PERFORMANCE MANAGEMENT SYSTEMS CHAPTER III PERFORMANCE APPRAISAL - - PowerPoint PPT Presentation

PERFORMANCE MANAGEMENT SYSTEMS

CHAPTER III

PERFORMANCE APPRAISAL

PERFORMANCE MANAGEMENT SYSTEMS CHAPTER III

PERFORMANCE APPRAISAL

• SCOPE:
• Meaning & objectives,
• Uses & benefits,
• Process,
• Methods,
• errors of raters,
• performance assessment & feedback.

PERFORMANCE MANAGEMENT SYSTEMS CHAPTER III

PERFORMANCE APPRAISAL

• Contents: Objectives, Uses, Benefits, Process,

Planning, Requisites of Effective Appraisal System, Approaches, Components, Types, Concerns & Issues, Steps, Methods, MBO, 360 degrees, HR Balanced Score-card, Result

• riented, Self-appraisal, Drawbacks & problems,

TQM’s critique of Performance appraisal, How to improve, Steps in appraisal interview, assessment, Practice, Review, Feedback, Ethics

• f appraisal.

PERFORMANCE MANAGEMENT SYSTEMS CHAPTER III

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• Performance appraisal (PA) is evaluation of

performance of employee using goals, plans, etc and facts, data and individual history. This is done periodically by subordinate and supervisor.

• The six primary criteria on which the value of

performance may be assessed are:

• quality,
• quantity,
• timeliness,
• cost effectiveness,
• need for supervision, and
• interpersonal impact.

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• Results of appraisal are normally used to:
• 1. estimate effectiveness of employee.

2 identify strengths and weaknesses in knowledge & skills,

• 3. Determine if his responsibilities can be

extended,

• 4. Identify future training & development needs.
• 5. Review progress towards goals & objectives.
• 6. Determine readiness for promotion.
• 7. Motivate & guide growth & development

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3.1 Objectives of performance appraisal:

• PA plans are designed to meet three

needs of organization and employees:

• 1. Provide judgment for salary revision,

promotion, transfer, demotion, termination.

• 2. Tell employee where he stands;

suggest changes in behavior, attitudes, skills, job knowledge.

• 3. Basis for coaching and counseling.

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3.1 Objectives of performance appraisal:

• Developmental objectives:
• Performance Planning- develop role

clarity, systematic planning & review.

• Performance development- gain more

insight, help employees in performi8ng higher level jobs through development. 3. Culture building 4. Performance monitoring & Control.

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3.1 Objectives of performance appraisal

• Specific objectives of PA are:
• 1. Help employee overcome his

weaknesses and improve his strength.

• 2. Generate feedback & guidance.
• 3. Realistic goal setting.
• 4. Provide inputs for rewards etc.
• 5. Create desirable culture and

tradition.

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PERFORMANCE APPRAISAL

3.1 Objectives of performance appraisal

Specific objectives of PA are (cont)

• 6. Identify employees for motivation,

training & development.

• 7. Observe employee for coaching him.
• 8. Identify promotion potential.
• 9. Generate significant relevant, free

and valid information about employees.

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3.2 Uses of PA

• Common uses are:
• 1. Determining salary increases, bonus,

promotions, demotions, terminations, transfer.

• 2. Determining training and development needs.
• 3. Promoting communication within different

levels in organization.

• 4. Motivating employees and establishing data

bank on appraisals. The data bank also shows how effective recruiting, selection and placement have been and helps manpower planning.

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3.3 Benefits of PA:

• Benefits of PA, besides those mentioned above,

are:

• 1. Offers opportunity for discussion on important

issues.

• 2. Gives opportunity to focus on work activities

and goals, identify and correct existing problems and encourage better future performance.

• 3. It creates profound effect on motivation and

satisfaction.

• 4. Provides recognition to employees.

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3.4 PA Process:

• Performance Appraisal Process involves:
• 1. Establish & communicate Performance

Standards. 2 Measure actual performance. Quantitative performance by others. Subjective measures are ratings on personal standards of

• pinions.

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3.4 PA Process:

• Four common sources of information used

for measuring actual performance are: a) personal observation, b) statistical reports c) oral reports d) written reports.

• 3. Compare actual performance with

standard and discuss the appraisal, in a way that subordinate accept appraisal in a constructive manner.

• 4. Taking corrective action.

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3.5 Planning appraisals

• Before appraisal Establish key task

areas, set goals, get facts and schedule first interview for appraisal. During appraisal: encourage two way communications, agree on goals, think how employee can be helped, record notes of interview. After appraisal: prepare formal record of interview. Monitor performance.

