In this article we will discuss about Performance Appraisal of Employees!
Learn about: 1. Introduction to Performance Appraisal 2. Meaning of Performance Appraisal 3. Origin 4. Features 5. Objectives 6. Purpose 7. Approaches 8. Ethics 9. Importance 10. Criteria 11. Components of Appraisal Evaluation 12. Process 13. Methods 14. Factors 15. Why Appraisal Techniques Failed? and Other Details.
Performance Appraisal of Employees: Meaning, Process, Methods, Importance, Objectives and Process
Performance Appraisal – Introduction
The world out there is an economic jungle. Every organisation, therefore, has to fight for survival. Only the fittest would be able to get ahead with confidence.
To remain at the top, organisations are virtually compelled to put their best foot forward. The scarce inputs have to be channelised in the best possible manner.
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This is where the contribution of human resources is going to make a big difference. The material and financial resources must be put to productive use. And this is possible only when an organisation is able to attract and retain talent. Appropriate rewards must be instituted.
Jobs with stretch pull and challenge must be created in sync with employee expectations. Growth opportunities must be put in place. Superior performers must be singled out for praise and their contributions must be rewarded in a proper way.
All this could happen only when the organisation is able to set challenging targets, measure the actual performance, identify the gaps and find innumerable ways and means to improve employee productivity consistently.
Measuring the job relevant strengths and weaknesses of individuals and teams working in an organisation through annual performance appraisal plans is simply not sufficient. Organisations need to go a step further to ensure that employees perform well consistently.
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This is where performance management counts, because it demands willingness and commitment of people striving harder and harder to meet the strategic aims of a company – on a daily basis.
Meaning of Performance Appraisal
In the fast changing trend towards globalization, today many organizations are striving hard to modernize themselves. One of the most important hallmarks of a modern organization is to have a performance appraisal system.
Performance appraisal is the systematic evaluation of the individual with respect to his performance on the job and his potential for development. It is defined as “a process of evaluating an employee’s performance of a job in terms of its requirements”.
According to Flippo, performance appraisal is “a systematic, periodic and so far as humanly possible, an impartial rating of an employee’s excellence in matters pertaining to his present job and to his potentialities for a better job”.
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To quote Dale Yoder, “Performance Appraisal includes all formal procedures used to evaluate personalities and contributions and potentials of group members in a working organization. It is a continuous process to secure information necessary for making correct and objective decisions on employees”.
Performance appraisal is also considered as a “process of establishing or judging the value, excellence, qualities or status of some object, person or thing”. Quite often, such appraisals are labelled as “ratings” where one individual, after comparison with another, is ranked or rated as “excellent, normal or average”.
Such ratings are generally used for ascertaining an employee’s eligibility for promotion. Hence, employee evaluation or rating is the appraisal of the relative worth of the enterprise of an employee’s services on his job.
Performance appraisal is variously known as employee evaluation, employee efficiency rating, performance rating, merit rating, employee development programme, development report, personnel development or progress record or report, personnel performance record, employee progress report, employee service rating, personnel rating, employee ability rating, and they all mean the same thing.
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It is a systematic, orderly and objective method of evaluating the present and potential usefulness of the employees to the organization. As said initially, the performance appraisal system is considered to be the hallmark of modern organization and not only in the Western countries but also in India more and more organizations are striving to have systematic appraisal of the performance of their employees.
It is believed that formal appraisal of an individual’s performance began in the Wei dynasty in China with an Imperial Rater appraising the performance of members of the official family.
People also believe that the performance appraisal system was probably started with the East India Company that started to keep some kind of a record in the form of “confidential roll” – C.R. Government organizations still continue to have the word C.R. for the confidential reports of their employees.
Employee evaluation or appraisal techniques are believed to be first used during World War I when, at the instance of Walter D. Scott, the U. S. Army adopted the man-to-man rating system for evaluating military personnel. Subsequently during 1920s, the adopted policy was of giving grade wage increments to hourly paid workers in industrial units on the basis of merit.
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These yearly appraisal plans were called as “merit rating programmes”. Up- to mid-fifties most of the employee appraisal plans followed the rating scales and heavy emphasis was given on personal traits. After 1950, attention was drawn towards the performance appraisal of professional, technical and managerial personnel. Performance appraisal philosophy witnessed drastic changes in recent years.
Now the personnel appraisal emphasizes on the development of the individual and evaluates professional, technical and managerial employees. On the other hand, “merit-rating” – the older term – is restricted to a large extent to the evaluation of hourly-paid employees and is used quite often for developing the criteria for wage adjustments, promotions, transfers, etc. At present, it is a common practice to use the term “performance appraisal” instead of any other terminology.
Performance Appraisal – Origin
Employee appraisal techniques are said to have been used for the first time during the First World War, when, at the instance of Walter Dill Scott, the US Army adopted the “Man-to-man” rating system for evaluating military personnel. During the 1920-30 period, rational wage structures for hourly paid workers were adopted in industrial units.
Under this system, the policy of giving grade wage increments on the basis of merit was accepted. These early employee plans were called merit rating programmes, which continued to be so called up to the mid-fifties.
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By then, most of these plans were of the rating- scale type, where emphasis was given to factors, degrees and points. In the early fifties, however, attention began to be devoted to the performance appraisal of technical, professional and managerial personnel.
Since then, as a result of experiments and a great deal of study, the philosophy of performance appraisal has undergone tremendous changes. Consequently, a change has also taken place in the terminology used.
Now, the older phrase merit rating is largely restricted to the rating of hourly paid employees, and is used frequently in developing criteria for salary adjustments, promotions, transfers, etc. The later phrase, personnel appraisal, places emphasis on the development of the individual as and widely used to evaluate technical, professional and managerial personnel.
