Module IV: Performance Appraisal, functions; self-managed teams, criteria for a good

appraisal system, Methods, performance appraisal interview

Performance Appraisal:
A performance appraisal is a regular review of an employee's job performance and overall
contribution to a company. Also known as an annual review, performance review or
evaluation, or employee appraisal, a performance appraisal evaluates an employee’s skills,
achievements, and growth--or lack thereof.

Performance Appraisal Types:

Most performance appraisals are top-down, meaning supervisors evaluate their staff with no
input from the subject. But there are other types:

 Self-assessment: Individuals rate their job performance and behaviour.

 Peer assessment: An individual's workgroup or co-workers rate their performance.
 360-degree feedback assessment: Includes input from an individual, supervisor, and
peers.
 Negotiated appraisal: A newer trend that utilizes a mediator and attempts to
moderate the adversarial nature of performance evaluations by allowing the subject to
present first. Also focuses on what the individual is doing right before any criticism is
given. This structure tends to be useful during conflicts between subordinates
and supervisors.

Objectives of Performance Appraisal:

Performance Appraisal can be done with following objectives in mind:

1. To maintain records in order to determine compensation packages, wage structure,

salaries raises, etc.
2. To identify the strengths and weaknesses of employees to place right men on right
job.
3. To maintain and assess the potential present in a person for further growth and
development.
4. To provide a feedback to employees regarding their performance and related status.
 5. To provide a feedback to employees regarding their performance and related status.
6. It serves as a basis for influencing working habits of the employees.
7. To review and retain the promotional and other training programmes.

Advantages of Performance Appraisal

It is said that performance appraisal is an investment for the company which can be justified
by following advantages:

1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion

programmes for efficient employees. In this regards, inefficient workers can be
dismissed or demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation packages
for employees. Merit rating is possible through performance appraisal. Performance
Appraisal tries to give worth to a performance. Compensation packages which
includes bonus, high salary rates, extra benefits, allowances and pre-requisites are
dependent on performance appraisal. The criteria should be merit rather than
seniority.
3. Employees Development: The systematic procedure of performance appraisal helps
the supervisors to frame training policies and programmes. It helps to analyse
strengths and weaknesses of employees so that new jobs can be designed for efficient
employees. It also helps in framing future development programmes.
4. Selection Validation: Performance Appraisal helps the supervisors to understand the
validity and importance of the selection procedure. The supervisors come to know the
validity and thereby the strengths and weaknesses of selection procedure. Future
changes in selection methods can be made in this regard.
5. Communication: For an organization, effective communication between employees
and employers is very important. Through performance appraisal, communication can
be sought for in the following ways:
a. Through performance appraisal, the employers can understand and accept
skills of subordinates.
b. The subordinates can also understand and create a trust and confidence in
superiors.
c. It also helps in maintaining cordial and congenial labour management
relationship.
 d. It develops the spirit of work and boosts the morale of employees.

All the above factors ensure effective communication.

6. Motivation: Performance appraisal 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.

Functions of Performance appraisal:

Performance appraisal has three basic functions:

(1) to provide adequate feedback to each person on his or her performance;

(2) to serve as a basis for modifying or changing behaviour toward more effective working
habits; and

(3) to provide data to managers with which they may judge future job assignments and
compensation.

Self-Managed Teams

A self-managed team is a group of employees that's responsible and accountable for all or
most aspects of producing a product or delivering a service. Traditional organizational
structures assign tasks to employees depending on their specialist skills or the functional
department within which they work. A self-managed team carries out supporting tasks,
such as planning and scheduling the workflow and managing annual leave and absence, in
addition to technical tasks. Management and technical responsibilities are typically rotated
among the team members.

Benefits of Self-Managed Teams

Self-managed teams have greater ownership of the tasks they perform and the end product
or service they deliver. Self-managed teams tend to be loss costly and more productive than
employees working within a traditional hierarchical structure because the team performs
both technical and management tasks. Team members may also fill in for each other to
cover holidays and absences. Decisions made by self-managed teams are more effective
because they're made by the people who know most about the job.

