Human Resource Management

Chapter Five:

Performance Appraisal
Presented by
Mohamed Mahad Isse

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Chapter 5 outline

• Areas of focus or Main topics

 Performance appraisal concept
 The importance of performance appraisal
 Steps in performance appraisal
 Techniques of performance appraisal

 Merits of performance appraisal

 Demits of performance appraisal
 Modern method vs. traditional method

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Chapter 5 outline

 Management by objectives
 Process of MBO
 Behaviorally anchored scale
 Human resource accounting
 Potential appraisal
 Conclusion
 Chapter summary

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CHAPTER FIVE

What is the employee

performance appraisal?
Performance appraisal

o Performance Appraisal is a systematic and orderly

evaluation of performance of employees at work by their
superiors.

o or others who are familiar with the techniques of

performance appraisal.
o Such appraisal is common in the case of blue collared
employees (workers, supervisors etc.)

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Outline Importance of
performance appraisal?
Importance and uses of appraisal

 It helps in Suitable Placements of subordinates as per

their potentiality.
 It provides Assistance in Self Improvement.
 It acts as Incentive to Improve the Performance
 It suggests appropriate training programme as per the
weaknesses of the employees.

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Cont’ed

• It helps in framing Sound Personnel Policies for promotion

and transfers.
• It promotes Cordial Employee-Employer Relations
• It facilitates HR Planning and Development of existing
manpower as per the future needs of enterprise.

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Cont’ed:

 It facilitates Direct Employee Communication through

 appraisal interview and post-appraisal interview.
 It wins the High Employee Morale as they feel that the
 management is interested in their career development and
well being

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PURPOSE

Purpose of performance appraisal

Purpose

 Management uses appraisals for general personnel

decisions.
– Promotions, transfers, and terminations
– Appraisals identify training and development needs.
 Appraisals also provide feedback to employees on how
the organization views their performance.

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PA

 Appraisals also provide feedback to employees on how

the organization views their performance.
– Appraisals are used as the basis for reward
allocations.
 Decisions about who gets merit pay increases and other
rewards are typically determined by performance
appraisals.

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SPA

Steps in performance appraisal?

Steps in performance appraisal

 Establishing performance standards

 Communicating standards to employees
 Measuring accrual performance

 Comparing actual performance with the standard set

 Appraisal interview – discussing actual performance with
the employee
 Flow up – training to improve the performance

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EVALUATION

What do we evaluate ?
Evaluation

 Individual task outcomes.

 Skills and knowledge
 Behaviors.
 Traits
 Attitude
 etc

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WHO SHOULD DO THE EVALUATION?

Who Should Do the Evaluating?

Who should do the evaluation

 By tradition, a manager’s authority.

 Immediate Superior
 Peer evaluations

 Self-Evaluation
 Immediate Subordinates
 360-Degree Evaluation

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Techniques of performance appraisal

 Traditional Methods:-
o Confidential Reports
o Grading
o Checklist Forced
o Choice Rating

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TPA

o Critical Incident
o Essay Method:
o Group Appraisal
o Field Review
o Ranking:

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Merits

 It is simple to understand and easy to use

 It is less expensive and less time consuming.
 It does not require trained raters.

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Demerits:

 It does not specify how much on employee is superior to

other.
 It is not possible to give objective proof for ranking
 Performance is not compared to standard performance
 There may be bias of raters in ranking
 It is highly subjective.

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Next

• The next lecture

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Graphic Rating Scale:

• Graphic Rating Scale: In this method, a list of various

factors like quantity of output, quality of output, initiative
etc.
• is prepared and given a degree (outstanding, very good,
good, fair, poor).
• While rating an employee, the rater is asked to mark in
front of each respective degree of quality.

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Demerits:

 It puts heavy pressure on rater, as he has to consider 4 to

12 factors with five degree for each.
 Rate has to do lot of paper work
 There may be gap between two degrees e.g. very good
and good.
 There may be bias of raters in rating.