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3.6 Requisites of an effective appraisal system:

• 1. Reliability and validity of information and

data which is legally adequate.

• 2. Job relatedness.
• 3. Standardisation of appraisal forms,

procedures, uses of techniques, ratings etc.

• 4. Practical validity: visible to administer,

possible to implement and economic. …cont.

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3.6 Requisites of an effective appraisal system:

• ..Cont.
• 5. Legal sanction as per law.
• 6. Training to appraisers.
• 7. Open communication.
• 8. Access to result to employee to check

and challenge them.

• 9. Due process of redressal procedure.

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3.7 Approaches to PA:

1.Personality based systems: consists of list of personality traits significant in the job being appraised. These are initiative, dive, intelligence, ingenuity, creativity, loyalty and trustworthiness.

• 2. Generalised descriptive systems:

these include general management qualities like organizing, planning, coordination, motivating, controlling, delegating, communicating etc.

• 3. Behavioral descriptive systems:

define meaning of each term in respect of actual behaviors required.

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3.7 Approaches to PA:

• 4. Result-centered systems: these

are directly job related.

• PA requires job description in

questionnaire form giving title, supervisor, subordinates, purpose, responsibility areas, size, targets, standards, other ways of measuring performance etc of the job.

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3.8 Components of PA

• Components flow from specific objectives of

appraisal.

• Common components of PA are:
• 1. Key performance areas (KPA) & Key result

areas (KRA). 2 Tasks, targets, objectives; attributes, qualities, traits.

• 3. Self appraisals.
• 4. Performance analysis.

….cont.

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3.8 Components of PA

• Cont.
• 5. Performance ratings.
• 6. Performance review, discussion or
• counseling. 7. Identification of

training/development needs.

• 8. Ratings/ assessment by appraiser.
• 9. Assessment/ review by reviewing

authority.

• 10. Potential appraisal.

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3.9 Types of Appraisals

• 1. Close ended appraisal system: It is used in
• Govt. or Public enterprises. A confidential report

is made for employee. Individual is informed

• nly in case of adverse report.
• 2. Open ended appraisal system: Performance

is discussed with employee and he is ranked on five/ten point scale. No effort is made to motivate average performer. Appraisal may turn out to be more subjective due to insufficient data.

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3.10 Concerns & Issues in appraisal:

• 1. Identifying job responsibilities and duties and

performance dimensions, standard, and goals.

• 2. Prioritising & weighing performance

dimensions & performance goals.

• 3. Determining appropriate methods for PA.
• 4. Developing suitable appraisal instruments&

scoring devices. ….cont.

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3.10 Concerns & Issues in appraisal:

• Cont.
• 5. Establish procedures for fair appraisal.
• 6. Feedback to employees.
• 7. Relate performance to reward.
• 8. Design, monitor and audit process to ensure

proper op0eration.

• 9. Opportunity to appeal for employee.
• 10. Training employees in appraisal system.

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3.11 Steps in Appraisal Programme:

• Top management support, adequately trained

superiors and discussion with subordinates are essential conditions for PA to serve its purpose. Steps for development and administration of the program effectively, as suggested by Pigors & Myers, are:

• 1. Agreement in line managers about needs and
• bjectives of the program.
• 2. Examine plans of other organizations for

relevant features.

• 3. Get cooperation of supervisors in devising the

appraisal program.

• 4. Take into confidence members of the union.

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3.11 Steps in Appraisal Programme:

• Cont.
• 5. Provide intensive training to supervisors.
• 6. Acquire line and staff coordination.

&.uniformity.

• 7. Periodic discussions, progress reviews and
• pportunity to subordinate to express himself.
• 8. Recommend salary changes as soon as

appraisal is finalised.

• 9. Provision for challenge and review appraisals.

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3.12 Methods of PA:

• 1. Essay appraisal: Rater writes a paragraph on

individual’s strengths and weaknesses, potential etc. It suggests course of action. It is less structured,

• pen ended and flexible.
• The drawback is variability in length of appraisals.

Secondly appraisals are difficult to compare or

• combine. They are highly subjective with no

common of evaluation. It is time consuming.

• 2. Graphic rating scales: This method may not have

depth but is reliable and consistent. It assesses person on quality and quantity of his work e.g. is he

• utstanding, above average, average,

unsatisfactory?