The appraisal of individuals in an employment has been labeled and described by experts over the years in different ways. Common descriptions include performance appraisal, merit rating, behavioural assessment, employee evaluation, personnel review, progress report, staff assessment, service rating and fitness report.
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Some personnel authorities use such concepts interchangeably, while others interpret some of these appraisal phrases differently. However, the term performance appraisal or evaluation is most widely used.
Performance Appraisal – Features
Features of an Effective Appraisal System:
An effective appraisal system should possess the following essential features:
i. Reliability and Validity:
Appraisal system should provide consistent, reliable and valid information and data, which can be used to defend the organization, even in legal challenges. If two appraisers are equally qualified and competent to appraise an employee with the help of the same appraisal technique, their ratings should agree with each other.
Then the technique satisfies the conditions of inter-rater reliability. Appraisals must also satisfy the condition of validity by measuring what they are supposed to measure. For example, if an employee is appraised with the object of promotion, information related to his potentialities to take up higher responsibilities and carry on activities at higher level should be supplied.
ii. Job Relatedness:
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The appraisal technique should measure the performance and provide information in job-related activities/areas.
iii. Standardization:
Appraisal forms, procedures, administration of techniques, ratings, etc., should be standardized as appraisal decisions affect all employees of the group.
iv. Practical Viability:
The techniques should be practically viable to administer, possible to implement and economical to undertake continuously.
v. Legal Sanction:
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Appraisals must meet the laws of the land. They must comply with provisions of various acts relating to labour.
vi. Training to Appraisers:
Because appraisal is important and sometimes difficult, it would be useful to provide training to appraisers viz., some insights and ideas on rating, documenting appraisals and conducting appraisal interviews. Familiarity with rating errors can improve rater’s performance and this may inject the needed confidence in appraisers to look into performance ratings more objectively.
vii. Open Communication:
Most employees want to know how well they are performing the job. A good appraisal system provides the needed feedback on a continual basis. The appraisal interviews should permit both parties to learn about the gaps and prepare themselves for future.
To this end, managers should clearly explain their performance expectations to their subordinates in advance of the appraisals period. Once this is known, it becomes easy for employees to learn about the yardsticks and, if possible, try to improve their performance in future.
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viii. Employee Access to Results:
Employees should know the rules of the game. They should receive adequate feedback on their performance. If performance appraisals are meant for improving employee performance, then withholding appraisal result would not serve any purpose. Employees simply cannot perform better without having access to this information.
Permitting employees to review the results of their appraisal allows them to detect any errors that may have been made. If they disagree with the evaluation, they can even challenge the same through formal channels.
ix. Due Process:
It follows then that formal procedures should be developed to enable employees who disagree with appraisal results (which are considered to be inaccurate or unfair). They must have the means for pursuing their grievances and having them addressed objectively.
Performance appraisal should be used primarily to develop employees as valuable resources. Only then it would show promising results. When management uses it as a whip or fails to understand its limitations, it fails. The key is not which form or which method is used.
Performance Appraisal – Objectives
Following are the objectives of performance appraisal:
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(1) To Provide Basis for Promotion:
The primary objective of performance appraisal is to provide basis for promotion of the employees concerned. One knows about the level of skill of an employee by such an appraisal. If on the basis of his performance appraisal an employee is found competent, he can be considered for promotion.
(2) To Provide Basis for Transfer:
On the basis of information gathered from performance appraisal, an employee is transferred from one department to the other.
(3) To Provide Basis for Training:
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Weaknesses of the employees are known with the help of their performance appraisal report. It is then decided what type of training must be imparted to an employee to improve his performance.
(4) To Help in Assigning Best Suited Work:
Employees are allotted work in future on the basis of performance appraisal. Each employee is assigned that job for which he is most suited. In this way, all employees are appointed to the post they are fit for.
(5) To Help in Motivation:
Employees too come to know of their shortcomings and they endeavour to remove them. All employees try to excel each other in job performance. Thus, performance appraisal becomes a great source of motivation.
(6) To Help in Determining the Wage and Salary:
It helps in determining the rate of remuneration of different employees. Besides, it serves as an index of the capability of all employees in the organisation and their wages are determined accordingly.
(7) To Help in Personnel Research:
Results of performance appraisal are used for research For instance, if performance appraisal reports of most of the employees are negative, it can be concluded that selection process of the organisation is defective. Similarly, knowledge of the type of training can be acquired by means of research.
(8) To Help in Managerial Decisions:
Performance appraisal has important role in managerial decisions.
Performance Appraisal – Purposes
Performance appraisal has been considered as a most significant and indispensable tool for an organisation, for the information it provides is highly useful in making decisions regarding various personal aspects such as promotions and merit increases.
Performance measures also link information gathering and decision-making processes which provide a basis for judging the effectiveness of personnel subdivisions such as recruiting, selection, training and compensation.
Accurate information plays a vital role in the organisation as a whole. They help pinpoint weak areas in the primary systems (e.g., marketing, finance and production). It is easier for managers to see which employees need training or counseling, because jobs are grouped by categories (e.g., production foreman, sales manager, financial analyst).
These categories can be broken into smaller and smaller groups, if necessary. If valid performance data are available, timely, accurate, objective, standardised and relevant, management can maintain consistent promotion and compensation policies throughout the total system.
McGregor says- Formal performance appraisal plans are designed to meet three needs, one of the organisation and the other two of the individual, namely.
1. They provide systematic judgements to back up salary increases, transfers, demotions or terminations.
2. They are means of telling a subordinate how he is doing, and suggesting needed changes in his behaviour attitudes, skills, or job knowledge. They let him know “where he stands” with the boss.
3. They are used as a base for coaching and counseling the individual by the superior.
Performance Appraisal – Approaches
Although potential uses of the performance appraisal system are many, very few organizations seem to make effective utilization of the system. There is great degree of variation in the approaches, design and use of performance appraisal system and also in the formats.
