METHODS OF PERFORMANCE APPRAISAL

Traditional Methods:
1. Ranking Method:
It is the oldest and simplest formal systematic method of performance appraisal in
which employee is compared with all others for the purpose of placing order of worth.
The employees are ranked from the highest to the lowest or from the best to the worst.
n doing this the employee who is the highest on the characteristic being measured and
also the one who is L lowest, are indicated. Then, the next highest and the next lowest
between next highest and lowest until all the employees to be rated have been ranked.
Thus, if there are ten employees to be appraised, there will be ten ranks from 1 to 10.

2. Paired Comparison:
In this method, each employee is compared with other employees on one- on one basis,
usually based on one trait only. The rater is provided with a bunch of slips each coining
pair of names, the rater puts a tick mark against the employee whom he insiders the
better of the two. The number of times this employee is compared as better with others
determines his or her final ranking.
N (N-1)/2
Where N = the total number of employees to be evaluated. Let this be exemplified with
an imaginary example.
If the following five teachers have to be evaluated by the Vice Chanceller of a University:
(K), Mohapatra (M Raul (R), Venkat (V), and Barman (B), the above formula gives 5 (5
-1) / 2 or 10 pairs.

3. Grading Method:
In this method, certain categories of worth are established in advance and carefully
defined. There can be three categories established for employees: outstanding,
satisfactory and unsatisfactory. There can be more than three grades. Employee
performance is compared with grade definitions. The employee is, then, allocated to the
grade that best describes his or her performance.
Such type of grading is done is Semester pattern of examinations and in the selection of
a candidate in the public service sector. One of the major drawbacks of this method is
that the rater may rate most of the employees on the higher side of their performance.

4. Forced Distribution Method:

The method assumes that employees’ performance level confirms to a normal statistical
distribution i.e., 10,20,40,20 and 10 per cent. This is useful for rating a large number of
employees’ job performance and promo ability. It tends to eliminate or reduce bias.
It is also highly simple to understand and easy to apply in appraising the performance of
employees in organisations. It suffer from the drawback that improve similarly, no single
grade would rise in a ratings.

5. Forced-Choice Method:
The forced-choice method is developed by J. P. Guilford. It contains a series of groups of
statements, and rater rates how effectively a statement describes each individual being
evaluated. Common method of forced-choice method contains two statements, both
positive and negative.
Examples of positive statements are:
1. Gives good and clear instructions to the subordinates.
2. Can be depended upon to complete any job assigned.
A pair of negative statements may be as follows:
1. Makes promises beyond his limit to keep these.
2. Inclines to favour some employees.
Each statement carries a score or weight, which is not made known to the rater. The
human resource section does rating for all sets of statements— both positive and
negative. The final rating is done on the basis of all sets of statements. Thus, employee
rating in this manner makes the method more objective. The only problem associated
with this method is that the actual constructing of several evaluative statements also
called ‘forced-choice scales’, takes a lot of time and effort.

6. Check-List Method:
The basic purpose of utilizing check-list method is to ease the evaluation burden upon
the rater. In this method, a series of statements, i.e., questions with their answers in ‘yes’
or ‘no’ are prepared by the HR department (see Figure 28-2). The check-list is, then,
presented to the rater to tick appropriate answers relevant to the appraisee. Each
question carries a weight-age in relationship to their importance.

7. Critical Incident Method:

In this method, the rater focuses his or her attention on those key or critical behaviours
that make the difference between performing a job in a noteworthy manner (effectively
or ineffectively).
The basic idea behind this rating is to apprise the workers who can perform their jobs
effectively in critical situations. This is so because most people work alike in normal
situation. The strength of critical incident method is that it focuses on behaviours and,
thus, judge’s performance rather than personalities.

8. Graphic Rating Scale Method:

The graphic rating scale is one of the most popular and simplest techniques for
appraising performance. It is also known as linear rating scale. In this method, the
printed appraisal form is used to appraise each employee.
The form lists traits (such as quality and reliability) and a range of job performance
characteristics (from unsatisfactory to outstanding) for each trait. The rating is done on
the basis of points on the continuum. The common practice is to follow five points scale.
The rater rates each appraisee by checking the score that best describes his or her
performance for each trait all assigned values for the traits are then totaled. Figure 28-3
shows a typical graphic rating scale.

