UNIVERSITRY OF MYSORE

C-1: Assignment

Subject : Human Resource Management

Topic : Significance and Methods of Performance Appraisal

Submitted To,
Dr.T.M.Shridhar Murthy
Guest Faculty
Institution of Development Studies
UOM, Manasagangothri, Mysuru.

Submitted By,
N.S. Rajeshwari
Fourth semester, M.B.A (ABM)
Institution of Development Studies
UOM, Manasagangothri, Mysuru.

Date: 20/05/2020 Reg No:18ABM020

Place: Mysuru
Introduction

Performance appraisal is an integral part of HRM and HRM deals with personnel is people.
“People” is the important and valuable resource that every organization or institution has in
the form of its employees. Dynamic people can build dynamic organization. Effective
employees can contribute to the effectiveness of the organization. HRM has multiple goals,
which include employee’s competency development, employee motivation development and
organization development. Employees require a variety of competencies, knowledge, attitude,
skills in technical area; Managerial areas, behavioural and human relations areas and
conceptual area to perform different tasks or functions required by their jobs.

Performance appraisal is also known as employee evaluation, merit rating, employee

assessment, etc. It is a systematic process of appraising an employee’s current and past
performance relative to his/her performance parameters. The employee’s performance should
be based on organizational expectations and employee’s actual performance. The idea that
per formal evaluation improves employee’s performance is not a new one but it is seen in the
roots of development of mankind. Each person is motivated when he is told about his actual
performance and accepts what were his/her previous mistakes. Performance appraisal process
may be held annually or monthly as per needed.

Meaning

Performance appraisal is a systematic evaluation of the employee’s present job capabilities

and also his potential for growth and development by his superiors. It can be either informal
or formal.

The informal appraisals are unplanned while formal appraisal system is set up by the
organisation to regularly and systematically evaluate employee performance. It reduces the
chance of bias and snap judgment but bound to yield better results.

Definition

C. Heyel (1973), “performance appraisal is the process of evaluating the performance and
qualifications of the employees in terms of the requirements of the job for which he is
employed, for the purposes of administration including placement, selection for promotions,
providing financial rewards and other actions which require differential treatment among the
members of a group as distinguished from actions affecting all members equally”.
Monappa and M.S. Saiyadain Douglas Mc Gregor (1957) says – Formal performance
appraisal plans are designed to meet three needs, one of the organisations and other two of
the individuals, namely –

(i) They provide systematic judgments to back up salary increase, transfers, demotions or
terminations.

(ii) They are means of telling a subordinate how he is doing, and suggesting needed changes
in his behaviour, attitudes, skills or job knowledge. They let him know ‘where he stands’ with
the boss

(iii) They are used as a base for coaching and counselling the individual by the superior.

Characteristics

(1) It should be simple and understandable by the employees. Any complications need to be
avoidable.

(2) It should be suitable to be adopted for appraisal at regular intervals because periodic
appraisal enables the employees to improve.

(3) It should create the atmosphere of mutual understanding and confidence.

(4) The system should be capable of giving equitable justice to all employees. Therefore, it
should be objective and free from personal bias.

(5) The employees should be taken in confidence while preparing performance appraisal.

(6) The system should be suitable to the organisation from the points of its structure, needs
and more essentially based on latest development in the area.

(7) It should be able to fulfill the desired purpose by locating potential for promotion,
increments, placements, transfers etc.

(8) Special training is given to evaluated” for making him more impartial and freer from bias.

(9) Negative appraisal of any employee should be immediately communicated to him so that
he can adopt measures for improvement.

(10) The employee should be allowed to go in appeal in case his performance appraisal is
negative if he is not satisfied. By this the management will win the confidence of the
employees.
(11) The performance appraisal system should not be aimed at harassing the employees who
are vital human resources and play very important role in achieving organisational goals. On
the other hand, the top bosses should be made aware that performance appraisal is aimed at
improving performance, organisational effectiveness and to accomplish organisational goals.

