Performance and Potential

Appraisal
What is performance
Def: It means outcomes achieved, or
accomplishments at work-the actual
contribution of an individual or team to
the organization's strategic goals
 Performance appraisal
means evaluating an
employee’s current
and/or past
performance relative to
his or her performance
standards
Performance
Management and
Appraisal
 Performance Appraisal
Performance appraisal is the process by which
organizations evaluate employee job performance.
 Uses of Performance
Appraisals
• Performance Improvement. Performance feedback
allows the employee, the manager and human
resource specialists to intervene with appropriate
actions to improve performance.
 Uses of Performance
Appraisals
• Compensation Adjustments. Performance
evaluations help decision-makers determine who
should receive pay raises. Many firms grant part or
all of their pay increases and bonuses on the basis of
merit, which is determined mostly through
performance appraisals.
 Uses of Performance
Appraisals
• Placement decisions. Promotions, transfers and
demotions are usually based on past or anticipated
performance. Often promotions are a reward for
past performance.
• Training and development needs. Poor performance
may indicate untapped potential that should be
developed.
 Uses of Performance
Appraisals
• Career planning and development. Performance
feedback guides career decisions about specific
career paths one should investigate
• Deficiencies in staffing process. Good or bad
performance implies strengths or weaknesses in the
human resource department’s staffing procedures.
 Uses of Performance
Appraisals
• Informational inaccuracies. Poor performance may
indicate errors in job analysis information, human
resource plans, or other parts of the human resource
management information system. Reliance on
inaccurate information may have led to
inappropriate hiring, training, or counselling
decisions.
 Uses of Performance
Appraisals
• Job design error. Poor performance may be a
symptom of ill-conceived job designs. Appraisals
help diagnose these errors.
• Avoidance of discrimination. Accurate performance
appraisals that actually measure job-related
performance ensure that internal placement
decisions are not discriminatory.
 Uses of Performance
Appraisals
• External challenges. Sometimes
performance is influenced by factors
outside the work environment, such as
family, finances, health, or other
personal matters. If such influences
are uncovered through appraisals, the
human resource department may be
able to provide assistance.
PA involves answering following
questions
a. What performance was to be achieved
b. Has it been achieved
c. What were the shortfalls and constraints
d. What are we going to do now
e. How will we know that we have done it
f. What kind of feedback can be expected
g. What assistance is reqd. to improve
h. What rewards are likely to follow
Comparing Performance Appraisal and
Performance Management

 Performance appraisal
 Evaluating an employee’s current and/or past
performance relative to his or her performance
standards.
 Performance management
 The process employers use to make sure
employees are working toward organizational
goals.
PfM
According to Armstrong, PfM is a means
of getting better results from the
organization, teams and individuals by
understanding and managing
performance within an agreed
framework of planned goals, standards
and competence requirements.
 Performance management - process
through which companies ensure that
employees are working towards
organizational goals
 includes practices through which the
manager defines the employee’s goals
and work, develops the employee’s
capabilities, and evaluates and rewards
the person’s efforts
 Performance Measures

Performance Measures. The ratings used to evaluate

employee performance
 Subjective vs. Objective
Measures
SUBJECTIVE OBJECTIVE
• Not verifiable by others • Verifiable by others
• Based on rater’s • Usually quantitative
opinions and therefore more
• Accuracy and precise
usefulness low • Rater’s opinion of ratee
can’t change rating
 The Components of an Effective
Performance Management Process
 Direction sharing
 Role clarification
 Goal alignment
 Developmental goal setting
 Ongoing performance monitoring
 Ongoing feedback
 Coaching and support
 Performance assessment (appraisal)
 Rewards, recognition, and compensation
 Workflow and process control
Performance Appraisal Roles
 Supervisors
 Usually do the actual appraising.
 Must be familiar with basic appraisal
techniques.
 Must understand and avoid problems that can
cripple appraisals.
 Must know how to conduct appraisals fairly.
Performance Appraisal Roles
(cont’d)
 HR department
 Serves a policy-making and advisory role.
 Provides advice and assistance regarding the
appraisal tool to use.
 Prepares forms and procedures and insists that all
departments use them.
 Responsible for training supervisors to improve their
appraisal skills.
 Responsible for monitoring the system to ensure that
appraisal formats and criteria comply with laws and
are up to date.
Designing the Appraisal Tool
 What to measure?
 Work output (quality and quantity)
 Personal competencies
 Goal (objective) achievement

 How to measure?
 Graphic rating scales
 Alternation ranking method
 MBO, etc
Steps in Appraising Performance

 Defining the job

 Making sure that you and your subordinate agree on
his or her duties and job standards.
 Appraising performance
 Comparing your subordinate’s actual performance to
the standards that have been set; this usually involves
some type of rating form.
 Providing feedback
 Discussing the subordinate’s performance and
progress, and making plans for any development
required.
The Appraisal Process
1. Establish performance standards
2. Communicate performance expectations to
employees
3. Measure actual performance
4. Compare actual performance with
standards
5. Discuss the appraisal with the employee
6. Initiate corrective action where necessary
Traditional methods of PA
1. Straight ranking
2. Man-to-man comparison
3. Graphic rating scale
4. Forced distribution
5. Check lists
6. Free form essay
7. Critical incidents
8. Field review
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 performance.
 It is quite useful for a comparative
evaluation.
Man-to-man comparison