9. Essay Method:
Essay method is the simplest one among various appraisal methods available. In this
method, the rater writes a narrative description on an employee’s strengths,
weaknesses, past performance, potential and suggestions for improvement. Its positive
point is that it is simple in use. It does not require complex formats and
extensive/specific training to complete it.
However, essay method, like other methods, is not free from drawbacks. In the absence
of any prescribed structure, the essays are likely to vary widely in terms of length and
content. And, of course, the quality of appraisal depends more upon rater’s writing skill
than the appraiser’s actual level of performance.
Moreover, because the essays are descriptive, the method provides only qualitative
information about the employee. In the absence of quantitative data, the evaluation
suffers from subjectivity problem. Nonetheless, the essay method is a good start and is
beneficial also if used in conjunction with other appraisal methods.

10.Confidential Report:
It is the traditional way of appraising employees mainly in the Government
Departments. Evaluation is made by the immediate boss or supervisor for giving effect
to promotion and transfer. Usually a structured format is devised to collect information
on employee’s strength weakness, intelligence, attitude, character, attendance,
discipline, etc. report.

MODERN METHODS

1. Management by Objectives (MBO):

Most of the traditional methods of performance appraisal are subject to the antagonistic
judgments of the raters. It was to overcome this problem; Peter F. Drucker propounded a new
concept, namely, management by objectives (MBO) way back in 1954 in his book.
The Practice of management. The concept of MBO as was conceived by Drucker, can be
described as a “process whereby the superior and subordinate managers of an organization
jointly identify its common goals, define each individual’s major areas of responsibility in terms
of results expected of him and use these measures as guides for operating the unit and assessing
the contribution of each its members”.
In other words, stripped to its essentials, MBO requires the manager to goals with each
employee and then periodically discuss his or her progress toward these goals.
In fact, MBO is not only a method of performance evaluation. It is viewed by the Practicing
managers and pedagogues as a philosophy of managerial practice because .t .s a method by
wh.ch managers and subordinates plan, organise, communicate, control and debate.
An MBO programme consists of four main steps: goal setting, performance standard, compari-
son, and periodic review. In goal-setting, goals are set which each individual, s to attain. The
superior and subordinate jointly establish these goals. The goals refer to the desired outcome to
be achieved by each individual employee.

2. Behaviourally Anchored Rating Scales (BARS):

The problem of judgmental performance evaluation inherent in the traditional methods of
performance evaluation led to some organisations to go for objective evaluation by developing a
technique known as “Behaviourally Anchored Rating Scales (BARS)” around 1960s. BARS are
descriptions of various degrees of behaviour with regard to a specific performance dimension.
It combines the benefits of narratives, critical incidents, and quantified ratings by anchoring a
quantified scale with specific behavioural examples of good or poor performance. The
proponents of BARS claim that it offers better and more equitable appraisals than do the other
techniques of performance appraisal we discussed so far.
 3. Assessment Centres:
The introduction of the concept of assessment centres as a method of performance method is
traced back in 1930s in the Germany used to appraise its army officers. The concept gradually
spread to the US and the UK in 1940s and to the Britain in 1960s.
The concept, then, traversed from the army to business arena during 1960s. The concept of
assessment centre is, of course, of a recent origin in India. In India, Crompton Greaves, Eicher,
Hindustan Lever and Modi Xerox have adopted this technique of performance evaluation.
In business field, assessment centres are mainly used for evaluating executive or supervisory
potential. By definition, an assessment centre is a central location where managers come
together to participate in well-designed simulated exercises. They are assessed by senior
managers supplemented by the psychologists and the HR specialists for 2-3 days.
Assessee is asked to participate in in-basket exercises, work groups, simulations, and role
playing which are essential for successful performance of actual job. Having recorded the
assessee’s behaviour the raters meet to discuss their pooled information and observations and,
based on it, they give their assessment about the assesee. At the end of the process, feedback in
terms of strengths and weaknesses is also provided to the assesees.
The distinct advantages the assessment centres provide include more accurate evaluation, mini-
mum biasedness, right selection and promotion of executives, and so on. Nonetheless, the
technique of assessment centres is also plagued by certain limitations and problems. The
technique is relatively costly and time consuming, causes suffocation to the solid performers,
discourages to the poor performers (rejected), breeds unhealthy competition among the
assessees, and bears adverse effects on those not selected for assessment.