Objectives

i. To identify employee weaknesses and strengths;

ii. To identify and meet training needs and aspirations;

iii. To generate significant, relevant and valid information about employee;

iv. To provide inputs to increments of rewards, transfers, promotion and salary

administration.

v. To help in improving employee’s performance if he is not found to be suitable during the

review period;

vi. To create a desirable culture and tradition in the organisation;

vii. To help in planning career development and human resources planning based on
potentialities.

viii. To provide ‘deadlock’ and research data for improving overall human resources
information system.

Features

1. Systematic process of evaluation of an employee.

2. Analysis of the strengths and weaknesses of an employee.

3. To find out how well an employee is performing the job.

4. Appraisal is done periodically.

5. It is based on a definite plan.

6. Performance appraisal is different from job evaluation.

7. Performance appraisal is a continuous process that is accepted by every organization.

Needs

1. Providing information about the performance ranks on which decision regarding salary
fixation, promotion, etc. are taken.

2. Review of the performance of the subordinates.

3. Providing information that helps to counsel the subordinates.

4. Getting information to diagnose deficiency in employees regarding skills, knowledge, etc.

5. To prevent grievance and in disciplinary activities.

Process

1. Establish Performance Standards:

The performance standards for each and every job should be developed and discussed with
the superiors after thorough analysis of the job. These standards should be clear and not
vague. They must be measurable after certain period.

2. Communicate the Standards:

After setting the performance standards of job, the next activity is to communicate these
standards to all concerned; at least two parties – (a) appraiser (b) appraisee. It is necessary,
these standards must be modified. The appraiser must ensure that the information
communicated by him has been received by appraisee and understood clearly.

3. Measure Actual Performance:

Now the next activity is to measure actual performance of appraisee on the job after certain
period. Generally, four common sources are used by appraiser to measure actual
performance, personal observation, statistical reports, oral reports and written reports.

4. Compare Actual Performance with Standards:

The fourth activity is the comparison of actual performance with standards. Sometimes actual
performance may be better than standards and sometimes it may go off the track. Any
deviations between actual performance and standard performance may be noted carefully for
next activity.
5. Feedback to the Employee:

In this activity the results of stage forth are discussed with employee. The information which
is received by appraisee about his assessment has a great impact on his performance.
Communicating poor performance is difficult task of appraiser.

6. Taking Corrective Action, if Necessary:

This is the final or last activity of the performance appraisal process. In this stage two types
of corrective action may be recommended by the appraiser. One is positive means salary
increase or promotion if actual performance of appraisee is up to the mark and second is
negative means coaching and counselling may be done if the performance is poor. If
necessary appraisee may be deputed for formal training courses.

Advantages

(i) It helps the supervisors to plan out the promotion programs for efficient employees.

(ii) It helps in planning compensation packages for employees. Compensation packages

which include bonus, high salary rates, extra benefits, allowances and pre-requisites are
dependent on performance appraisal.

(iii) The systematic procedure of PA helps the supervisors to frame training policies and
programs.

(iv) It helps the supervisors to understand the validity and importance of the selection
procedure.

(v) Systematic appraisal helps to identify the ability of the employees.

(vi) It serves as a motivation tool. Through evaluating performance of employees, a person’s

efficiency can be determined if the targets are achieved. This very well motivates a person for
better job and helps him to improve his performance in the future.

Disadvantages

(i) If not done right, they can create a negative experience.

(ii) Performance appraisals are very time consuming and can be overwhelming to managers
with many employees.

(iii) They are based on human assessment and are subject to errors and biases.
(iv) Can be a waste of time if not done appropriately.

(v) They can create a very stressful environment for everyone involved.

Significance

1. Performance appraisal helps supervisors to assess the work performance of their

subordinates.

2. Performance appraisal helps to assess the training and development needs of employees.

3. Performance appraisal provides grounds for employees to correct their mistakes, and it also
provides proper guidance and criticism for employee's development.

4. Performance appraisal provides reward for better performance.

5. Performance appraisal helps to improve the communication system of the organization.

6. Performance appraisal evaluates whether human resource programs being implemented in

the organization have been effective.

7. Performance appraisal helps to prepare pay structure for each employee working in the
organization.

8. Performance appraisal helps to review the potentiality of employees so that their future
capability is anticipated.

Methods

1. Ranking Method:

This method requires the evaluator to list all salespeople in order of their performance,
beginning with the top performer. A number of ranking methods are used for conducting the
performance appraisal of employees.