 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 on the basis of
the overall comparisons, the employees
are given the final rankings
Graphic rating scale
 In this method, an employee’s 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 on 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.
 Graphic
Rating
Scale with
Space for
Comments
Forced Distribution Method
 To eliminate the element of bias from the
rater’s 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 lists 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.
Free form essay Method
 This traditional form of appraisal, also known as
"Free Form method" 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.
Critical Incidents Method

 In this method of Performance appraisal, the evaluator

rates the employee on the basis of critical events and
how the employee behaved during those incidents.
 Keeping a record of uncommonly good or undesirable
examples of an employee’s work-related behavior and
reviewing it with the employee at predetermined times
 It includes both negative and positive points.
 Does not just reflect the employee’s most recent
performance
 The drawback of this method is that the supervisor has
to note down the critical incidents and the employee
behaviour as and when they occur.
Examples of Critical Incidents for
an Assistant Plant Manager
Field Review Method

 In this method, a senior member of the HR

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.
Modern methods of PA
1. Assessment centre
2. Human Asset Accounting Method
3. Management by objectives (MBO)
4. Behaviorally Anchored Rating Scales
5. 360 degree Performance Appraisal
6. Balanced Scorecard
Assessment Centre Method
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 characteristics.

The major competencies that are judged in assessment

centres are interpersonal skills, intellectual capability, planning
and organizing capabilities, motivation, career orientation etc.

Assessment centres are also an effective way to determine the

training and development needs of the targeted employees.
Human asset accounting method
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.
Behaviorally anchored rating scale (BARS)
It 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 (for eg. the qualities like
inter personal relationships, adaptability and reliability, job
knowledge etc).

These statements are developed from critical incidents.

In this method, an employee’s actual job behaviour is judged

against the desired behaviour by recording and comparing the
behaviour with BARS.

Developing and practicing BARS requires expert knowledge.

 Example of a
Behaviorally
Anchored
Rating Scale for
the Dimension
Salesmanship
Skill
360 degree performance appraisal
It is 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. Superior’s appraisal
3. Subordinate’s appraisal
4. Peer appraisal

It is also a powerful developmental tool because when conducted at regular

intervals it helps to keep a track of the changes others’ perceptions about
the employees.

A 360 degree appraisal is generally found more suitable for the managers
as it helps to assess their leadership and managing styles. etc.
Management by objectives (MBO)
It was developed by Peter Drucker and refers to a comprehensive,
organizational wise goal setting and appraisal program

It can be defined as a process whereby the employees and the

superiors come together to identify common goals, the employees
set their goals to be achieved, the standards to be taken as the
criteria for measurement of their performance and contribution and
deciding the course of action to be followed.

The essence of MBO is participative goal setting, choosing course

of actions and decision making.

An important part of the MBO is the measurement and the

comparison of the employee’s actual performance with the
standards set. Ideally, when employees themselves have been
involved with the goal setting and the choosing the course of action
to be followed by them, they are more likely to fulfill their
responsibilities.
APPRAISAL FEEDBACK
INTERVIEW
 Supervisor and subordinate review the
appraisal and make plans to remedy
deficiencies and reinforce strengths
Preparing for the Appraisal
Interview
 First, give the subordinate at least a
week’s notice to review his or her work,
and to read over his or her job
description, analyze problems, and
compile questions and comments.
Preparing for the Appraisal
Interview
 Next, study his or her job description,
compare the employee’s performance to
his or her standards, and review the files
of the person’s previous appraisals
Preparing for the Appraisal
Interview
 Finally, choose the right place for the
interview and schedule enough time for it.
The interview should be done in a private
area
Appraisal Interview
 Interview’s main aim is to reinforce
satisfactory performance or to
diagnose and improve
unsatisfactory performance
 Get agreement before the
subordinate leaves on how things
will be improved and by when
 Unclear
Halo Effect
Standards

Common
Appraisal
Problems
Central
Bias Tendency

Leniency or
Strictness
Who Should Do the Appraising?
 The immediate supervisor
 Peers
 Rating committees
 Self-ratings
 Subordinates
 360-Degree feedback
Sources of Performance Information
Objectives of Potential Appraisal

1. To assess an individual in terms of the

highest level of work the individual will be
able to handle successfully in future without
being overstretched.
2. To assist the organisation in discharging its
responsibility of selecting and developing
managers for the future to ensure its
continuous growth.
Potential Attributes
1. Analytical power 9. Initiative
2. Creativity 10. Result orientation
3. Sense of reality 11. Team player
4. Effective leadership 12. Negotiation skills
5. Conceptual skills 13. Problem solving
6. Technical skills 14. Decision making
15. Subordinate
7. Communication skills development
8. Planning ability
Characteristics of an Effective
Performance Appraisal System
• Is it valid?
• Is it reliable?
• Did employees have input into its development?
• Are its standards acceptable to employees?
• Are its goals acceptable to employees?
• Are its standards under the control of employees?
Characteristics of an Effective
Performance Appraisal System

• How frequent is the feedback?

• Have raters been trained?
• Have ratees been trained?
• Do employees have input in the appraisal
interviews?
• Do the appraisals have consequences?
• Are different sources (raters) utilized?