Performance Appraisal System

(PAS)
 What Is Performance ?

•Performance is what is expected to be delivered by an

individual within a time frame.

•In organisational context, performance is defined as the

record of outcomes produced on specific job functions
or activities during a specific time period.

Performance Appraisal System (PAS)

 Why Appraise Performance ?

• Promotion decisions.
• Identification of training needs.
• Providing feedback
• Career planning (strengths & weaknesses)
• Compensation packages

Performance Appraisal System (PAS)

 Definition

According to Dessler, “Performance appraisal may be

defined as any procedure that involves (1) Setting work
standards, (2) Assessing employee’s actual performance
relative to these standards; and (3) Providing feedback to the
employees with the aim of motivating the person to
eliminate performance deficiencies or to continue to perform
above par.”

Performance Appraisal System (PAS)

Taking Corrective
Action

Performance Appraisal System (PAS)

 Methods
• Traditional Method
– Essay appraisal
– Graphic rating scale
– Field review
– Ranking method
– Paired Comparison Method
– Forced Distribution Method
– Critical Incident Method
– Checklist Method
– Forced choice Method
• Modern Method
– 360 degree appraisal
– Assessment Centre
– Management by objectives
– BARS
– HRA
– Balanced scorecard
 Essay Appraisal
• It is the simplest form where the rater writes or is asked to
write covering individual strengths, weaknesses, potentials
and so on.

• It is qualitative technique of appraisal.

• The biggest drawback is its variability in length and content.

• Since different essays touch on different aspects of

performance, it becomes difficult for comparison.
 Graphic Rating Scale
• It is the most simplest and most popular technique.

• The scale lists traits, such as quality and a range of performance values
(from unsatisfactory to outstanding for each trait).

• The supervisor rates by checking the score that best describes his or her
performance for each trait.

• The assigned values for the traits are then totaled.

• Merits:
– Easy to construct, understand & use.
– In expensive as traits are defined without any ambiguity.

• Demerits:
– Very high degree of subjectivity.
– Easy to manipulate.
 Graphic
Rating Scale
with Space for
Comments

Figure 9–3
© 2005 Prentice Hall Inc. All rights
9–10
reserved.
 Field Review
• A member of the personal or central administrative staff meets
small group of rater from each supervisory unit and goes over
each employee’s rating with them to :

(a) identify areas of inter-rater disagreement

(b) help the group arrive at concensus
(c ) determine that each rater consists the standard
similarly.

• It tends to be more fair and valid,

• On the negative side the process is more time consuming.

 Ranking Method
• Employees are compared directly against one another.

• It is easy to explain, understand & use.

• The simplest ranking procedure is straight ranking in which

the evaluator arranges employees in order from best to worst
on the basis of their overall performance.

• A variation to it is alternate ranking ,where the evaluator first

ranks the best employee, next the worst employee, then the
second best, then the second worst, and so on until all
employees are ranked.
Alternation Ranking Scale

Figure 9–6
© 2005 Prentice Hall Inc. All rights
9–13
reserved.
 Paired-Comparison Method
• Ranking employees by making a chart of all
possible pairs of the employees for each trait
and indicating which is the better employee of
the pair.
 Ranking Employees by the
Paired Comparison Method

Note: + means “better than.” − means “worse than.” For each chart, add up the number of
1’s in each column to get the highest-ranked employee.
Figure 9–7
© 2005 Prentice Hall Inc. All rights
9–15
reserved.
 Forced Distribution Method
• It operates under an assumption that employee performance level conforms
to a normal statistical distribution.
• It seeks to overcome the problem by compelling the rater to distribute the
ratees on all points on the rating scale.

– Example:
• 15% high performers
• 20% high-average performers
• 30% average performers
• 20% low-average performers
• 15% low performers

• It is assumed that employee performance levels conform to a bell-shaped

curve.
• Merit: eliminates the error of leniency.
• Demerit: Affects employee morale.
Forced-Distribution Curve
 Critical Incidents Method
• Here the supervisor keeps a log of positive and
negative examples of a subordinate’s work-
related behaviour.
– Advantages:
• Provides actual examples of good and poor performance .
• Ensures that the supervisor thinks about the subordinates
appraisal all during the year.
• Disadvantages:
– Supervisor need to jot down.
– Delay feedback to employees.
Examples of Critical Incidents for
an Assistant Plant Manager

Table 9–1
© 2005 Prentice Hall Inc. All rights
9–19
reserved.
 Checklist Method
– Here rater is given a list of job-related
characteristics or behaviours and is asked to check
the items that are typical of a particular employee.
– Relative weights are then calculated.
 Forced-choice Method
• Here the items are assembled in pairs and the
rater has to choose the item that is more
characteristic of the employee.