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3.12 Methods of PA:

• There are three groups of appraisals, viz.
• a) Traditional Performance rating,

b) Newer rating systems like Rank-order procedure, Paired-comparison system, Forced distribution procedure, forced choice technique, critical incident method, and behaviorally anchored rating scale (BARS) method. C) Result oriented.

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3.12 Methods of PA:

• a) Traditional Performance rating: It involves

filling form by supervisor, rating given by a

• committee. It is time consuming. Rating is on

specific factors which can be summarized into a composite performance score. Rating Form contains factors like job knowledge, judgment,

• rganizing ability, dependability, creativity,

dealing with people, delegation, and leadership. Method is simple to understand and easy to

• apply. The method is critcised on clarity of

standards, differing perceptions, excessive leniency or strictness, the central tendency, the halo effect and impact of individual’s job. Moreover rating of one factor influences ratings

• f other factors.

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3.12 Methods of PA:

• b) Newer rating methods:
• i) The rank order procedure: Less than ten

employees are evaluated at a time and each is ranked as first, second etc. Separate ranking is done for each trait. Technique is cumbersome and difficult when number of employees is large.

• ii) Paired comparison system: Each employee

is compared with other, tick marking traits where hi is better. Final ranking is based on number of tick marks. Method is time consuming and cumbersome for large number of employees.

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3.12 Methods of PA:

• iii) The forced distribution Procedure: Here

superior rates subordinates according to a specified distribution. A person is evaluated relative to his performance in the group he

• works. The procedure is used for many traits. It

is used to eliminate rating errors like leniency or central tendency.

• iv) Forced choice technique: It forces rater to

select from a series the one statements or traits which best fits the individual and one that least fits him. Each statement is assigned score, not known to appraiser. This avoids personal bias and enhances objectivity. It is a costly technique and usually limited to middle and lower management.

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3.12 Methods of PA:

• v) Critical incident method: Superiors are

trained to lookout for critical incidents of

• subordinates. They enlist them as they happen

and build up a record of each subordinate with debit and credit for minus and plus sides. Evaluation under this method is based on

• bjective evidence and factual data. Drawback is

supervisor has to jot down incidents daily for so many employees. It may become a chore. He may delay feedback to employees. Secondly action on incident has to wait for yearend. This method can be used with others.

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3.12 Methods of PA:

• vi) Behaviorally Anchored Rating Scales

(BARS) Method: Here actual job related behaviors are rated. Rating scale uses specific behaviors as anchor points reflecting different degree of performance effectiveness. BARS combines elements of rating scales and critical incident method related to the dimension of job. Effective and ineffective job behaviors are described more objectively.

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3.12 Methods of PA:

• Merits:

1.High participation & acceptance.

• 2. It differentiates among behavior, performance

& results.

• 3. Technique is valid as it identifies observable &

measurable behaviors of specific jobs.

• Demerits:
• 1. Identification of critical behaviors that are

activity directed rather than result directed.

• 2. Construction of BARS is expensive and time

consuming.

• 3. High gain claims not supported by research.

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3.12 Methods of PA:

• vii) The Field Review: Appraisal by

person outside the department. This involves review of employee records and interviews covering his relations, qualities, weaknesses, what he doe and does not do well, is he satisfactory or outstanding, how he can be helped or trained etc.

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3.13 Management by Objective (MBO)

• This is a result oriented appraisal system.
• MBO in essence involves setting out clearly

defined goals of an employee in agreement with his superior.

• Characteristics of MBO:
• 1. establishing organizational goals.
• 2. Individual objectives Vis a Vis organization.
• 3. Review of performance.
• 4. Goal setting & planning
• 5. Organisational commitment.
• 6. Mutual goal setting.
• 7. Frequent reviews.

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3.13 Management by Objective (MBO)

• Key concepts of MBO are emphasis on results,

participation, human relations, & a regular review system.

• Four main steps in MBO:
• 1. Define job, key responsibilities & duties with

subordinates.

• 2. Define expected results (objectives) in

measure\able terms.

• 3. Measure results, compare with expected

results.

• 4. Provide feedback, appraise, periodic review

meetings.

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3.13 Management by Objective (MBO)

• This method is not normally applied to lower
• categories. MBO is a management system. It is

a tool for team building to increase work commitment of the team, inspire them for excellence in performance.

• Benefits of MBO:
• 1. Way of measuring performance objectively.
• 2. Coordinates goals with company goals.
• 3. Clarifies job expectations.
• 4. Improves relationship.
• 5. Fosters increased competence, personal

growth & development opportunity.

• …cont

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3.13 Management by Objective (MBO)

• 6. Aids overall planning system.
• 7. Provides basis for equitable salary

determination.