In general, there are three approaches to performance appraisal practices/ procedures:
This is an unsystematic use and often haphazard appraisal system which was frequently used in the beginning and which has subsequently given place to more formal methods. It has been largely based on seniority or quantitative standards of output for rank and file employees.
This approach is highly systematic and takes into account the measurement of employee characteristics and/or employee contribution (or both). In this system all employees are rated in the same manner utilizing the same approach so that the rating of separate personnel can be compared.
This approach is based on the behavioural value of fundamental trust in the goodness, capability and responsibility of human beings. It lays emphasis on providing mutual goal setting and appraising of progress made by both the appraiser and the appraisee.
A systematic appraisal process is considered to be superior to a casual, intuitive and at times haphazard evaluation. The fundamental value of systematic performance appraisal is that it provides information of great assistance in making and enforcing administrative decisions about such matters as promotions, pay increases, lay off and transfers.
It provides this information in advance of the time when it may be needed, thereby avoiding spot judgement when a decision may be made. Moreover, the systematic approach provides the information in a form that permits the making of comparisons’. Records established by the systematic rating of personnel are of great value in backing up decisions that have been challenged.
Another value of systematic appraisal lies in the fact that it serves to stimulate and guide employee development through a comparison of actual performance with the approved pattern. Not only appraisees but also appraisers benefit with better skills in judging and helping personnel through systematic approach.
Performance Appraisal – Ethics
Ethics of performance appraisal is such an important factor that if it is ignored there arise several problems and organizational morale issues. Thereby the basic purpose of evaluation gets defeated.
Marion S. Kellog spells out Ten Commandments of keeping the appraisals ethical:
1. Don’t appraise without knowing why the appraisal is required.
2. Appraise on the basis of representative information.
3. Appraise on the basis of sufficient information.
4. Appraise on the basis of relevant information.
5. Be honest in your assessment of all the facts you obtain.
6. Don’t write one thing and say another.
7. In offering an appraisal, make it plain that this is only your personal opinion of the facts as you see them.
8. Pass appraisal information along only to those who have good reason to know it.
9. Don’t imply the existence of an appraisal that hasn’t been made.
10. Don’t accept another’s appraisal without knowing the basis on which it was made.
She adds further that these “ethical standards are most certain to be met if appraisals are accompanied by such qualifiers as:
(i) The facts on which the appraisal is based;
(ii) Time period covered;
(iii) The purpose for which the appraisal is made;
(iv) The situational factors that shed light on the facts presented;
(v) The nature of the appraiser’s working relationship with the employee;
(vi) An explanation of how and where the facts were obtained.
It thus goes without saying that an appraisal plan must consider the ethics of evaluation without which the very purpose of appraisal may be at stake.
Performance Appraisal – Importance
Performance appraisal, basically, aims to meet two things- the administrative purposes include decisions about who will be promoted, transferred or laid off. They also include compensation decisions and the like. The developmental decisions include those related to improving and enhancing individual capabilities.
These cover identifying a person’s strengths and weaknesses, eliminating external performance obstacles, establishing training needs and so on. Whichever way you look at it, performance appraisal is a highly useful and important tool for managers. It helps in looking at the characteristics, traits, behaviour, actions of employees from close quarters and assists managers in taking appropriate personnel decisions.
For example:
1. It unifies the appraisal procedure so that all employees are rated in the same manner, utilising the same approach so that the ratings obtained of separate personnel are comparable.
2. It provides information which is useful in making and enforcing important decisions about selection, training, promotions, pay increases, transfers, lay-offs, discharges, salary adjustments, etc. The information is supplied well in advance so that spot judgements may be avoided.
3. It provides information in the form of records about ratings which may be produced as evidence when decisions on ratings are challenged in a court of law. Even arbitrators accept these in the course of grievance handling procedures as authentic records.
4. It serves to stimulate and guide employee development. Appraisal programmes provide information on the weaknesses of employees and enable them to gauge their own value and accomplishments and to know what they are doing. The weaknesses provide the basis for an individual development programme.
If used properly, such periodical appraisals will establish an atmosphere in which criticism can be taken without resentment and can be used constructively for self-improvement.
5. By finding out an employee’s qualifications, and his work and comparing it with job requirements, inefficient employees and those whose views are not in harmony with the company’s objectives or management philosophy can be weeded out or persuaded to adjust themselves.
6. A periodic and accurate appraisal constrains a supervisor to be alert and competent in his work, i.e., it improves the quality of supervision by giving him an incentive to do the things that he should normally be doing anyway.
7. It gives supervisors a more effective tool for rating their personnel, enables them to make a careful analysis of their men and gives them a better knowledge and understanding of them.
8. It makes for better employer-employee relations through mutual confidence, which comes as a result of frank discussions between a supervisor and his men.
Performance Appraisal – Criteria
The seven criteria for assessing performance are:
1. Quality- The degree to which the process or result of carrying out an activity approaches perfection.
2. Quantity- The amount produced, expressed in monetary terms, number of units, or number of completed activity cycles.
3. Timeliness- The degree to which an activity or a result produced.
4. Cost-effectiveness- The degree to which the use of the organisation’s resources (e.g. human, monetary, technological, material) is maximised in the sense of getting the highest gain.
5. Need for Supervision- The degree to which a job performer can carry out a job function without supervisory assistance.
6. Interpersonal Impact- The degree to which a performer promotes feelings of self-esteem, goodwill and co-operation among co-workers and subordinates.
7. Training- Need for training for improving his skills knowledge.
The above criteria relate to past performance and behaviour of an employee. There is also the need for assessing the potential of an employee for future performance, particularly when the employee is tipped for assuming greater responsibilities.
