Performance Appraisal

“A Performance Appraisal is a process of evaluating an employee’s performance of

a job in terms of its requirements.”
- Walter Dill Scot

“It is the process of evaluating the performance and qualifications of the employees
in terms of the requirements of the job for which he is employed, for purposes of
administration, including placement,… selection for promotions, providing
financial rewards and other actions which require differential treatment among the
members of a group as distinguished from actions affecting all members equally.”
- C.Heyel

“Performance appraisal may be defined as any procedure that involves

(1) setting work standards;
(2) assessing the employee’s actual performance relative to these standards; and
(3) providing feedback to the employee with the aim to motivating that person to
eliminate performance deficiencies or to continue to perform above par.”
– Gary Dessler

Important terms:
 Systematic
 Periodic
 Evaluation/ Assessment
 Performance
 Job requirements
 Distinguishing
 Motivating/ eliminating performance deficiencies
 Administrative functions

Performance Appraisal Inputs-Based on Tavistock School

Activity 1
Activity 2
Activity 3 Task I
Activity 4
Job
Task
JOB Analysis Performance

Activity 5
Activity 6 Yard
Activity 7 Task II Stick
Activity 8
Performance Appraisal Output
• Remedial
• Developmental
• Innovative

PA Process
Stage I :Set up standards based on job description and job specification
Stage II :Inform standards to all
Stage III :Follow instructions for measurement
Stage IV :Assess influences of internal and external
factors on job and adjust measurements
Stage V :Measurement of performance
Stage VI :Comparison with standards/ others
Stage VII :Communicating/ counseling
Stage VIII :Suggestions
Stage IX :Follow-up

PA Steps
Step I Establish performance standards
Step II Communicate performance expectations to the employees
Step III Measure actual performance
Step IV Compare actual performance with standards
Step V Discuss the appraisal with the employee
Step VI Initiate corrective measures/ Recommend for rewards

PA Components
 Identification of key performance areas (KPA) and target setting through
periodic discussions
 Identification of qualities required for the present and future jobs
 Self-appraisal by the appraisee
 Performance analysis to identify the facilitating and hindering factors of the
jobs
 Performance counseling and discussion
 Identification of training needs
 Action-planning and goal setting for future
 Final assessment

PA Procedure
 Performance Standards
 Key areas of responsibility
 Expressing standards
 Performance Measurements
 Performance Appraisal
 The Final Appraisal Document
KPAs
The categories and functions need to be well defined so that assessment of the
performance of any employee can be conducted meaningfully.
 Clarity about activities
 Acknowledging importance of the activities
 Commitment to solving problems related to activities
 Understanding of expected performance level vis a vis the KPA ratings
Examples:
 Sales Officer: Contacting potential customers, market survey, attending to
customer complaints etc…
 HR Executive: Finding out HR requirements, recommending recruitment
inputs, preparing assessment parameters and tests etc…
 Accounts Officer: Budget preparation, payment of bills, scrutinizing
purchase orders, maintaining daily account records etc…

Performance Targets
 Qualitative
 Quantitative
 Time bound
 Acceptable standards
 Measurement of efforts

Example:

Role: Manager (Finance)

KPA: Cost- reduction (weightage 2)
Activities: a> Working on company cost-reduction manual;
b> Working with operating managers for cost reduction
Objective: Optimum utilization of the company operations
Performance Targets:
· >Complete write-up and acceptance of company cost-reduction manual and
distribute to all managers by the year-end.
· >Collect ten suggested cost-reduction ideas per month from each of six operating
managers.

Categories of PA

According to Rock and Lewis, the following are the categories of PA.
• Narrow interpretation: This is the performance assessment of an individual after a
specified period. This is done with the help of certain predetermined measurement
criteria. Rating of the individual through various methods is a common phenomenon here.
Some of the methods used for assessing the job performance and the characteristics of
the individuals include traits rating scale, ranking method, employee comparison method,
and performance standard method.
• Broad interpretation: This takes a holistic view of the individual performance. Therefore
it aims at the complete job management process. It advocates methods like
 accountability management, management by objectives, management by end-results
etc… This helps improving the entire managing process and the individual managers
throughout the year.

