Basic Theoretical Concepts of Performance appraisal

Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does. According to Flippo, a prominent personality in the field of Human resources, "performance appraisal is the systematic, periodic and an impartial rating of an employees excellence in the matters pertaining to his present job and his potential for a better job." Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future. It is a powerful tool to calibrate, refine and reward the performance of the employee. It helps to analyze his achievements and evaluate his contribution towards the achievements of the overall organizational goals. By focusing the attention on performance, performance appraisal goes to the heart of personnel management and reflects the management's interest in the progress of the employees.

Objectives Of Performance appraisal:

y

To review the performance of the employees over a given period of time.

To judge the gap between the actual and the desired performance.

To help the management in exercising organizational control.

Helps to strengthen the relationship and communication between superior subordinates and management employees.

To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.

To provide feedback to the employees regarding their past performance.

Provide information to assist in the other personal decisions in the organization.

Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.

To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.

To reduce the grievances of the employees.

Literature Review
I. Rationale Performance appraisals are one of the most important requirements for successful business and human resource policy (Kressler, 2003). Rewarding and promoting effective performance in organizations, as well as identifying ineffective performers for developmental programs or other personnel actions, are essential to effective to human resource management (Pulakos, 2003). The ability to conduct performance appraisals relies on the ability to assess an employees performance in a fair and accurate manner. Evaluating employee performance is a difficult task. Once the supervisor understands the nature of the job and the sources of information, the information needs to be collected in a systematic way, provided as feedback, and integrated into the organizations performance management process for use in making compensation, job placement, and training decisions and assignments (London, 2003). After a review of literature, a performance appraisal model will be described in detail. The model discussed is an example of a performance appraisal system that can be implemented in a large institution of higher education, within the Student Affairs division. The model can be applied to tope level, middle-level and lower level employees. Evaluation instruments (forms) are provided to assist you with implementation the appraisal system. II. Introduction Performance evaluations have been conducted since the times of Aristotle (Landy,Zedeck, Cleveland, 1983). The earliest formal employee performance evaluation program is thought to have originated in the United States military establishment shortly after the birth of the republic (Lopez, 1968). The measurement of an employees performance allows for rational administrative decisions at the individual employee level. It also provides for the raw data for the evaluation of the effectiveness of such personnel- system components and processes as recruiting policies, training programs, selection rules, promotional strategies, and reward allocations (Landy,Zedeck, Cleveland, 1983). In addition, it provides the foundation for behaviorally based employee counseling. In the counseling setting, performance information provides the vehicle for increasing satisfaction, commitment, and motivation of the employee. Performance measurement allows the organization to tell the employee something about their rates of growth, their competencies, and their potentials. There is little disagreement that if well done, performance measurements and feedback can play a valuable role in effecting the grand compromise between the needs of the individual and the needs of the organization (Landy, Zedeck, Cleveland, 1983). III. Purpose Performance appraisals should focus on three objectives: performance, not personalities; valid, concrete, relevant issues, rather than subjective emotions and feelings; reaching agreement on what the employee is going to improve in his performance and what you are going to do (McKirchy, 1998). Both the supervisor and employee should recognize that a strong relationship exists between training and performance evaluation (Barr, 1993). Each employee should be allowed to participate in periodic sessions to review performance and clarify expectations. Both

the supervisor and the employee should recognize these sessions as constructive occasions for two-way communication. Sessions should be scheduled ahead of time in a comfortable setting and should include opportunities for self-assessment as well as supervisor feedback. These sessions will be particularly important for new employees who will benefit from early identification of performance problems. Once these observations have been shared, the supervisor and employee should develop a mutual understanding about areas for improvement, problems that need to be corrected, and additional responsibilities that might be undertaken. When the goals are identified, a plan for their achievement should be developed. The plan may call for resources or support from other staff members in order to meet desired outcomes. In some cases, the plan might involve additional training. The supervisor should keep in contact with the employee to assure the training experiences are producing desired impact (Barr, 1993). A portion of the process should be devoted to an examination of potential opportunities to pursue advancement of acceptance of more complex responsibilities. The employee development goals should be recognized as legitimate, and plans should be made to reach the goals through developmental experiences or education (Barr, 1993). Encouraging development is not only a supervisor's professional responsibility, but it also motivates an employee to pursue additional commitments. In addition, the pursuit of these objectives will also improve the prospect that current employees will be qualified as candidates when positions become available. This approach not only motivates current performance but also assists the recruitment of current employees as qualified candidates for future positions (Barr, 1993). How to arrive? Reasons why need to be done Benefits of productive performance appraisals. - Employee learns of his or her own strengths in addition to weaknesses. - New goals and objectives are agreed upon. Employee is an active participant in the evaluation process. - The relationship between supervisor and employees is taken to an adult-to-adult level. - Work teams may be restructured for maximum efficiency. - Employee renews his or her interest in being a part of the organization now and in the future. - Training needs are identified. - Time is devoted to discussing quality of work without regard to money issues. - Supervisor becomes more comfortable in reviewing the performance of employees. - Employees feel that they are taken seriously as individuals and that the supervisor is truly concerned about their needs and goals. (Randi, Toler, Sachs, 1992). IV. Pitfalls to Avoid When conducting performance appraisals on any level, it is important to keep in mind the common pitfalls to avoid. These pitfalls may include but are not limited to: 1. Bias/Prejudice. Race, religion, education, family background, age, and/or sex. 2. Trait assessment. Too much attention to characteristics that have nothing to do with the job and are difficult to measure. 3. Over-emphasis on favorable or unfavorable performance of one or two tasks which could lead to an unbalanced evaluation of the overall contribution. 4. Relying on impressions rather than facts.