Performance Appraisal – Components of Appraisal Evaluation
As we have seen, performance evaluations can be made for a variety of reasons – counseling, promotion, research, salary, administration or a combination of these. So, it is necessary to begin by stating very clearly the objectives of the evaluation programme. Having done this, the personnel evaluation system should address the questions who, what, when, where, how? of performance appraisal.
As Ruderman observes, “the appraisal can be accomplished by one or more individuals involving a combination of the immediate supervisor, other managers acquainted with the assessee’s work, a higher level manager, a personnel manager, the assessee’s peers, the assesse himself and the assessee’s subordinates.”
Usually the immediate supervisor must be entrusted with the task of rating the assesse because he is most familiar with his work; and because he is also responsible for recommending or approving personnel actions based on the performance appraisal; and for providing a feedback of performance appraisal to the subordinate.
Because of these reasons, supervisors’ ratings are regarded as the best possible assessment; and they are often considered as the “heart of the most appraisal systems.” This is so because getting supervisor’s appraisal is relatively easy and also makes sense. Therefore, most appraisal systems rely heavily on the supervisor’s evaluation.
In such rating, hierarchical control is maintained over the appraisal process. Appraisal is also done, by the staff specialists, i.e., the personnel officers. They may advise the supervisor while evaluating their subordinates stressing the need for evidence for making specific appraisal judgements and comparing a particular subordinate’s evaluation with those of others.
The appraisal of an individual may also be done by his peers. Such appraisal proves effective in predicting future management success. Researchers have verified that ratings made by peers have been quite accurate in predicting which persons would be promoted and which would not. Sometimes self-evaluation is also employed for evaluating performance. Self-rating emphasises, human relations, which supervisors focus on technical knowledge and initiative.
Flippo observes- “The major value lies in the development and motivation areas, it being claimed that this approach: (1) results in a superior upward flow of information, (2) forces the subordinate to become more personally involved and, to some extent constrains him to think about himself and his work. (3) improves communication between superior and subordinate, in that each is given more information by the other when disagreements are discovered, and (4) improves motivation as a result of great participation.”
But this approach has its disadvantage that the individual may rate himself excessively high than it would be if he was rated by his superior. Because of this fairly consistent upward bias in self-appraisals, the best thing would be to use these appraisals for counseling and developing subordinates. They are not as useful for making salary and promotion decisions.
Many companies use Rating Committees to evaluate employees. These committees consist of supervisors, peers, and subordinates. Everyone on the Committee is a person who is able to intelligently evaluate some aspect of the employee’s performance. Many discrepancies in the ratings may occur — such as “very strict” or “very lenient” ratings — when evaluations are done by individuals.
It has, therefore, been felt that “the combined use of several rates” can help “cancel out” problems like ‘bias’ as ‘halo’ effect on the part of the individual rates. Second, the raters at different levels in the organisation usually observe different facets of an employee’s job performance and the appraisal by a group reflect these differences.
Last, in many companies, subordinates and superiors jointly establish goals and periodically evaluate the subordinate’s performance with respect to these goals.
The “what” of the performance appraisal consists in appraising non-supervisory employees for their current performance, and managers for future potential? It also includes evaluation of human traits.
In all the trait-based appraisals, the personal characteristics of employees such as their ability to make decisions, loyalty to the organisation, communication skills or level of initiative are generally appraised. In such appraisals, the rater generally asks a lot about what a ratee has but relatively little about what he or she actually does while at work.
In Behaviour-based appraisals, the behaviour of employees is being put to close examination, looking at how the job is actually done. A sales executive, thus, should be assessed on behaviours such as how he greets customers who enter the store, how he helps them find the items those customers are looking for, and how he thanks them for choosing the particular store for their requirements, etc.
Behaviour based appraisals, of course, might prove to be advantageous for aggressive employees and may unfairly put the reserved and not-so-pushy kind of employees at a serious disadvantage.
The ‘why’ of an appraisal is concerned with:
(a) Creating and maintaining a satisfactory level of performance of employees in their present jobs;
(b) Highlighting employee needs and opportunities for personal growth and development;
(c) Aiding in decision-making for promotions, transfers, lay-offs and discharges; and
(d) Promoting understanding between the supervisor and his subordinates.
(e) Providing a useful criterion for determining the validity of selection and training methods and techniques and forming concrete measures for attracting individual of higher caliber to the enterprise.
The ‘when’ answers the query about the frequency of appraisal. It has been suggested informal counseling should occur continuously. The manager should discuss an employee’s work as soon as possible after he has judged it. He should use good work as an opportunity to provide positive reinforcement and use poor work as a basis for training.
In most organisations, employees are formally evaluated once a year, in others twice a year. New employees are rated more frequently than the older ones. The ideal thing is that each employee should be rated three months after being assigned to a job, after six months on the job, and every six months thereafter.
The time of rating should not coincide with the time of salary reviews, for if the two occur together constructive evaluation and considerations of self-development will probably take second place to the pressures of pay.
The ‘where’ indicates the location where an employee may be evaluated? It is usually done at the place of work or office of the supervisor. Informal appraisals may take anywhere and everywhere, both on the job in work situations and off the job.
Performance Appraisal – Process
Performance appraisal is planned, developed and implemented through a series of steps.
Those are:
i. Establish performance standards:
Appraisal systems require establishment of clear, measurable and objective performance standards well in advance. To be useful, standards should relate to the desired results of each job. Both the appraiser and the appraise must have a clear idea about how the standards have to be met.
ii. Communicate the standards:
The appraiser should prepare job descriptions clearly; help the appraise set his goals and targets; analyse results objectively; offer coaching and guidance to the appraise whenever required and reward good results. The appraise should be very clear about what he is doing and why he is doing it.
