Performance Appraisal & Management ( UNIT-VI )

📌 Performance Appraisal & Management — Meaning

Performance Appraisal is the formal and systematic evaluation of an employee’s job

performance compared to the performance standards set by the organization.

Performance Management is a continuous process of setting goals, monitoring

performance, providing feedback, and developing employee potential.

Example:
At Infosys, employees are appraised annually based on client feedback, teamwork, and
project delivery.

📌 Three-Step Process of Performance Appraisal

1️⃣Set Work Standards/Goals

👉 The manager defines clear, specific, and measurable job standards for employees.
Example: A sales target of ₹5 lakh per quarter.

2️⃣Assess Performance
👉 Measure and compare actual employee performance with the set standards using reports,
observations, and feedback.
Example: Employee achieves ₹6 lakh sales.

3️⃣Provide Feedback
👉 Manager discusses performance results with the employee, highlighting strengths and areas
for improvement.
Example: Praising the sales executive for exceeding the target and suggesting new
responsibilities.

📌 Why Appraise Performance?

✔️Pay, Promotion, and Retention Decisions

👉 Helps decide salary hikes, promotions, or transfers.

✔️Aligns Performance with Company Goals

👉 Ensures individual performance contributes to business objectives.

✔️Corrects Deficiencies & Reinforces Strengths

👉 Identifies weak areas and motivates good performance.

✔️Career Planning for Employees

👉 Provides clarity for future growth opportunities.

✔️Identifies Training Needs

👉 Finds skill gaps and plans development programs.
Example:
A marketing manager’s low digital marketing skills are identified, leading to specialized
training.

📌 Who Should Do the Appraising?

 Peer Appraisals: Feedback by coworkers.

 Crowd Appraisals: Mass feedback through tools like Rypple.
 Virtual Games: Role-playing games to test decision-making and teamwork.
 Rating Committees: Multiple supervisors rate employee performance collectively.
 Self-Ratings: Employee assesses their own performance.
 Appraisal by Subordinates: Employees evaluate their managers.
 360-Degree Feedback: Combined feedback from supervisors, peers, subordinates,
and customers.
Example: Used by companies like Wipro and Infosys.

📌 Traditional Tools for Appraising Performance

1️⃣Graphic Rating Scale

👉 Rates employees on various job factors (e.g., teamwork, punctuality) on a scale.
Example: 1 (Poor) to 5 (Excellent)

2️⃣Alternation Ranking Method

👉 Ranks employees from best to worst, choosing highest and lowest alternately.

3️⃣Paired Comparison Method

👉 Compares each employee with every other in pairs. How it Works:

 Each time, the better-performing employee in the pair is noted.

 Finally, the number of times each employee is rated better is counted.

Example:
If there are 4 employees — A, B, C, D —

 A is compared with B, C, D
 B is compared with C, D
 C is compared with D
The employee who wins more comparisons is ranked higher.

Advantage:
👉 Suitable for small teams.

Limitation:
👉 Becomes difficult if the number of employees is large.
4️⃣Forced Distribution Method
👉 Divides employees into categories like Top 10%, Average 70%, Bottom 20%. 📌 How it
Works:

 Employees are categorized into different performance levels based on predetermined

percentages.
 The rater has to classify employees accordingly — no flexibility.

Example:
A company fixes this distribution:

 20% — Below Standard

 60% — Meet Standards
 20% — Outstanding

If a manager has 10 employees, they must place:

5️⃣Critical Incident Method

👉 Maintains records of employee’s exceptional good or bad behavior.

7️⃣Management by Objectives (MBO)

👉 Sets specific, measurable goals agreed upon by employee and manager, and performance is
measured based on goal achievement.

4. Forced Ranking (Bell Curve Method)

Definition:
Employees are ranked and placed into a curve (top, middle, bottom performers).

Breakdown:

 🔵 Top 2% – Outstanding (Always excels)

 🔷 14% – Exceeds Expectations (Often proactive)
 🟢 68% – Meets Expectations (Does job well)
 🟡 14% – Needs Improvement (Needs training)
 🔴 2% – Unacceptable (Low performer)

Example:
A company with 100 employees will have:

 2 top stars
 68 average performers
 2 at bottom
5. Balanced Scorecard

Definition:
A method to measure employee performance from 4 areas.

Area What It Checks Example KPI

Financial Money & profits Revenue, Net Profit
Customer Customer happiness Returns, Satisfaction
Internal Process How well things run inside the company Downtime, Inventory
Learning & Growth Employee development Retention, Innovation

6. Technology in Appraisal (AI & EPM)

AI in Appraisal:

 Smart systems analyze performance data.