5. Holding the employee responsible for the impact of factors beyond his/her control. 6. Failure to provide each employee with an opportunity for advance preparation (Maddux, 1993).

V. Legal Implications Any performance appraisal system used to make employment decisions about a member of a protected class (i.e. Based on age, race, religion, gender, or national origin) must be a valid system (an accurate measure of performance associated with job requirements). Otherwise, it can be challenged in the courts based on Title VII of the 1964 Civil Rights Act, the Civil Rights Act of 1991 and the Age Discrimination in Employment Act of 1975 (London, 2003). Uniform Guidelines on Employee Selection 1978 is the controlling federal law in the area of performance appraisals. The Equal Employment Opportunity Commission (EEOC) requires that any measurement used to differentiate between employees must be valid and fairly administered. The Americans with Disabilities Act (ADA) suggests that performance appraisals for people with disabilities for people with disabilities will not be conducted any differently than those for other employees. Another important aspect to consider is the employees right to privacy. Employees must have complete access to their personnel files, but others should have controlled access. The records should be accurate, relevant, and current. VI. Rewards Effective reward systems are often hard to establish when creating performance appraisals. The question of how specific the reward, when the reward should be given, and how to reward group efforts can be a tricky subject to master. Our advice on this is to keep it simple. It is important to have an established reward system. However, rewards can be as simple as more autonomy on the job, praise for progress, additional professional development funding, and vacation time. The important aspect to remember when establishing reward systems is to be consistent. If two employees are being evaluated in the same way, their reward opportunities should reflect their evaluation outcomes.

Need for the study:Performance Appraisal is being practiced in 90% of the organisations worldwide. Selfappraisal and potential appraisal also form a part of the performance appraisal processes. Typically, Performance Appraisal is aimed at: y To review the performance of the employees over a given period of time. y To judge the gap between the actual and the desired performance. y To help the management in exercising organizational control. y To diagnose the training and development needs of the future.
y

Provide information to assist in the HR decisions like promotions, transfers etc.

Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.

To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.

To reduce the grievances of the employees.

Helps to strengthen the relationship and communication between superior subordinates and management employees.

According to a recent survey, the percentage of organisations (out of the total organisations surveyed i.e. 50) using performance appraisal for the various purposes are as shown in the diagram below:

The most significant reasons of using Performance appraisal are:

y

Making payroll and compensation decisions 80%

Training and development needs 71%

Identifying the gaps in desired and actual performance and its cause 76%

Deciding future goals and course of action 42%

Promotions, demotions and transfers 49%

Other purposes 6% (including job analysis and providing superior support, assistance and counseling)

Statement of the Problem

1. Dont assess actual performance most of the assessment that managers complete focuses on the person, including characterizations of their personal traits (i.e. commitment), knowledge (i.e. technical knowledge) or behaviors (i.e. attendance). While these factors may contribute to performance, they are not measures of actual output. If you want to assess the person, call it person appraisal. Performance is output quality, volume, dollar value, and responsiveness. 2. Infrequent feedback if the primary goal of the process is to identify and resolve performance issues, executing the process annually is silly. A quality assessment/control program anywhere else in the business would operate in real time. At the very minimum, formal feedback needs to be given quarterly, like the GE process. 3. Non-data-based assessment most processes rely 100% on the memory of those completing the assessment because pre-populating the forms with data to inform decisions would be too difficult (cynicism). In addition, most assessment criteria are fuzzy and subjective. 4. Lack of effectiveness metrics many accept that the goals of the process are to recognize results, provide feedback to address weaknesses, determine training needs, and to identify poor performers. Unfortunately, rarely do process owners ever measure their processes contribution to attaining any of these goals. Instead, the most common measure relating to performance appraisal is the percentage completed. 5. Lack of accountability managers are not measured or held accountable for providing accurate feedback. While they may be chastised for completing them late, there is no penalty for doing a half-assed job or making mistakes on them, which is incredibly common. One firm attempting to remove a troublesome employee found that the manager had rated the individual the highest within the department and awarded them employee of the year.
Process related problems

6. Disconnected from rewards in too many organizations, getting a merit raise, bonus, or promotion is completely disconnected from an employees performance appraisal scores. When there is a weak link, employees and managers are not likely to take the process seriously. 7. No integration the process is not fully integrated with compensation, performance management, development, or staffing (internal movement). A lack of integration and coordination leads to duplication and missed opportunity. 8. Individual scores exceed team performance without controls, quite often the average score of team members exceeds the actual performance of the team (i.e. the team reached 80 percent of its goals but the average performance appraisal for its members was 95 percent).