For this purpose, performance standards must be communicated to appraisees and their reactions should be noted down right away. If necessary, these standards must be revised or modified.
iii. Measure actual performance:
After the performance standards are set and accepted, the next step is to measure actual performance. This requires the-
(i) Use of appropriate technique of measurement,
(ii) Understanding the factors that affect performance and
(iii) Obtaining information on results achieved. Factors like experience, individual judgment, personal observation and written reports help the appraisers get the requisite information.
iv. Compare actual performance with standards and discuss the appraisal:
Actual performance may be better than expected and sometimes it may go off the track. Whatever the consequences, there is a way to communicate and discuss the final outcome. The assessment of another person’s contribution and ability is not an easy task.
It has serious emotional overtones as it affects the self-esteem of the appraise. Any appraisal based on subjective criteria is likely to be questioned by the appraise and leave him quite dejected and unhappy when the appraisal turns out to be negative.
v. Taking corrective action:
Corrective action is of two types- one puts out the fires immediately, while the other destroys the root of the problem permanently. Immediate action sets things right and get things back on track whereas the basic corrective action gets to the source of deviations and seeks to adjust the difference permanently. Basic corrective steps seek to find out how and why performance deviates.
360-degree appraisal is a system or process in which employees receive confidential, anonymous feedback from the people who work around them. The inputs for the said appraisal are provided by subordinates, peers, superiors, team members, customers, suppliers and anyone who works closely with the employee (whose performance is evaluated by multiple raters) in question.
The appraisal measures behaviours and competencies exhibited by the rate over a period of time. The skills that are being appraised include listening, planning and goal setting. Other aspects of behaviour such as teamwork, leadership and effectiveness are also assessed.
The responses from different raters (subordinate’s appraisal, peer appraisal, superior’s appraisal along with self-appraisal) are combined to obtain an objective assessment of the rate’s performance and behaviours.
The feedback could be brutally frank—but reliable and credible—since it is obtained in an anonymous manner. As such, the quality of information obtained tends to be high. There is less scope for individual bias or prejudice coming in the way of an unbiased assessment.
Advantages and Disadvantages of 360-Degree Appraisal System:
Advantages:
1. It is transparent and free of bias.
2. Employees get to know the perception about them from others’ point of view; this helps them know more about themselves.
3. Employees get a ready list of improvement areas from their customers to work on.
4. Employees get to know their good points; this helps boost their self-esteem.
5. The exercise helps improve overall quality of the staff because each is helping the other to improve.
Disadvantages:
1. Some people may fear retaliation if they give negative feedback. This is mostly in cases where the organization does not have an open culture.
2. The system could prove to be complex in combining all the responses.
3. Feedback can be intimidating and cause frustration and resentment, if the employee feels the respondents have ganged up.
4. The responses could be mutually conflicting and may not match with one another (though the information could be objective).
5. The raters may require heavy doses of training to carry out the exercise in an impartial, objective and systematic way. It is necessary to create the right culture in the company before introducing the system. If many people are unhappy or their morale is low, the situation can turn disastrous as some staffers will become obvious targets.
6. Anonymous feedback might encourage people to throw brickbats against the ‘target’ and may use the opportunity to settle past scores.
Performance Appraisal – Methods
1. Written Essays:
The simplest method of appraisal is to write a narrative description of an employee’s strengths, weaknesses, past performance, potential and suggestions for improvement (so good or bad appraisal may be determined by evaluating the employee’s actual level of performance).
These focus on the evaluator’s attention on those behaviours that are key in making the difference between executing a job effectively or ineffectively, i.e., the appraiser writes down anecdotes that describe what the employee did that was specifically effective or ineffective. The key here is that only specific behaviors, and not vaguely defined personality traits, are cited.
This is one of the oldest and most popular methods. In this method, a set of performance factors, such as quality and quantity of work, depth of knowledge, cooperation, loyalty, attendance, honesty and initiative are tested. The evaluator then goes down the list and rates each on incremental scales.
The scales typically specify five points, so a factor such as job knowledge might be rated 1 (“poorly informed about work duties”) to 5 (“has complete mastery of all phases of the job”). This method is popular because it is less time consuming and allows for quantitative analysis and comparison.
These evaluate one individual’s performance against that of one or more others. It is a relative rather than absolute measuring device. The three most popular comparisons are group order ranking, individual ranking and paired comparisons.
The group order ranking require the evaluator to place employees into a particular classification, such as top one-fifth or second one-fifth and so on. This method is often used in recommending students to graduate schools or campus interviews.
The individual ranking approach rank orders employees from best to worst. If the manager is required to appraise thirty, subordinates, this approach assumes that the difference between the first and second employee is the same as that between the 21st and 22nd. The result is a clear ordering of employees, from the highest performer down to the lowest.
The paired comparisons approach compares each employee with every other employee and rates each as either the superior or the weaker member of the pair. After all paired comparisons are made, each employee is assigned a summary ranking based on the number of superior scores he or she achieved.
Performance Appraisal – Factors
There are many significant factors which deter or impede objective evaluation while conducting the performance appraisal process.
These factors are:
1. The Halo Effect or Error:
The “halo effect” is a “tendency to let the assessment of an individual one trait influence the evaluation of that person on other specific traits.” There is this effect in appraisal when the appraiser assigns the same rating to all traits regardless of an employee’s actual performance on these traits.
The ‘halo’ effect refers to the tendency to rate an individual consistently high or low or average on the various traits, depending upon whether the rater’s overall impression of the individual is favourable or not. This means that the halo effect allows one characteristic, observation or occurrence (either good or bad) to influence the rating of all performance factors.
The halo effect arises when traits are unfamiliar, ill-defined and involve personal relations. This often occurs when an employee tends to be more conscientious and dependable, that the appraiser might become biased toward that individual to the extent that the appraiser rates him high on many desirable attributes; or when the employee is more friendly or unfriendly toward the appraiser.
In such cases, a very high rate may be given to a favoured employee, whereas a low rating may be given to an unfriendly employee so that he may be bypassed even though he is a very capable one, when the question of a promotion arises.