Disadvantages of Self-Managed Teams

Although a cohesive self-managed team may create a sense of trust and respect between
team members, overly cohesive teams can lead to "groupthink": Team members are more
likely to conform with team norms than raise issues that may upset other team members.
This may lead to reduced effort or stifled innovation. Teams may struggle to make the
transition from supervisor-led management to self-management, either due to lack of
interpersonal skills or poor implementation of the self-managed team concept within the
organization.

Leading a Self-Managed Team

Although self-managed teams are autonomous in terms of how they manage and carry out
their work, they still require guidance from leaders within the organizational hierarchy.
External leaders provide the link between the wider organization and the self-managed
team, empowering the team and advocating on its behalf. External leaders may struggle to
find the appropriate balance in their leadership style: Their own managers may expect them
to be more hands-on, while the team may resist perceived interference

Criteria for a Successful performance appraisal

Successful performance appraisal systems have a number of common characteristics. The

following discussion focuses on the criteria for a successful performance appraisal system:

1. Clear Objectives: A good performance appraisal should be built around unambiguous

objectives. These objectives should cover all levels and areas of the organization and reflect
the needs of each. The appraisal system should be clear in its purpose.
2. Management and employee endorsement: To be effective, the appraisal system should
be supported by the entire work force. This includes management support for possible
expenses such as additional training, employee meetings, and appraisal forms and other
materials, and staff time.
3. Flexibility: An organization must design its system with enough flexibility to adapt to any
changes that might occur.
4. Predictability: the timing of the performance appraisal and any other feedback sessions
should be predictable. For example, some organizations have an annual performance
appraisal close to the hiring anniversary date of the employee. This enables the employee to
prepare for the evaluation.
5. Performance dialogue: performance discussions between the rater and the employee are
perhaps the most critical component of a successful performance appraisal system.
6. Appraisal Form: The importance of an appropriate appraisal form should not be
overlooked. Many organizations simply adopt “standard” form that may or may not be
tailored to their goals and objectives.
7. Periodic system checks: Systematically evaluating the validity of the performance
appraisal system should be a key feature.

Performance Appraisal Methods:

1. Ranking
2. Paired Comparison
3. Forced Distribution
4. Confidential Report
5. Essay Evaluation
6. Critical Incident
7. Checklists
8. Graphic Rating Scale
9. BARS
10. Forced Choice Method
11. MBO
12. Field Review Technique
13. Performance Test

We will be discussing the important performance appraisal tools and techniques in detail.

1. Ranking Method

The ranking system requires the rater to rank his subordinates on overall performance.
This consists in simply putting a man in a rank order. Under this method, the ranking
of an employee in a work group is done against that of another employee. The relative
 position of each employee is tested in terms of his numerical rank. It may also be
done by ranking a person on his job performance against another member of the
competitive group.

Advantages of Ranking Method

i. Employees are ranked according to their performance levels.

ii. It is easier to rank the best and the worst employee.

Limitations of Ranking Method

iii. The “whole man” is compared with another “whole man” in this method. In
practice, it is very difficult to compare individuals possessing various
individual traits.
iv. This method speaks only of the position where an employee stands in his
group. It does not test anything about how much better or how much worse an
employee is when compared to another employee.
v. When a large number of employees are working, ranking of individuals
become a difficult issue.
vi. There is no systematic procedure for ranking individuals in the organization.
The ranking system does not eliminate the possibility of snap judgements.
2. Forced Distribution method

This is a ranking technique where raters are required to allocate a certain percentage
of rates to certain categories (eg: superior, above average, average) or percentiles (eg:
top 10 percent, bottom 20 percent etc). Both the number of categories and percentage
of employees to be allotted to each category are a function of performance appraisal
design and format. The workers of outstanding merit may be placed at top 10 percent
of the scale, the rest may be placed as 20 % good, 40 % outstanding, 20 % fair and 10
% fair.

Advantages of Forced Distribution

i. This method tends to eliminate raters bias

ii. By forcing the distribution according to pre-determined percentages, the
problem of making use of different raters with different scales is avoided.
 Limitations of Forced Distribution

iii. The limitation of using this method in salary administration, however, is that it
may lead low morale, low productivity and high absenteeism.