• 8. develops factual data.
• 9. Stimulates self-motivation, self-discipline &

self control.

• 10. Serves as a device for integration of many

management functions. MBO has potential problems. It lacks top management support, It is difficult to establish

• bjectives, requires lot of paperwork, too much

concentration on short term planning, it is time consuming.

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3.14 360 Degrees Feedback

• Here employee receives feedback from

variety of dimensions like boss, colleagues, peers, subordinates, internal & external customers etc. It uses multiple

• raters. Other names are multi-rater

system, upward feedback system, and full- circle feedback.

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3.14 360 Degrees Feedback

• Steps in 360 degree assessment:
• 1. Identify & define key competencies based on
• rganizational vision, values & goals.
• 2. Express them as attitudes for assessment.
• 3. Select multiple raters.
• 4. Compare results.
• 5. Feedback to employee.
• 6. Create action plan.

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3.15 HR Balanced Scorecard (BSC)

• BSC creates a template for measurement of
• rganizational as well as individual performance. It is

a measurement based management system, which enables organizations to clarify vision and strategy before initiating action. It is also a monitoring system that integrates all employees towards a common goal. BSC translates strategy into performance measures and targets and helps cascade corporate level measures to lower level. A business needs a winning team and game plan with clear understanding of plans and goals for success. A Balanced Scorecard creates a business strategy where all moves fit together. It is about setting goals, measuring performances, communicating actions, and end results to the team. It tracks and reports data from four critical perspectives: customer, financial, operational & strategic

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3.15 HR Balanced Scorecard (BSC)

• The key information to be obtained is in these

areas:

• 1. Company as a working place.
• 2. HR as enabler & retaining top talent.
• 3. Does HR provide support system?
• 4. Are HR plans competitive?
• 5. Are HR service delivery cost-effective?
• 6. HR process effective?
• ….cont.

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3.15 HR Balanced Scorecard (BSC)

• 7. Use of technology.
• 8. Return on investment in people.
• 9. Recruiting & selection better?
• 10. adequate talent & leadership for future.
• 11. HR helps to meet customer needs.
• 12. HR creating environment for vision sharing.
• 13. Investment by company in HR capabilities

development.

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3.16 Result-oriented Appraisal:

• It relates to future which can be improved.

It stresses forward planning for

• vercoming problems beforehand.

Superior guides subordinate with defined targets, feedback and knowledge of

• results. Individuals are highly motivated.

Sufficient groundwork has to be done before launching the result oriented programs.

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3.16 Result-oriented Appraisal:

• Limitations & potential problems of

result-oriented appraisal are:

• 1. it is excessively result-oriented.
• 2. It may be inflexible.
• 3. Not easy to create or use.
• 4. May not provide adequate personal

incentives to improve performance.

• 5. It may not fit all aspects of job.

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3.17 Self Appraisal / Assessment:

• Appraisee has to be interested in

development or change to succeed. He recapitulates and jots down his accomplishments & failures. He reviews

• wn performance. Meeting for appraisal is
• n joint problem-solving basis with

constructive feedback. Self assessment form is filled by individual which covers all aspects of evaluation and solutions.

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3.18 Drawbacks & Problems in PA:

• Difference in perception and value systems

influence evaluation. Individual rater bias can compromise credibility of appraisal.

• Some common rater errors:
• 1. Halo effect (single trait influencing all others)
• 2. Horns effect (one negative aspect affecting

entire appraisal)

• 3. Leniency or constant error.
• 4. Varying standards.

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3.18 Drawbacks & Problems in PA:

• 5. Contrast error (rating people relative to others

& not against standards.).

• 6. Similar to or different from me (i.e. the rater)
• 7. Sampling error (taking small sample of work)
• 8. Central Tendency
• 9. Spill-over effect (allowing past performance to

influence current appraisal).

• 10. Personal bias

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3.18 Drawbacks & Problems in PA:

• Problems associated with PA:
• 1. Measurement problem due to lack of

understanding roles & responsibilities involved

• r vagueness.
• 2. Organisational problem- not taken seriously.
• 3. Judgment problem (disagreements & bias).
• 4. Communication problem.
• 5. Feedback problem (generalized feedback)

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3.18 Drawbacks & Problems in PA: 6.Perception problem (perceive appraisal as isolated event & not ongoing process) 7.Rating problem (central tendency, generalized e.g. satisfactory, adequate etc.)