Another example may be of the students who tend to rate a faculty member as ‘outstanding’ on all criteria when they are particularly appreciative of a few things he does in the classroom. Similarly, a few bad habits like coming late for lectures, being slow in returning papers, or assigning an extremely demanding reading requirement — might result in student’s evaluating the lecturer as “lousy” across- the-board.
The halo effect problem can be alleviated by:
(i) Providing a five to ten minutes training programme to the evaluators;
(ii) Restructuring the questions by requiring the evaluator to consider each question independently; and
(iii) Having the evaluator appraise all rates on each dimension before going to the next dimension.
2. Leniency or Strictness Tendency or Constant Errors:
Every evaluator has his own value system which acts as a standard against which he makes his appraisals. Relative to the true or actual performance an individual exhibits, some supervisors have a tendency to be liberal in their ratings, i.e., they consistently assign ‘high values’ to their employees, while at other times they may have a tendency to assign consistently ‘low ratings.’
The former tendency is known as ‘positive leniency error’; while the latter as ‘negative leniency error.’ When an evaluator is positively lenient in his appraisal, an individual’s performance becomes overstated, i.e., rated higher than it actually should. Similarly, under the negative tendency, performance is understated than what it should be.
Both these trends usually arise from varying standards of performance observed by supervisors and from different interpretations of what they evaluate in employee performance. The tendency can be avoided by holding meetings or training sessions for raters so that they may understand what is required of them in rating.
3. The Central Tendency Problem:
It is the most commonly found error. It assigns “average ratings” to all the employees with a view to avoiding commitment or involvement; or when the rater is in doubt or has inadequate information or lack of knowledge about the behaviour of the employee, or when he does not have much time at his disposal.
Such tendency seriously distorts the evaluations, making them most useless for promotion, salary, or counseling purposes. The ranking tools are aimed at avoiding this problem.
4. Similarity Error:
This type of error occurs when the evaluator rates other people in the same way he perceives himself. For example, the evaluator who perceives himself as aggressive may evaluate others by looking for aggressiveness. Those who show this characteristic may be benefited while others may suffer. This error also washes out if the same evaluator appraises all the people in the organisation.
5. Miscellaneous Biases:
Bias against employees on ground of sex, race, religion or position is also a common error in rating. For example, a higher rating may be assigned to a senior employee. The rater may also be influenced by organisational influence and give higher ratings to those holding higher positions. Besides these, there may be opportunity bias, group characteristic bias and knowledge-of- predictor bias.
Beach observes- “Actual experience with rating has demonstrated that supervisors will rate their people near the middle of the spectrum (average) if their bosses put pressure on them to correct the sub-par performers (or get rid of them) and if they are called upon to really justify an outstanding rating. In other words, they will follow the path of least resistance, because they know that the ‘Big Boss’ will question them about those rated low or very high.”
6. Social Differentiation:
Rating is sometimes impeded by the evaluator’s style of rating behaviour. Pigou has classified raters as- “high differentiators” — i.e., using all or most of the scale; or “low differentiators” – i.e., using a limited range of the scale.
He observes- “Low differentiators tend to ignore or suppress difference, perceiving the universe as more uniform than it really is. High differentiators, on the other hand, tend to utilise all available information to the utmost extent and, thus, are better able to perceptually deny anomalies and contradictions than low differentiators.”
Social differentiation makes evaluations using ‘trait’ criteria unreliable.
Why Appraisal Techniques Failed?
Performance appraisal techniques have often failed to give a correct assessment of the employee.
According to Zavala, the causes of such failures are:
(a) The supervisor plays dual and conflicting role of both the judge and the helper.
(b) Too many objectives often cause confusion.
(c) The supervisor feels that subordinate appraisal is not rewarding.
(d) A considerable time gap exists between two appraisal programmes.
(e) The skills required for daily administration and employee development are in conflict.
(f) Poor communication keeps employees in the dark about what is expected of them.
(g) There is a difference of opinion between a supervisor and a subordinate, in regard to the latter’s performance.
(h) Feedback on appraisal is generally unpleasant for both supervisor and subordinate.
(i) Unwillingness on the part of supervisors to tell employees plainly how to improve their performance.
How Appraisals Could be Made More Effective?
The rater must be thoroughly well-versed in the philosophy and nature of the rating system. Factors and factor scales must be thoroughly defined, analysed, and discussed.
The success of an appraisal programme depends upon:
a. The existence of an atmosphere of confidence and trust so that both supervisor and employee may discuss matters frankly and offer suggestions which may be beneficial for the organisation and for an improvement of the employee.
b. The supervisor must very thoroughly evaluate the employee’s performance so that he is capable of meeting challenges about his ratings of his subordinate.
c. The results of performance rather than personality traits should be given due weight. Suggestions for improvement should be directed towards the objective facts of the job (such as work schedules, output, reports completed, sales made, losses incurred, profits earned, accomplishments, etc.). Plans for the future must be developed jointly after consultation with subordinates. The individual as a person should never be criticised.
d. The supervisor should try to analyse the strengths and weaknesses of an employee and advise him on correcting the weaknesses.
e. The appraisal programme should be less time-consuming and less costly. At the same time, it should bring the maximum benefit.
f. Which particular technique is to be adopted for appraisal should be governed by such factors as the size, financial resources, philosophy and objectives of an organisation?
g. The results of the appraisal, particularly when they are negative, should be immediately communicated to the employees, so that they may try to improve their performance.
h. A post-appraisal interview should be arranged so that employees may be supplied with feedback and the organisation may know the difficulties under which employees work, so that their training needs may be discovered.