• The pairs are designed so that both items

appear equally good or bad to the rater, but
only one is related to actual job performance.
 Modern Methods of
Performance Appraisal
Self Appraisal
• Self Appraisal has an
important role to play in
employee development.
• Self appraisal should be a
continuous process
• It is a significant initial step
for Performance
Development.
• It should start at the end of
performance period just
before the performance
review discussion takes
place.
 360 Degree Appraisal
• This technique is understood as systematic collection
of performance data on an individual or group
derived from a no. of stake holders – The stake
holders being the immediate supervisor, team
members, customers, peers and self.
• It is also referred as multi source assessment or
multi-rater feedback.
Objectives of 360 Degree Appraisal
• Provide insights into the strong &
weak areas of the candidate
• Identification of developmental
need and preparing dev. Plan.
• Generate data for personnel
related decisions
• Re-enforcing change mgt. efforts
and interventions for orgnl.
Effectiveness.
Objectives of 360 Degree Appraisal
• Provide insights into the strong &
weak areas of the candidate
• Identification of developmental
need and preparing dev. Plan.
• Generate data for personnel
related decisions
• Re-enforcing change mgt. efforts
and interventions for orgnl.
Effectiveness.
 Advantages of 360 Degree Appraisal
• It is more objective than one person’s
assessment.
• Increased awareness and relevance of
competencies.
• More reliable feedback.
• New insights
• Supporting a climate of continuous of
improvement.
Drawbacks of 360 Degree Appraisal
• People not giving frank and honest feedbcak.
• People being put under stress in receiving or
giving feedback.
• Lack of action following feedback.
• Too much bureaucracy.
Management by Objectives ( MBO)
• It is a process of collaborative goal setting by
manager & subordinate; the extent to which
the goals are accomplished is a major factor in
evaluating and rewarding the subordinate’s
performance.
• This method of PA was introduced by Drucker
(1961).
• It is primarily a corporate performance system
leads up to individual efforts.
 MBO Process

Starting the Establishment Collaborative Communicating

Periodic
MBO of Orgnl. Goal setting & Orgnl. Goals Evaluation
Goals & Plans Planning & Plans Review
Program

Meeting

Verifiable
goals &
clear plans

Counseling

Resources
 Merits of MBO
• Establishes link between orgnl. & individual performance.
• Easy to implement & measure.
• Employee motivated as he is aware of expected roles &
accountability
• Performance oriented diagnostic system.
• Facilitates employee counseling & guidance
 Demerits of MBO
• Difficult to have employees agree on goals.
• Interpretation of goals may vary.
• Goal setting for qualitative function may be cumbersome.
• Time consuming, complicated lengthy & expensive.
 BARS: Behaviourally Anchored Rating Scales

• It is a sophisticated rating method in which supervisors

construct rating scale associated with behavioural anchors.
• It combines the benefits of critical incidence and graphic
rating scale by anchoring rating scale with specific behavioural
examples of good or poor performance.
• Developing a BARS requires five steps
– Generate critical incidence
– Develop performance dimensions
– Reallocate incidence
– Scale the incidence.
– Develop a final instrument.
 Performance Appraisal Methods
 Subjective measures (more)
 Behaviorally Anchored Rating Scale (BARS): replace the
vague descriptors in a rating scale with specific examples of
performance
 Example: Customer assistance
5 = Could be expected to volunteer to help customer and to walk
with customer to location of desired product
4 = Could be expected to walk with customer to location of desired
product when asked for help by customer
3 = Could be expected to tell and point customer to where the
desired product is located when asked for help by customer
2 = Could be expected to shrug shoulders and walk away when
asked for assistance by customer
1 = Could be expected to hide from customers in the employee
break-room

34
 Performance Appraisal Methods
 Subjective measures (more)
 BARS (more)
 Note that a different scale will be needed for each
aspect of job performance
 Advantages:
 Job-relevant measures of performance
 Involves employees in developing scales
 Disadvantages:
 More work (time & money) to develop BARS
 Employees may not consistently fit into one of the BARS
categories
 Possible solution: BOS?