 Reduces human bias.

EPM (Electronic Performance Monitoring):

 Tracks what employees do on their computers.

 Helps managers see productivity.

Example:
AI sends alerts if productivity drops or suggests training.

✅ Extra Tip: How to Give Feedback

Use the “SBI” method:

 Situation – What happened?

 Behavior – What did the employee do?
 Impact – What was the result?

Example:
"In yesterday’s meeting (S), you gave clear ideas (B), which helped the team make faster
decisions (I).

Performance Management

Definition:
A continuous process of identifying, measuring, and developing employee and team
performance and aligning it with organizational goals.
Example:
Setting quarterly goals, regular feedback, and development plans.

💻 Performance Management Technology

1. Cloud-Based Software
o Stores appraisal data
o Tracks goals and progress
o Examples: BambooHR, SuccessFactors
2. EPM (Electronic Performance Monitoring)
o Monitors real-time work activity via digital systems
o E.g., tracks time spent on tasks
3. HR Scorecards & Digital Dashboards
o Visually track KPIs (Key Performance Indicators)
o Help in data-driven HR decisions

📊 Balanced Scorecard Framework

Developed by: Robert S. Kaplan & David P. Norton (1992)

Purpose: Look at performance holistically (all-round)

🟠 Four Perspectives of Balanced Scorecard

🔹Perspective 🔸Focus ✍️Example KPI

Financial Profitability, cost control Net Profit, OPEX
Customer Customer satisfaction & loyalty Satisfaction score, return rate
Internal Processes Internal operations Machine downtime, process speed
Learning & Growth Employee learning & innovation Training hours, retention

🧭 Balanced Scorecard – Strategy Mapping

Term Meaning Example

Objective What to achieve Improve safety
Measure How to measure it # of accidents
Target Desired level 10% fewer accidents
Initiative Actions taken Safety training program

📈 HR Scorecard
Developed by: Becker, Huselid & Ulrich (2001)
Definition: A tool to align HR strategy with business strategy and predict future business
outcomes using HR metrics.

Focus:

 Track HR Deliverables
 Use leading indicators to predict performance

🔧 Steps to Create an HR Scorecard:

1. Create HR Strategy Map

o Align HR goals with business goals
2. Identify HR Deliverables (HR KPIs)
o Retention rate, hiring time, etc.
3. Design HR Policies & Practices
o Training, recruitment, performance systems
4. Align HR Systems
o Ensure tech, culture, and people match strategy
5. Create HR Efficiencies
o Minimize waste, maximize performance

Recruitment Strategy Map Breakdown

Strategic Goals:

 Objective: Become the most innovative organization in the sector.

 Path: Achieved by hiring more qualified professionals.

Employee Growth Goals:

 Objective: Recruit better-qualified candidates.

 Impact: Leads to increased innovation.

Financial Goals:

 Objective: Reduce recruitment costs.

 Outcome: Supports other process improvements.

Process Goals:

 Objectives:
1. Reduce lead time in recruitment.
2. Enhance employer attractiveness.
 Connection: Improving these processes aids in reducing costs and attracting top
talent.
Recruitment Strategy and HR Scorecard

The comparison highlights how recruitment efforts align with broader organizational goals. It
also tracks the effectiveness through measurable Key Performance Indicators (KPIs).

1. Strategic Goal:
o Objective: Be the most innovative organization in the sector.
o HR KPIs: Innovation benchmark position.
 Current: Rank 5
 Target: Top 3.

Example: If a competitor launches five innovative products in 95 days while your

organization takes 121 days, focus on reducing this time-to-market to gain a
competitive edge.

2. Employee Growth Goal:

o Objective: Hire more qualified professionals.
o HR KPIs: Manager satisfaction score after 1 year (quality of hire).
 Current: 0.70
 Target: 0.85.

Example: Conduct skill-based assessments and refined interviews to ensure new hires
align with company needs.

3. Financial Goal:
o Objective: Decrease recruitment costs.
o HR KPIs: Recruitment cost in dollars.
 Current: $4 million
 Target: $3.5 million.

Example: Leverage digital tools for recruitment (e.g., LinkedIn hiring solutions) to
reduce overhead.

4. Process Goals:
o Objectives: Reduce lead time, be a more attractive employer.
o HR KPIs:
 Time to hire (days): Current: 38; Target: 25.
 Acceptance ratio (%): Current: 70%; Target: 90%.
 Top employer benchmark: Current: Top 40%; Target: Top 20%.

Example: Streamline recruitment processes like resume screening and onboarding to

shorten the time to hire while creating a strong employer brand.