Norman Maier suggests three such interviews- (a) Tell-and- Sell Method, to communicate to the employee information about his performance, gain his acceptance of it, and draw up a plan for future improvement, if necessary, (b) The-Sell-and- Listen Method, to communicate the evaluation results to the employee and get his reactions to them, (c) Problem-solving Approach, under which the ratee and the rater sit together and find out alternative solutions for improving performance.
i. The standards of performance appraisal can be improved by training of the evaluators. It has been indicated that appraisers who are trained in how to evaluate subordinates tend to be more effective appraisers than those who had not undergone such training.
j. Lastly, many of the problems or hindrances can be minimised if right appraisal tools are chosen.
A good appraisal system should measure important job characteristics (relevancy), be free from contaminating influences, and cover all key aspects of the job. It should be reliable and avoid rating errors of all kinds. More importantly, appraisal systems must be fair to women, minorities and other protected groups.
Of course, appraisals must also be practical. Balancing all these demands might prove to be a tough and challenging job for raters/appraisers in an organisation. Performance appraisal is an important tool for inspiring employees to give their best. The use of appropriate assessment instrument by training raters is a step in the right direction while trying to put the system in place.
Offering feedback in an appropriate manner would help the ratees to overcome performance-related deficiencies and meet the expectations of raters in every way. The unpleasant confrontations between the superiors and subordinates must be avoided at all times and the opportunity should be utilised to build rapport and understanding between the parties.
When offering feedback to subordinates, the supervisors must ensure that the feedback is credible, specific, and constructive and accompanied by concrete examples of poor or good performance. The subordinates must be encouraged to participate in the system with enthusiasm so that they begin to think that the targets are achievable and fixed in an atmosphere of mutual trust and concurrence.
Performance Appraisal – Problems
The problems inherent in performance appraisal may be listed thus:
Judgment Errors:
People commit mistakes while evaluating people and their performance. Biases and judgment errors of various kinds may spoil the show. Bias here refers to inaccurate distortion of a measurement.
These are:
i. First Impressions (Primacy Effect):
The appraiser’s first impression of a candidate may colour his evaluation of all subsequent behaviour. In the case of negative primacy effect, the employee may seem to do nothing right; in the case of a positive primacy effect, the employee can do no wrong.
ii. Halo:
The halo error occurs when one aspect of the subordinate’s performance affects the rater’s evaluation of other performance dimensions. If a worker has few absences, his supervisor might give the worker a high rating in all other areas of work. Similarly, an employee might be rated high on performance simply because he has a good dress sense and comes to office punctually!
iii. Horn Effect:
The rater’s bias is in the other direction, where one negative quality of the employee is being rated harshly. For example, the rate does not smile normally, so he cannot get along with people!
iv. Leniency:
Depending on rater’s own mental make-up at the time of appraisal, raters may be rated very strictly or very leniently. Appraisers generally find evaluating others difficult, especially where negative ratings have to be given.
A professor might hesitate to fail a candidate when all other students have cleared the examination. The leniency error can render an appraisal system ineffective. If everyone is to be rated high, the system has not done anything to differentiate among employees.
v. Central Tendency:
An alternative to the leniency effect is the central tendency, which occurs when appraisers rate all employees as average performers. For example, a professor, with a view to playing it safe, might give a class grades nearly equal to B, regardless of the differences in individual performance.
vi. Stereotyping:
Stereotyping is a mental picture that an individual holds about a person because of factors like the person’s sex, age, religion and caste. By generalizing behaviour on the basis of such blurred images, the rater grossly overestimates or underestimates a person’s performance.
For example, employees from rural areas might be rated poorly by raters having a sophisticated urban background if they view rural background negatively.
vii. Recency Effect:
In this case, the rater gives greater weightage to recent occurrences than earlier performance. For example, an excellent performance that may be six or seven months old is conveniently forgotten while giving a poor rating to an employee’s performance which is not so good in recent weeks.
Alternatively, the appraisal process may suffer due to a ‘spillover effect’, which takes place when past performance influences present ratings.
viii. Poor Appraisal Forms:
The appraisal process might also be influenced by the following factors relating to the forms that are used by raters:
1. The rating scale may be quite vague and unclear.
2. The rating form may ignore important aspects of job performance.
3. The rating form may contain additional, irrelevant performance dimensions.
4. The forms may be too long and complex.
ix. Lack of Rater Preparedness:
The raters may not be adequately trained to carry out performance appraisal activities. This becomes a serious limitation when the technical competence of a rate is going to be evaluated by a rater who has limited functional specialization in that area.
The raters may not have sufficient time to carry out appraisals systematically and conduct thorough feedback sessions. Sometimes, the raters may not be competent to do the evaluations owing to a poor self-image and lack of self-confidence. They may also get confused if the objectives of appraisal are somewhat vague and unclear.
x. Ineffective Organizational Policies and Practices:
If the sincere appraisal effort put in by a rater is not suitably rewarded, the motivation to do the job thoroughly declines. Sometimes, low ratings given by raters are viewed negatively by management—as a sign of failure on part of rater or as an indication of employee discontent.
So, most employees receive satisfactory ratings, despite poor performance. Normally, the rater’s immediate supervisor must approve the ratings. However, in actual practice, this does not happen. As a result the rater ‘goes off the hook’ and causes considerable damage to the rating process.
Performance Appraisal – Limitations
Main limitations of performance appraisal are as under:
(1) Opposition by Inefficient Employees:
Performance appraisal gives the ml picture of the level of performance of the employees. It highlights their shortcomings. That is why inefficient employees or those who shirk work always oppose it and try to create obstructions in such appraisal.
(2) Possibility of Bias:
Performance appraisal is not free from personal bias. That is why many a time its objectives cannot be achieved. If the officer responsible for doing performance appraisal has liking for a particular employee and disliking for the other, he may submit favourable appraisal report in respect of the former and unfavourable in respect of the latter.