• 8. Fear of failure problem
• 9. Top management support problem.
• 10. Perceived meaning problem (about meaning
• f selected traits)
• 11. Bias problem- Mathew effect. Appraisal

results tend to become self-fulfilling. Employees’ past record prejudice future attempts to improve.

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3.18 Drawbacks & Problems in PA:

• Common Pitfalls in PA:
• 1. Demand too much of supervisor.

2.Standards & ratings tend to vary widely and unfairly.

• 3. Personal values and bias can replace
• rganization standards.
• 4. Lack of communication results in employees not

knowing how they are rated.

• 5. PA can not replace sound selection, placement &

training programmes.

• 6. PA ratings can boomerang when negative feed

back is communicated to employees.

• 7. PA interferes with more constructive coaching

relationship.

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3.19 TQM’s critique of PA:

• PA focuses on personal factors while TQM on

systems and process factors. PA, according to Deming is root cause of quality problems.

• Four critical factors in Deming’s analysis are:
• 1. Cause of poor worker performance lies in
• rganization.
• 2. Result-oriented PA compromises quality as

they are tied to rewards.

• 3. PA practices band of discouraged workers

who are ranked, equating average with unsatisfactory.

• 4. Managers neglect quality to play number

game

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3.19 TQM’s critique of PA:

• TQM and PA can be integrated to optimise gains from

both.

• 1. Primary focus of PA should be employee development.
• 2. Concentrate appraisal discussions on eliminating

barriers to quality.

• 3. Modify the system to incorporate TQM tenets, meeting

basic administrative requirements at the same time.

• 4. Train raters in both personal and system factors.
• 5. Downplay results and highlight competencies.
• 6. Collect data from multiple sources including customers.

7 Ask employees to list examples of achievements. Ask them to document three critical TQM effort – task achievement, quality improvement & team performance foe appraisal discussion. TQM & PA can work together in delivering quality products and services to customers.

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3.20 How to improve PA:

• 1. encourage discussions.
• 2. Constructive intentions.
• 3. Remunerative justice
• 4. Employee participation.
• 5. Appraiser’s credibility.
• 6. Set performance goals.
• 7. More feedback.
• 8. Training.

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3.21 Steps in appraisal interview:

• 1. setting stage and preparation.
• 2. Employee’s own assessment
• 3. Manager’s assessment
• 4. Employee’s reaction.
• 5. Resolving differences.
• 6. Ending session, summarizing

discussion.

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3.22 PA Assessment:

• It is a part of HR administration.
• 1. Plan of action agreed at PA is carried out.
• 2. Follow up to check if desired changes are

taking place.

• 3. Superior’s help in improvement.
• 4. Help employees to continue their outstanding

performance.

• 5. Evaluate the PA system and performance of

appraisers periodically.

• 6. Periodic research study on effectiveness,

validity and reliability of appraisal tools & techniques

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3.23 PA in practice:

• Companies review, combine and improve the PA

process to get best results.

• One company identified 12 factors to be

assessed:

• 1. coaching
• 2. Effective communication.
• 3. Encouraging teamwork.
• 4. Establish high standards and get results.
• 5. Effective delegation.
• …..cont.

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3.23 PA in practice

• 6. Rewarding performance.
• 7. Developing employees
• 8. Building consensus
• 9. Supporting reasonable risk taking.
• 10 forward thinking
• 11. Improving the organization.
• 12. Managing diversity

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• 3. 24 Performance Review:
• Objectives of Performance Review are:

1.Let subordinate know where they stand.

• 2. Recognise their good work.
• 3. Point out how & where they can improve.
• 4. Develop them on present job.
• 5. Develop & train for higher job
• 6. Communicate how they may progress in the

company.

• 7. Serve as record for evaluation of department
• r organization as a whole.
• 8. Warn employees to improve

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• 3. 24 Performance Review:
• Ten golden rules for performance meeting:
• 1. be prepared.
• 2. Create the right atmosphere.
• 3. Work to clear structure.
• 4. Use praise.
• 5. Let individual do most talking.
• 6. Invite self assessment.
• 7. Discuss performance and not personality.
• 8. Encourage analysis of performance.
• 9. Do not deliver unexpected criticism
• 10. Agree on measurable objectives and plan of

action.

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• 3. 24 Performance Review:
• Performance review problems:
• 1. Identifying criteria for evaluation.
• 2 Collecting relevant information.
• 3. Resolving conflict.
• 4. Defensive reaction to criticism.
• Norman Mier identifies three types of PA

interviews:

• 1. Tell & Sell Method
• 2. Tell & listen method.
• 3. Problem solving method.

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THE END