9. Each year stands alone each performance appraisal by definition covers a finite period of time. However, if the goal is to assess potential and identify patterns, an employees performance must be assessed over multiple years. 10. No comprehensive team assessment although individuals on the team are assessed, there is no simultaneous overall assessment of the team. Often contingent workers on the team are not addressed at all. 11. A focus on the squeaky wheel most performance appraisal systems focus on weak performers. There is significantly less focus on top performers and thus there is no system to capture their best practices and then to share them with others. 12. Little legal support performance appraisals may be an executives worst enemy in grievances and legal proceedings. Even though the process may be flawless, poor execution by managers often results in performance appraisals that do not aid in a disciplinary action. Errors may include unfettered discretion, improper handwritten notes, generalizations about race, gender, or age, and appraisals that do not match the performance data. At my university, a study demonstrated that while Asians got the highest performance score, they somehow managed to get the lowest average pay raise. When the HR director was confronted, he was furious that anyone would calculate and expose the obvious discrimination. 13. No second review even though the process may have impacts on salary, job security, and promotion, in many firms the assessment is done by a single manager. If there is a second review, it may be cursory, and therefore not ensure accuracy or fairness. 14. Not reliable or valid most process managers do not regularly demonstrate with metrics that the process is consistently repeatable (reliable) and that it accurately assesses performance (valid). 15. Cross-comparisons are not required one of the goals of the process is often to compare the performance of employees in the same job. Unfortunately, most appraisal processes (with the exception of forced ranking) do not require managers to do a side-by-side comparison, comparing each member of the team with one another. 16. Assessments are kept secret although a salespersons performance ranking may be posted on a wall, performance appraisals are often kept secret. An overemphasis on privacy concerns might allow managers to play favorites, to discriminate, and to be extremely subjective. Keeping ratings secret allows managers to avoid open conversations about equity. 17. Process manager is not powerful often the process is managed by lower-level HR administrators without a complete understanding of performance and productivity. 18. No process goals the overall process operates without clear and measurable goals, and as a result there is little focus.

19. Not global most processes and forms are headquarters centric, failing to address cultural, language, and legal differences. 20. Forced ranking issues although forced ranking has some advantages, using it may result in significant morale and PR issues. 21. No ROI calculation HR fails to do a periodic business case justifying the value added compared to the time and the cost of the process.

OBJECTIVES OF PERFORMANCE APPRAISAL :The main objective of performance is to improve the performance of the organization through improved employee performance. The goal of performance appraisal is to allow the employee the opportunity to progress to their full potential in order to meet the organizational needs and his personal development goals. Through this process, true teamwork and maximum performance can be achieved. The foundation of the performance appraisal is improved communication between the employee and the manager.

Objectives of performance appraisal are depicted below:

1. To increase motivation and productivity: Performance appraisal helps employees to set plan work and identify skills in order to achieve them. Employee is motivated as there is clarity of what he is required to do in a given period. Increased clarity brings greater focus on job related activities, which in turns facilitates better performance, efficiency and commitment. This increases the productivity of the individual employees and the organization stands benefited out of improved performance of employees.

2. To enhance transparency: Setting of performance targets /objectives, agreement on measurement criteria and organizations expectations of desired performance level brings to transparency to the appraisal process.

3. To retain top talent: Performance appraisal helps organization in taking people related decisions such as career planning, career development, promotions, training and development opportunities, and succession planning. Meritorious employees are rewarded better with increased compensation, promotions, leadership grooming opportunities, job rotations, etc. and help retain top talents in the organization by satisfying their growth and development needs.

4. To increase commitment: Employees involvement in planning of work and identification of skills helps to bring greater self-awareness and increases his commitment to the objectives of performance appraisal activities. Performance appraisal provides an opportunity to communicate performance feedback, review the job description, plan upcoming goals and objectives and develop an individual development plan.

5. To develop employees: Performance appraisal accord an opportunity to develop an employee through the identification

of gaps in skills and competencies. Once deficiencies in skills and competencies has identified, suitable training and development programmes can be established for rectifying the gaps/deficiency. This results in personal and professional development of employees.

Research Hypotheses:-