Employees who feel that they are productive, but find themselves in lower
grade(than expected) feel frustrated and exhibit over a period of time
reluctance to work.
3. Critical Incident techniques

Under this method, the manager prepares lists of statements of very effective and
ineffective behaviour of an employee. These critical incidents or events represent the
outstanding or poor behaviour of employees or the job. The manager maintains logs
of each employee, whereby he periodically records critical incidents of the workers
behaviour. At the end of the rating period, these recorded critical incidents are used in
the evaluation of the worker’s performance. Example of a good critical incident of a
Customer Relations Officer is : March 12 - The Officer patiently attended to a
customers complaint. He was very polite and prompt in attending the customers
problem.

Advantages of Critical Incident techniques

i. This method provides an objective basis for conducting a thorough discussion

of an employees performance.
ii. This method avoids recency bias (most recent incidents are too much
emphasized)

Limitations of Critical Incident techniques

iii. Negative incidents may be more noticeable than positive incidents.

iv. The supervisors have a tendency to unload a series of complaints about the
incidents during an annual performance review sessions.
v. It results in very close supervision which may not be liked by an employee.
vi. The recording of incidents may be a chore for the manager concerned, who
may be too busy or may forget to do it.
4. Checklists and Weighted Checklists
In this system, a large number of statements that describe a specific job are given.
Each statement has a weight or scale value attached to it. While rating an employee
the supervisor checks all those statements that most closely describe the behaviour of
the individual under assessment. The rating sheet is then scored by averaging the
weights of all the statements checked by the rater. A checklist is constructed for each
job by having persons who are quite familiar with the jobs. These statements are then
categorized by the judges and weights are assigned to the statements in accordance
with the value attached by the judges.

Advantages of Checklists and Weighted Checklists

i. Most frequently used method in evaluation of the employees performance.

Limitations of Checklists and Weighted Checklists

ii. This method is very expensive and time consuming

iii. Rater may be biased in distinguishing the positive and negative questions.
iv. It becomes difficult for the manager to assemble, analyze and weigh a number
of statements about the employees characteristics, contributions and
behaviours.
Performance Appraisal Interview

A performance appraisal interview is the first stage of the performance appraisal process and
involves the employee and his or her manager sitting face to face to discuss threadbare all
aspects of the employee’s performance and thrash out any differences in perception or
evaluation. The performance appraisal interview provides the employee with a chance to
defend himself or herself against poor evaluation by the manager and also gives the manager
a chance to explain what he or she thinks about the employee’s performance.

In a nutshell, the performance appraisal interview precedes the normalization process and is
subsequent to the employee filling up the evaluation form and the manager likewise doing so.
The interview is the stage where both sides debate and argue the employees’ side of the story
as well as the manager’s perception.

Objective Evaluation versus Personal Biases:

Though management theorists like to propound the benefits of objective evaluation, it is a

fact in contemporary organizations that an element of personal bias enters the evaluation.
This is evident from the studies and surveys done by HR consultants like Hewitt that point to
the employee’s dissatisfaction with the performance appraisal process as one of the main
reasons for leaving the company. To curb the incidence of biases and heuristics playing a role
in the appraisal, HR managers typically conduct orientations and trainings to both the
Managers and the Employees to sensitize them to these dangers that are sometimes inherent
in the process.

On the other hand, the employees’ should approach the process without unrealistic
expectations and expect the Manager to agree to whatever they write on the performance
evaluation form. Hence, there is a need for both sides in the interview process to approach the
same with an open mind and be as objective as possible. However, this is easier said than
done and hence organizations expend resources on making the process as transparent and
objective as possible.

The Right and Wrong Way to Approach a Performance Appraisal Interview:

The performance appraisal interview must be taken seriously and both the employee and the
manager must set aside time to go through the process. The manager cannot arbitrarily
change the time or the venue and must not approach the interview in a haphazard manner.
Despite all these injunctions, it is often the case that the manager has to be reminded about
the interview and then he or she hurriedly arranges the meeting. This is definitely the wrong
way to approach the interview. Further, the manager must make the time to go through the
employees’ self evaluation and rate the same objectively.

Though there is no right way to conduct the performance appraisal interview, it is incumbent
upon the manager to avoid the pitfalls described above. A rule of thumb would be set aside a
few days to conduct all the interviews with members of his or her team and ensure follow-ups
to the process. The follow-up is needed when the employee is not satisfied with the interview
discussion and hence requests for additional time to debate the rating. In some cases, the HR
manager may need to step in to ensure that the process is concluded to the satisfaction of the
employee and the manager.