Some of the important ones are listed as under:

(I) Simple Ranking Method:

In this method all the employees are rated on the same set of factors and ranks as given to
them on the basis of their performance in relation to others in the group. They are all rated
from the first to the last in order of their performance.

(II) Paired Comparison Method:

In this method all the employees’ performances are compared with other employees but
comparison is made with only one member at a time. The number of times each member is
preferred over the other is recorded. These numbers determine the ranks of members and
obviously the top performers will be those with highest ranks for more number of times.

(III) Forced Distribution Method:

It is a method to evaluate employee performance according to a predetermined distribution

scale. Generally, the organisations use five grade scales where one end of the scale represents
the best job performance and the other represents the poorest job performance. All the
employees are rated somewhere on the scale according to their level of performance in
comparison to other employees.

2. Graphic Rating Scale Method:

Graphic rating scale method identifies specific desired traits, behaviour factors or
performance criteria, such as, quality and quantity of work, cooperativeness, analytical
ability, decisiveness, initiative, emotional stability, etc. Employees are rated on a scale based
on the extent to which they exhibit the desired behaviour or the extent to which they meet the
desired performance criteria.

3. Critical Incidents Method:

Under this method the immediate supervisor tries to make a continuous record of all the good
or bad incidents of a person’s work-related behaviour. Whenever employees are found doing
something good or positive which contribute towards increasing the overall productivity of
the organisation or creating a healthy work atmosphere it is recorded as their positive
contribution.

4. Checklist Method:

In this method the employer starts with a list of factors in their checklist, such as, does the
employee cooperate with other co-workers, do they keep their work place neat and clean, do
they follow their supervisors instructions closely, do they reach on their workplace in time,
and are they able to achieve the work targets assigned to them properly.

5. Essay Method:

Brief narratives by the manager describe the performance of an employee. A manager may
write a detailed write-up on the job knowledge and potential of the employee; employees
understanding of the company’s programs, policies, and objectives; employees promotability;
overall appraisal of the employee’s performance; and employees relation with their co-
workers and superiors; and so forth.

6. Management by Objectives Method:

Management by objectives (MBO) is a comprehensive management approach which is used

for conducting performance appraisal. It is considered as one of the most scientific and
objective method as a set procedure is followed. The primary focus in this method is on
developing a set of objectives which are to be realised by the employees.

7. 360° Feedback Appraisal:

The term 360° feedback appraisal is also known as multi-rater feedback, multisource
feedback, full circle appraisal and group performance review. This concept was developed in
the US in the year 1998. This concept involves a process of collecting information about a
person’s behaviour from the people around him – his boss (es), colleagues, fellow members
in the team, suppliers, as well as customers.

8. Potential Appraisal:

This is done to predict whether an employee is capable of taking on more demanding work,
and the speed at which he or she is capable of advancing. This appraisal method tries to judge
the potential of employees for being promoted to higher positions. In this method it is
necessary to inform employees of their future prospects and give them an opportunity to
perform to the best of their capacity.

Conclusion

Human resources are the vital source of every organization. Every employee in an
organization increases the productivity and goodwill of every company. An employee, being
an individual is treated as assets in the organization. So, the organization should mainly
emphasis performance appraisal techniques and its development programme. Both the
appraiser and appraise should realize the principle and use the tool of appraisal system in a
constructive way for the prosperity of the organization. The performance appraisal technique
prevailing in the organization is fair. Employees are satisfied with the present performance
appraisal system that is a traditional one. As many new appraisal techniques are emerged, the
organization can implement modern technique which would be more effective. The welfare
measure of organization is at par with the company policies and has brought a great sense of
involvement in work among the employees of the organization. If the suggested measures are
taken into consideration it will help to increase the effectiveness of performance appraisal
system.

Bibliography

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appraisal.html?m=1
➢ http://www.yourarticlelibrary.com/human-resource-development/performance-
appraisal-meaning-features-needs-and-methos/32368
➢ B0930823.pdf