According to Robbins, the categorizations are:

• Single-trait, single-subject: Here the individual is not compared to anyone, and each
trait is measured alone. Some of the common methods are checklist method, the
numerical and graphic rating scale etc…
For instance, in the following appraisal of a Journalist, the individual is to be assessed
against the set parameters, and there is no comparison as such with anybody else on the
appraisal format.
Example:
Company: The Times of India

Performance Appraisal of
Name:_____________ Designation:____________________ Payroll id:____________________

Scores to be used for appraising performance based on the parameters listed

below
*HIGH FLIER/ OUTSTANDING (5)
*REGULARLY EXCEEDS (4)
*MEETS REQUIREMENTS OCCASIONALLY (3)
*MEETS (2)
*FAILS TO MEET (1)
{Appraiser’s Scores (S2); Weighted Score w x S2 = t Remarks}

PART A- GENERAL PARAMETERS

1 QUALITY OF WORK ( w = 15 )
Ability to deliver high quality work. 15 x =

2 QUANTITY OF WORK ( w = 15 )
Ability to meet targets and complete all assigned work. 15 x =

3 COMMITMENT TO WORK & INITIATIVE ( w = 15 )

Level of sincerity, motivation and initiative. 15 x =

4 INNOVATION AT WORK ( w = 10 )
Ability to bring in new ideas/new dimensions on a continuing basis. 10 x =

5 TEAMWORK ( w = 10 )
Has the ability to work in a team. 10 x =

6 POTENTIAL ( w = 10 )
Demonstrates potential for future growth in the organisation. 10 x =

7 DISCIPLINE AND WORK HABITS ( w = 5 )

Is regular and punctual at work and can meet deadlines. 5 x =

• Single-trait, multiple-subject: The subjects or the employees are compared to each

other for a single trait/ quality. Here members of a group/ department are rated through
methods like group order ranking, individual ranking, and paired comparison method.

• Multiple-trait, single-subject: The subject is evaluated on the basis of the best-suited

trait against multiple traits present in the format. The method used for rating is forced
choice rating scale. Here the evaluator has to tick the option that suits the subject best.
Methods
Traditional Methods
• Straight Ranking: Individuals are ranked in order of merit and are placed in a
simple grouping. The whole person is compared to the whole person. Attributes
are not fractionalized. It is basically a method of comparing people in a group and
judging them. Thus, the position provided to each individual is relative.

Ranking
1st _____
2nd_____
3rd _____

• Paired comparison method: Individuals are compared to each other in pairs

against certain predetermined traits. The results derived out of the comparison of
all the possible pairs in a group are then tabulated, and ranks assigned.

• Man-to-Man Comparison: a yardstick is created using the best of qualities of a

performer and the performances of individuals are compared to the yardstick.

• Grading: In this a list of categories are to be assessed. This is done by selecting a

grade which matches the employee's performance. Topics may be related to
targets achieved, employee effort, enthusiasm to begin and complete new tasks,
the ability to work with others and qualities of leadership. This system may ask
for a simple form of grading such as:

-- Excellent
-- Very Good
-- Satisfactory
-- Poor
-- Very poor

• 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.

1----------2---------3----------4----------5----------6----------7
Poor Exceptional
Needs Outstanding
Improvement

1--------------2--------------3--------------4--------------5
Inadequate Below Average Above Superior
Average Average
 • Forced choice description: Attributes related to the performance are given in the
form of statements or description. One out of the pair is to be selected. This
description should best suit the performer.
• Forced distribution: The ratings are distributed along the normal distribution
curve. This compels the rater to distinguish between the excellent, good and the
poor.
• Check lists: 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: Statements are given about the performer based on the facts of
the performance.
• Critical Incident: 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. It includes both negative and positive points. 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.
• Group Appraisal: Appraisal is done by a group. Sometimes teams are also
appraised using this method.
• Field Review Method: The performance is reviewed by getting information about
the performer who is posted in the field. This done by collecting information from
the supervisor or the clients.

Mixed and Computerized PA

 Software Packages
 On-line
 EMP (Electronically Monitored Performance)

Other Modern Methods

• MBO: Management by objectives or appraisal by results was initiated by Peter
Drucker. It is a process where the superior and subordinate managers of an
organisation jointly identify its common goals, define each individual’s major
areas of responsibility in terms of results expected of the subordinate, and use
these measures as standards to perform.
The advantage of this appraisal method is that the targets for achievement are set
by mutual agreement of the superior and the subordinate. It is result oriented and
targets only the performance. Following is the procedure involved in the MBO
process:
- Set organizational goals: The objectives of the organization, and its
strategies should be clearly mentioned.
- Joint goal setting: The superior and the subordinate should sit together to
decide upon the performance targets.
 - Performance reviews: There should be frequent review of the performance
jointly by the superior and the subordinate.
- Set checkposts: To measure the performance and to keep a track of the
performance, checkposts should be established.
- Feedback: The superior should give the subordinate specific, relevant and
timely feedback so that the subordinate can perform as per expectation.