35
 BARS
Advantage Disadvantage
• A more accurate gauge  Very time consuming
• Clearer standards.  Each job requires separate
• Feedback BARS
• Independent dimensions  Behaviours are activity
• Consistency oriented rather than result
oriented.
 Balanced Score Card
• It is a way of measuring organisational, business unit or
department success, balancing long term and short term
actions & balancing different measures of success:
– Financial
– Customer
– Internal Business Processes
– Learning & Growth

It is a conceptual framework for translating an organisations

vision into a set of performance indicators distributed
among four perspectives
 Balance Score Card Perspective

•Optimum cost efficiency of operations

Financial
•Maximise benefits/ costs

•Customer satisfaction
•Effective partnership
Customer •Customer value creation
•Enhanced Customer service

•Improves productivity
Internal •Streamline processes
Processes •Process Control
•Supplier satisfaction
•Access to strategic information
•Employee satisfaction
Learning & Growth •Quality workforce
•Organisational structure for continuous improvement
 Common Rating Errors
• Leniency Error
• Severity Error
• Central Tendency Error
• Halo Error
• Horn Error
• Primacy Error
• Recency Error
• Status Effect
Potential Appraisal
 Potential Appraisal
• Potential can be defined as ‘a latent but
unrealized ability’.

• It typically represents latent qualities in an

individual which manifests in concrete terms
while performing various tasks/jobs.
 Potential Appraisal

• The objective of potential appraisal is to

identify the potential of a given employee to
occupy higher positions in the organisational
hierarchy and undertake higher
responsibilities (Pareek,p.141)
 Potential Appraisal
• Potential appraisals are required to:

– Inform employees about their future prospects.

– Help the organisation chalk out a suitable
succession plan
– Update training efforts from time to time
– Advise employees about what they must do to
improve their career prospects
 The Philips model
Problem Children Stars

P High
o
t Planned Separation Solid Citizens
e
n
t
Low High
i
a Performance
l
 The Philips model
• Low potential-low performance
• Low potential-high performance
• Low performance- high potential
• High performance-high potential
Performance appraisal system
and Performance management
system (PMS)
 Performance Management
 Performance appraisal: the measurement and
assessment of an employee’s job performance
 Performance management: the integration of
performance appraisal systems with other HRM
systems for the purpose of aligning the employees’
work behaviors and results with the organization’s goals
 Example: link an employee’s pay increase to the employee’s
job performance
 To do this, we have to measure the employee’s job performance
 Goal: Improve the organization by improving the
employees’ work behaviors and results

48
 Conceptual Evolution of Performance Mgt. between
1991-1997

From To
System Process
Appraisal Joint Review
Reward Oriented Development Oriented
Ratings Common Less Rating
Top Down 360 Degree Feedback
Directive Supportive
Owned by HR Professionals Owned by Users

Armstrong & Baron (2000)

Performance appraisal system and Performance management system (PMS)

 Performance Appraisal to Performance Management

Neely (1999) stated the reasons for this move:

• Changing nature of Work.

• Increasing competition
• TQM

Thus, Performance mgt. is a key strategy of HRM

aimed at improving organisational performance
in order to attain & sustain its competitive
advantage

PERFORMANCE APPRAISAL SYSTEM AND PERFORMANCE MANAGEMENT SYSTEM (PMS)

 Performance Management Cycle
Development Tool

Administrative Tool

Source of figure: Adapted from Fisher, Schoenfeldt, & Shaw (2006), Figure 10.1, p. 421
51
 Performance Management:

A process that consolidates goal setting, performance appraisal, and

development into a single, common system, the aim of which is to ensure
that the employee’s performance is supporting the company’s
(continuous improvement) strategic aims.

It includes:
• Direction sharing- mission, vision and strategy, etc.
• Role clarification
• Goal setting and Planning
• Goal alignment
• Developmental goal setting
• Ongoing Performance Monitoring
• Performance assessment (appraisal)
• Ongoing feedback (coaching)
• Rewards, recognition and compensation

PERFORMANCE APPRAISAL SYSTEM AND PERFORMANCE MANAGEMENT SYSTEM (PMS)

PERFORMANCE APPRAISAL SYSTEM AND PERFORMANCE MANAGEMENT SYSTEM (PMS)