(3) Difficulty in Setting Standards:
Under performance appraisal actual work performed by an employee is compared with standardized work. But to set standard is itself a difficult task.
(4) Possibility of Wrong Appraisal:
Several basis are used for performance appraisal of an employee. For example- counting of units produced, quality of work, knowledge about different activities associated with the work, cooperation with other employees, amount of self-confidence, etc. Of these, there are some basis which can be measured quantitatively but there are others which are qualitative by nature and so cannot be measured quantitatively. In their case (qualitative) chances of wrong appraisal cannot be ruled out.
Performance Appraisal – Obstacles to Effective Appraised System
Performance appraisals, although very widely used, have well-recognised short comings and limitations. Even when the process emphasizes appraisal rather than counselling, it is far from universally satisfactory. There are certain barriers which work against the effectiveness of appraisal system.
The identification of these barriers is necessary to minimise their impact on the appraisal programmes are:
1. Faculty assumptions,
2. Psychological blocks and
3. Technical pitfalls.
1. Faulty Assumptions:
Because of the family assumptions of the parties concerned—superior and his sub-ordinate—in appraisal system, it does not work properly or subjectively.
These assumptions work against an appraisal system in the following Manner:
(i) The assumption that managers naturally wish to make fair and accurate appraisals of sub-ordinates is untenable. McFarland feels that both supervisors and sub-ordinates show tendencies to avoid formal appraisal processes.
(ii) Another faulty assumption is that managers take a particular appraisal system as perfect and feel that once they have launched a programme that would continue forever. They expect too much from it and rely too much on it, or blame for their faults. It should be recognised that no system can provide perfect, absolutely defensible appraisals devoid of subjectivity.
(iii) Managers sometimes assume that personal opinion is better than appraisal and they find little use of systematic appraisal and review procedures. However, this ‘management by instinct’ assumption is not valid and leads to bias, subjectivity and distorted decisions based on partial or inaccurate evidence.
(iv) Manager’s assumptions that employees want to know frankly where they do stand and what their superiors think about them are not valid. In fact, sub-ordinates resist to be appraised and their reaction against appraisal has often been intense.
2. Psychological Blocks:
The value of any tool, including performance appraisal, lies largely on skills of the user. Therefore, the utility of performance appraisal depends upon the psychological characteristics of managers, no matter whatever the method is used. There are several psychological blocks which work against the effectiveness of an appraisal system.
There are manager’s feeling of insecurity, appraisal as an extra burden, their being excessively modest or sceptical their feeling to treat their sub-ordinates’ failure as their deficiency, disliking of resentment by sub-ordinates, disliking of communicating poor performance to sub-ordinates and so on. Because of these psychological barriers, managers do not tend to become impartial or objective in evaluating their sub-ordinates, thereby defeating the basic purpose of appraisal.
3. Technical Pitfalls:
The design of performance appraisal forms has received detailed attention from psychologists, at the problem of adequate criteria still exists there. At best, appraisal method is subjective and does not measure performance in any but in the most general sense.
The main technical difficulties in appraisal fall into two categories:
(A) The criterion problem and
(B) Distortions that reduce the validity of results.
(A) 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.
(B) Distortions:
Distortions occur in the form of biases and errors in making the evaluation. Such distortions may be introduced by evaluator consciously or unconsciously.
An appraisal system has the following possible distortions:
(i) Halo Effect:
This distortion exists where the rater is influenced by rater’s one or two outstandingly good (or bad) performance and he evaluates the entire performance accordingly. Another type of halo effect occurs where the rater’s judgement is influenced by the work team or informal group with which a sub-ordinate associates. If the group is not well liked the attitude may work the rating of the individuals on it, apart from the actual performance.
(ii) Central Tendency:
This error occurs when the rater marks all or almost all his personnel as average. He fails to discriminate between superior and inferior persons. This may arise from the rater’s lack of knowledge of individuals he is rating, or from haste, indifference, or carelessness.
(iii) Constant Errors:
There are easy rates and tough raters in all phases of life. Some raters habitually rate everyone high others tend to rate low. Some rate on potential rather than on recently observed performance. In such a situation, the results of two raters are hardly comparable.
(iv) Rater Likes and Disliking:
Managers, being human have strong liking for people, particularly close associates. The rating is influenced by personal factors and emotions and raters may weight personality traits more heavily than they realise. Raters tend to give high rating to persons whom they like and low rating that they dislike.
Overcoming the Obstacles:
Systematic performance appraisal is a measurement process and as such must be reliable which means that it must be accurate and consistent. Two main obstacles come in the way of reliable appraisal system technical characteristics of system itself and the abilities of the appraiser to exercise objective judgement and apply the tools provided. Taking appropriate actions in this direction may reduce the impact of these obstacles if not altogether eliminate them.
Following measures may be taken:
1. The reliability of a rating system can be obtained by comparing the rating of two individuals for the same person. It can also be obtained by comparing the supervisor’s rating given now to another rating in future.
2. The appraisal system can be designed to help in minimising undesirable effects. The system should focus on objective analysis of performance in terms of specific events, accomplishments or failures. The raters may be required their rates through as much continuous and close personal observation as possible.
3. The rating must be made by the immediate superiors; however a staff department can assume the responsibility of monitoring the system. Though the staff department cannot charge any ratings, it can point out inconsistencies to the rater, such as harshness, leniency, central tendency and so on.
4. The rating should be reviewed with the rater. It helps him to know where he stands, what he expected to do, what are his strengths and weakness and what further actions he should take. This not only put sub-ordinates in a position to improve performance, he also minimises his resistance to appraisal if a proper atmosphere has created.
5. The most important factor for effective appraisal system is the supportive management philosophy. Without an appropriate basic philosophy to generate the continuous support of all the managers, appraisal system cannot succeed. According to Myers, a goal-oriented climate in the organisation proves to be more favourable for effective performance appraisal.