• BARS: Behaviourally Anchored rating Scale is a combination of the narrative

form, numerical rating and critical incident method. It involves the following
steps:
1. Generate Critical Incidents: The important or critical tasks in a job are listed.
This is done by a group of experts who know the job well, or have done the
job (or are doing it). They describe outstanding performances and extremely
poor performances.
2. Develop Performance Dimensions: They develop performance dimensions (or
category) by clustering the incidents. These dimensions are then defined.
(Sometimes this done by another group of experts.)
3. Reallocate Incidents: Another group of experts who know the job well,
scrutinize the incidents, the dimensions, the definitions and redesign them
(wherever required).
4. Scale the Incidents: The group rates the characteristics defined on a scale (7 to
9 point or sometimes 5 to 10 point scale) to suit the predetermine dimensions.
5. Develop Final Instruments: Finally the “behaviour anchors” are determined.
They are the subset of incidents on a point rating scale, used for defining
performance dimensions.

Sample 3 Point Rating Scale

Scale Rating Sample Definitions (Choose and/or Modify as
Appropriate)
3 Points Excellent Should ensure extremely effective performance.
(Pass) Exceptional Significantly above criteria for successful job performance.
Mastery
Much More Surpassed expectations.
than Reserved for the exemplary set of skills that yield a
Acceptable particularly sophisticated approach to handling the
situation.
Meets all major / essential / core criteria or acceptable
equivalents and met three or more additional criteria.
Significant evidence that skill is present.
Outstanding.
Truly excellent.
Fully meets competency requirement.
Proactive
2 Points Good Should be adequate for effective performance.
(Pass) Acceptable Meets criteria relative to quality and quantity of behaviour
Satisfactory required for successful job performance.
Average Meets several of the major / essential / core criteria and
one or two of the minor / additional criteria or acceptable
equivalents.
Describes / demonstrates a sufficient range of skills for
handling the situation and/or the desired outcome is
obtained.
Some of the major and minor criteria were met; some
deficiencies exist in the areas assessed but none of major
concern.
Satisfactory evidence that skill is present.
Competent – solid and steady in essential aspects but could
be improved.
Meets enough of the competency requirement to
adequately perform the task.
Reactive
0-1 Points Unacceptable Insufficient or significantly below criteria required for
(Fail) Weak successful job performance.
Poor Many deficiencies.
Much less A major problem exists.
than No answer or inappropriate answer.
acceptable Describes / demonstrates insufficient range of skills
appropriate for handling of situation.
Describes / demonstrates plausible but inappropriate
behaviours for handling the situation and/or the outcome
if not obtained.
Describes / demonstrates counter-productive behaviours
that have negative outcomes or consequences (make the
situation worse)
No evidence that skills is present OR evidence that the skill
is not present
Not competent.
Not Active

• Assessment centre: An assessment centre has a standardised process for

evaluation of behaviour using multiple inputs. These centres use well-trained
process observers and robust techniques. Compared to normal interviews, at
assessment centres, judgements about behaviours are made by not one but many,
using specifically developed simulations. Data is pooled by the assessors or by a
statistical integration process. Trained assessors observe and evaluate candidates
on their relevant managerial qualities, while those candidates are performing a
variety of situational exercises. Assessment centre exercises (e.g., role-play, in-
basket, fact-finding and group discussions), intend to measure dimensions such as
leadership, planning, sensitivity, problem solving, and many others.
Assessment centres serve three main human resources functions:
• Selection and promotion
• Diagnosis (e.g., identification of training and development needs)
• Development (i.e., skill enhancement through simulations).
The following dimensions are normally assessed in assessment centres:
• Planning and organising
• Leadership n Analytical
• Problem solving
• Sensitivity
• Decision-making
• Creativity
• Sociability
• Management control and delegating.

Assessment Centre Procedure

Step I
• Establish goals
• Obtain Top management commitment
• Do detailed Job Analysis
• Define dimensions to be assessed
Step II
• Develop policies for feedback data
• Design physical facilities
• Select exercises and participants
• Design assessor training programme
Step III
• Train assessors
Step IV
• Conduct programme
Step V
• Provide feedback
Step VI
• Evaluate participants and centre against job success criteria

Human asset accounting: Human assets accounting or human resource accounting may
be defined as the measurement and reporting of the cost and value of people as
organizational resources. It involves accounting for investment in people and their
replacement costs, as well as accounting for economic value of people to an organization.

Variables used to assess the value of human organisation in a company

• Key Causal- structure, management policies and decisions, behaviour,
leadership, strategies and skills etc…
 • Intervening variables- loyalty, attitude, motivation, communication,
collaboration, team spirit etc…

Problems
Measurement and accuracy
 Halo Effect
 Leniency or Strictness
 Central Tendency
 Similarity
 Others- organizational dynamics, politics and structure related issues
 Social Differentiation