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Modern Methods

 360-Degree performance appraisal

o when the appraisal of a manager is made by the
superiors, peers, subordinates and clients,
o it is called as 360-degree system of performance
appraisal.
o This system was developed fits at General Electric, US in
1992.

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Merits of 360 Degree Appraisal

o There is Systematic Performance Data Collection

o It provides greater Potentiality of Self Development
o Only Formal Communication is entertained in 360-
degree appraisal.
o It Identify Special Traits like team building skills and
interpersonal skills.

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Demerits of 360 Degree Appraisal

 Creates Sense of Insecurity when employees heard that

 the appraisal would be obtained from multiple of sources.
 It is Time Consuming, as it requires time to select right
and multiple raters.
 All raters may not be equally close to the employee.

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Assessment center

• Assessment center may be defined as “a central location

where managers may come together-
• to participate in job related exercises evaluated by trained
observers”.
• Here, the managers have to participate in job related
exercises and their performance is judged by trained
observers.
• In this, qualities like interpersonal skills, communication
skills, self-confidence, decision-making ability etc. is
assessed.

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Process

 Evaluators observe and rate employees as they perform

jobs.
 After this, raters meet to discuss their observations.
 Then they make a summery report.
 Assessment is done mainly with a view to determine
employee promotion.

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Merits

o It defines the criteria for selection and promotion.

o It provides better forecasts for future performance
o It helps to determined training and development needs of
an employee.
o It provides fair and equal opportunity to prove all
candidates.

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Demerits

 It is costly and time consuming method

 Raters are often influenced by subjective e.g personality
 If the report of assessment center is negative,
 employee may feel demoralized and frustrated.

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Management by objectives

 Peter Drucker coined the term MBO in 1954. MBO is a

way of managing which focuses on the accomplishment
 of well-defined objectives rather than on tasks and
activities.
 Management by objectives
• ___________________________________________
____________________________________________

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Management by objectives

 MBO Involves setting specific measurable goals with each

employee and then periodically reviewing the progress
made.
1. Set the organization’s goals.
2. Set departmental goals.
3. Discuss departmental goals.
4. Define expected results (set individual goals).
5. Performance reviews.
6. Provide feedback.

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Process of MBO

o Establishing Goal:
o Setting Performance Standard for the subordinate.
o Comparison of Goal attained with the goal agreed upon.

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Behaviorally Anchored Rating Scale

 The scale point of BARS is determined by statements of

effective and ineffective behaviors.
 While appraisal, a rater indicates which behavior on each
scale best describes the performance of an employee.

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Features of BARS

 Raters who will use the scale define the areas of

performance to be appraised.
 Scales are fixed by description of actual job behavior.
 Scales carries behaviors, which are observable and
related to the job.
 BARS help to remove rating errors.

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Human Resource Accounting

 In this method, the performance of employees is assessed

in terms of cost and contribution of employees.
 Cost of human resource consists of expenditure on
recruitment, selection, training etc.
 and contribution of human resource is the monetary value
of productivity.

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Potential appraisal

 The concept of performance counseling and potential

appraisal is closely connected.
 Its basic objective is to help the employee to overcome
 his weaknesses and to reinforce his strong points.

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Potential appraisal -2

 Performance appraisal only evaluates what the

subordinate has performed
 whereas potential appraisal seeks to examine what the
subordinate can do.

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A GRAPHIC RATING SCALE

Note: For example, what exactly is meant by

“good,” “quantity of work,

Table 9–2
© 2005 PRENTICE HALL INC. ALL
RIGHTS RESERVED. 9–41
 Class room teaching appraisal by students

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Chapter Summary

• Areas of focus or Main topics

 Performance appraisal concept
 The importance of performance appraisal
 Steps in performance appraisal
 Techniques of performance appraisal

 Merits of performance appraisal

 Demits of performance appraisal
 Modern method vs. traditional method

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Chapter summary

 Management by objectives
 Process of MBO
 Behaviorally anchored scale
 Human resource accounting
 Potential appraisal
 Conclusion
 Chapter summary

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