms of identified targets.
• Manage your skills development.
• Identify areas for development (skills gaps which exist).
• Obtain timely feedback that will allow you to change direction when
needed.
• Promote an environment of self-management.

Core KRAs of the HR Department

1. Recruitment/ Selection
2. Workforce Planning/
3. Diversity Management
4. Performance Management
5. Reward Management
6. Workplace Management
7. Industrial Relations
8. Safety And Health Workplace
9. Building Capabilities And Organization Learning
10.Effective Hr Management Systems , Support And Monitoring

Key Performance Areas [KPA]

When the key results area is large, it is broken into manageable areas
for managing/ evaluation. These sub-sections of KRAs are called KPA.
For example
KRA = Recruitment / Selection
KPA 1= Recruitment
KPA 2 = Selection

Key Performance Indicators [KPI]

To manage each KRA/ KPAs, a set of KPIs are set.
A key performance indicator is a financial and non-financial measure used to
measure progress towards a stated organizational goal or objective (KPA / KRA).

The benefits of measuring Key Performance Indicators

• It can be a very quick way of seeing the actual performance of a goal or
strategic objective.
• Decisions can be made much quicker when there are accurate and visible
measures to back them up.
• Can allow management to see the company or department performance in one
place.
• A team can work together to a common set of measurable goals.

Characteristics of KPI
• KPI is always connected with the corporate goals.
• A KPI is decided by the middle or top management.
• It belongs to an individual who is accountable for its outcome.
• A KPI leads to action.
• Few in number.
• They are indicators of performance desired by the organization.
• Easy to understand.
• It should be balanced not undermine each other.
• Users can gauge their progress overtime.
• KPI’s loses its value overtime so they must be periodically reviewed and
refreshed.