Session 10:

Performance & Potential

Appraisal

Praxis Business School, Kolkata

HCM | Jan-Mar 2019 1 / 15
Concept of Performance Appraisal
Performance appraisal is a formal assessment and rating of individuals by their managers
at – usually – an annual review meeting. The objectives of Performance Appraisal are:
Objective Remarks
1. Setting targets and goals as Performance standards and specific goals are set at the
performance standards beginning of the appraisal period. These targets motivate
the employee to perform better.
2. Evaluating employee performance The evaluation of employee performance helps
understand the strengths and weaknesses of the
employee. This evaluation also helps to determine the
achievement of pre-set goals and targets.
3. Identifying training and development An employee’s areas of weakness are also the areas for
needs improvement or development. These are the
shortcomings in the individual’s performance, which need
to be improved upon.
4. Rewarding performance Rewarding a good performer and punishing a bad one
encourages employees to perform better. As has been
stated in the reinforcement theory, behaviour is a function
of its consequences.

5. Improving performance Once the strengths and weaknesses are identified, the
employees can be encourages to overcome his
weaknesses and leverage his strengths to optimize his
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performance.
 The Appraisal Process
Determination of standards of performance
Step 1 based on the organizational objectives and the
job description.

Measurement of employee performance

Step 2
against the pre-determined goals and
standards.

Step 3 Actual process of measurement.

Step 4 Communicating the results of appraisal to the

employee concerned
Who are the appraisers?

Traditionally, appraisal has been the job of the supervisor with

the employee himself having no role to play in the process.
However, the whole concept has changed today and the
appraisee has an important role in the process.
In a 360 degree feedback process, the feedback can be provided
by:
 Self-appraisal
Many employers use Rating
 Supervisors Peers Committees to evaluate
employees, especially when
 Customers/Clients the employee performs a
variety of tasks in different
 Subordinates environments under different
 supervisors
Performance Appraisal Methods

Traditional Methods Modern Methods

 Management by  Behaviorally Anchored
Objectives or goal-setting Rating Scale (BARS)
 Graphic rating scale  360 degree Performance
Appraisal
 Work standards approach
 Team Appraisals
 Essay appraisal
 Balanced Scorecard
 Critical incidents method
Method
 Forced choice rating
method
 Point allocation method
 Ranking methods
 Checklist
Examples of
Rating charts
Example
of BARS
 Problems of Rating
 Leniency or Severity  Stereotyping
 Central Tendency  Recency Effect
Effect  Primacy Effect
 Halo Effect  Perceptual Set
 Spillover Effect  Fundamental
 attribution error
Status Effect

Factors that help improve accuracy:
1 Ratings based on observation of
actual performance
2 Documented behaviours to improve
recall
3. Usage of checklists
4. Awareness of personal biases
5 Comparison and benchmarking of
ratings
6. Management accountability of ratings
Factors that may low er accuracy:
1 Ratings done as pa rt of administrative
exercise
2 Raters unable to express himself honestly
and unambiguously
3. Rater unaware of causes of rating errors
4 Rater tends to rec all behaviours selectively
and only to improve his own rating
5 Performance factor s are unrelated to the job
and / or poorly defined

7. Performance factors are well-defined 6 Rater tends to infl ate ratings when the
ratees receive scor es
Appraisal Interview
The appraisal interview plays a prominent role in the success
of a performance appraisal system. A well-designed appraisal
system also needs to be implemented well.

Challenges of appraisal interview:

 The organizational culture
 the relationship between the employee and his boss
 the maturity level of the individuals
 An apprehensive employee
 A wary appraiser
 A biased appraiser
 Inexperience
Ethics of Performance Appraisal
Every performance management system needs the support of
the top management and the acceptance of the workforce for
its success.

Removing “intentional” errors from the appraisal process:

 Making the ratings more measurable and quantifiable
 Reducing subjectivity by using multi-rater feedback
 Using instruments/methods which have hidden weights or
keys attached to them
 Having the feedback evaluated by a third party like the HR
department
 Training appraisers on how to provide negative feedback
Forced Distribution of Performance

Forced distribution method seeks to overcome the problem of leniency by
compelling the rater to distribute the overall ratings on all points of the scale
representing a “bell curve”

Forced distribution of performance ensures high performers are adequately
differentiated and recognized, and low performers (deadwood) are periodically
weeded out.
Number of Employee

5% 10% 60% 20% 5%

Unsatisfactory Below Average Good Excellent
Average


Major weakness of the forced distribution method lies in the assumption that the
employee performance levels always conform to a normal (or some other)
distribution. Organisations that have done a good job in selecting talented
workforce during it’s growth phase, the forced distribution often leads to
reduction in employee morale .
Uses of Performance Appraisal
 Training and development needs of
the employees can be determined
 Organizational effectiveness can be
improved by improving the individual
performance of the employees
 The performance appraisal system
forms the basis for compensation
management in the organization, in
addition to other methods like market
surveys.
 Can be used as basis for transfers,
promotions and other career planning
activities of individual employees, and
even for determining termination.
 An effective performance appraisal
system also helps in succession
planning in the organization
 Cross-functional transfers and job
enrichment exercises etc. can be
taken up, based on inputs from the
appraisal system.
 Human resources of the firm can be
evaluated based on the competency
and skill set and potential of the
workforce. This provides the base for
human resource planning
 An assessment of the value of the
human resources helps in
organizational planning.
 The performance appraisal system also
helps in evaluating and auditing the
existing plans, processes and systems
in the organization.
Assessing Potential
Yearly performance appraisal process leads to the process of
assessing the employee’s potential to contribute to the
organisation’s progress in medium to longer term. The Philips
Model below shows the four categories of employees:
High

Problem Child Star Performers

Potential

Question Mark Solid Citizens

Low

(Planned Separation?)

Low High

Performance
Talent Review Grid Example
Legal Issues Associated with Performance
Appraisal
The appraisal system is a common target of legal disputes by employees involving
charges of unfairness and bias. An employee may seek legal recourse to obtain relief
from a discriminatory performance appraisal. Few recommendations for developing a
fair and legally defensible performance appraisal system is mentioned below:

1. Legally defensible appraisal Procedures:

 All personnel decisions should be based on formal, uniform and
standardised performance appraisal system; Formal appeal process
2. Legally defensible appraisal Content:
 Objectively verifiable performance data, and job related performance
dimensions should be used; avoid appraisals based on traits
3. Legally defensible Documentation of Appraisal Results:
 A thorough, written record of evidence of performance appraisal
ratings and improvement actions should be maintained, especially
while leading to termination decision
4. Legally defensible Raters:
 Only trained raters who have the opportunity to observe the
performer first-hand should be allowed to do performance rating;
more than one rater should be used preferably to reduce bias