4. 360 – Degree Appraisal:

Yet another method used to appraise the employee’s performance is 360 – degree appraisal.
This method was first developed and formally used by General Electric Company of USA in 1992.
Then, it travelled to other countries including India. In India, companies like Reliance Industries,
Wipro Corporation, Infosys Technologies, Thermax, Thomas Cook etc., have been using this
method for appraising the performance of their employees. This feedback based method is
generally used for ascertaining training and development requirements, rather than for pay
increases.
Under 360 – degree appraisal, performance information such as employee’s skills, abilities and
behaviours, is collected “all around” an employee, i.e., from his/her supervisors, subordinates,
peers and even customers and clients.
In other worlds, in 360-degree feedback appraisal system, an employee is appraised by his
supervisor, subordinates, peers, and customers with whom he interacts in the course of his job
performance. All these appraisers provide information or feedback on an employee by
completing survey questionnaires designed for this purpose.
All information so gathered is then compiled through the computerized system to prepare
individualized reports. These reports are presented to me employees being rated. They then
meet me appraiser—be it one’s superior, subordinates or peers—and share the information
they feel as pertinent and useful for developing a self-improvement plan.
In 360 – degree feedback, performance appraisal being based on feedback “all around”, an em-
ployee is likely to be more correct and realistic. Nonetheless, like other traditional methods, this
method is also subject to suffer from the subjectivity on the part of the appraiser. For example,
while supervisor may penalise the employee by providing negative feedback, a peer, being
influenced by ‘give and take feeling’ may give a rave review on his/her colleague.
 5. Cost Accounting Method:
This method evaluates an employee’s performance from the monetary benefits the employee
yields to his/her organisation. This is ascertained by establishing a relationship between the
costs involved in retaining the employee, and the benefits an organisation derives from Him/her.
While evaluating an employee’s performance under this method, the following factors are also
taken into consideration:
1. Unit wise average value of production or service.
2. Quality of product produced or service rendered.
3. Overhead cost incurred.
4. Accidents, damages, errors, spoilage, wastage caused through unusual wear and tear.
5. Human relationship with others.
6. Cost of the time supervisor spent in appraising the employee.

PROCESS OF JOB EVALUATION

The process of job evaluation involves following steps:
 Securing acceptance from employees after explaining the purpose and use of job
evaluation programme.
 Creating job evaluation committee consisting of experienced employees, union
representatives and HR experts.
 Deciding the job to be evaluated, which may represent the type of work performed in
the organisation.
 Analysing and preparing job description.
 Selecting method of evaluation, according to the job factors and organisational
demand.
  Classifying the jobs on the basis of weightage and monetary values.
 Installing the programme in the whole organisation after explaining it to employees.
 Conducting periodical review in the light of changes in environment from time to
time.

INCENTIVES

MEANING & DEFINTION

1. According to Milton L. Rock, incentives are defined as ‘variable rewards granted
according to variations in the achievement of specific results’.
2. According to K. N. Subramaniam, ‘incentive is system of payment emphasizing the
point of motivation, that is, the imparting of incentives to workers for higher production
and productivity’.

TYPES

1. Financial incentives:
Some extra cash is offered for extra efficiency. For example, profit sharing plan and
group incentive plans.
2. Non-financial incentives:
When rewards or prizes are provided by the organization to motivate the employees it is
known as non-financial incentives.
3. Monetary and non-monetary incentives:
Many times, employees are rewarded with monetary and non-monetary incentives that
include promotion, seniority, recognition for merits, or even designation as permanent
employee.

IMPORTANCE OF INCENTIVES

1. Motivational Tool
Incentive programs motivate employees to push and challenge themselves to achieve
higher degrees of productivity. This ultimately translates to increased earnings for your
company. When incentive plans are in place, employees recognize that significant effort
on their behalf will be acknowledged and rewarded. This can increase the amount of
time, effort and energy a staffer is willing to put forth on your company’s

2. Promoting Teamwork
Incentive plans tied to teamwork or group initiatives can help promote collaborative
work efforts in your business. Staffers working in teams that collectively rely on each
others' productivity for the group to receive a bonus or award may support and
encourage each other to perform at top levels. Peer pressure may also encourage
additional degrees of performance from underperforming staffers who don't want to let
their team members down.

3. Morale Boosters
Incentive plans have the potential to raise morale and increase job satisfaction in a
company. Employees see a direct correlation between their work effort and their
earning potential. Higher workplace morale can decrease turnover, which saves your
company money associated with recruiting, hiring and training new staffers.
Additionally, staffers with high levels of job satisfaction often exhibit lower degrees of
absenteeism, which can also help improve a company's bottom line.

4. Service Levels
Employees competing for or striving to meet the goals of an incentive plan may provide
higher degrees of service to your customers. This can encourage repeat business,
improve customer satisfaction and enhance your company's reputation. Improved
service levels can also encourage referral business as well as positive word-of-mouth
advertising.

5. Incentive Program Essentials

For an incentive program to be effective, goals and objectives should be clearly defined
for staffers. Workload should also be equitably distributed, or it could create resentment
if staffers feel they have to carry slow or poor-performing team members. Consider both
individual and group incentives to promote the concepts of solo effort and teamwork.