What is a Performance Appraisal?

A performance appraisal is a regular review of an employee's job performance and overall

contribution to a company. Performance appraisal is a systematic process that evaluates an
individual employee’s performance in terms of his productivity with respect to the pre-
determined set of objectives. It is an annual activity, which gives the employee an opportunity to
reflect on the duties that were dispatched by him or her, since it involves receiving feedback
regarding their performance. It also evaluates the individual’s attitude, personality, behaviour
and stability in his job profile. There are various applications of appraisals like compensation,
performance improvement, promotion, termination, and much more. Various performance
appraisal methods are followed by organisations to ensure fair appraisals to their employees.

Objectives of Performance Appraisal

Performance Appraisal can be done with following objectives in mind:
1. To assist the managers to observe their sub-ordinates more closely and to do a better job
coaching.
2. To maintain records in order to determine compensation packages, wage structure,
salaries raises, etc.
3. To identify the strengths and weaknesses of employees to place right men on right job.
4. To maintain and assess the potential present in a person for further growth and
development.
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 programs.
Who does the appraisal?
Performance appraisal is an important human resource management activity which involves both
the line managers and human resource managers. Generally speaking, the human resource
manager designs the performance appraisal system, train the line managers in the use of the
system and maintain the records. The line managers do the evaluation of the employees under
them and communicate the results to their employees.
 For performance to be more than merely a paper work exercise conducted every year as a ritual,
the top management must encourage its use and use it to make reward decisions such as
promotions.
Performance Appraisal Tools and Techniques
Following are the tools used by organizations for Performance Appraisals of their employees.
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.
2. Behaviorally Anchored Rating Scale
This is latest a modern appraisal technique, which has been developed recently. It is claimed that
the Behaviorally Anchored Rating Scale method is one of the most equitable technique
compared to other methods of appraisals. It is a combination of narrative techniques like essay
evaluation and quantifiable techniques like rating scale. It is comparatively more expensive than
other techniques, but it usually guarantees precision and effectiveness.
3. Forced Distribution method
This is a ranking technique where raters are required to allocate a certain percentage of rates to
certain categories (e.g. superior, above average, average) or percentiles (e.g. 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.
4. Critical Incident techniques
Under this method, the manager prepares lists of statements of very effective and ineffective
behavior of an employee. These critical incidents or events represent the outstanding or poor
behavior of employees or the job. The manager maintains logs of each employee, whereby he
periodically records critical incidents of the worker’s behavior. At the end of the rating period,
these recorded critical incidents are used in the evaluation of the worker’s performance.
5. 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 behavior 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.
5. 360 Degree Feedback:
This method involves getting a feedback about the employee from every individual who interacts
with him during his working hours. They can be his peers, his subordinates, his superiors,
customers who have interacted with him and even he himself would be interviewed about his
perception of himself and his duties at the workplace. This performance appraisal method would
be very useful because the best way to review an employee’s overall performance and get an
insight about his behavior, personality and attitude this is the best method to follow. Although it
is time consuming, but it is cost effective and precise. It keeps biases out of play due to multiple
opinions, so that the review isn’t affected by biases of one person.

Performance Appraisal Biases

Managers commit mistakes while evaluating employees and their performance. Biases and
judgment errors of various kinds may spoil the performance appraisal process. Bias here refers to
inaccurate distortion of a measurement. These include:
1. First Impression (primacy effect): Raters form an overall impression about the subject
on the basis of some particular characteristics identified by them. The identified qualities
and features may not provide adequate base for appraisal.
2. Halo Effect: The individual’s performance is completely appraised on the basis of a
perceived positive quality, feature or trait. In other words, this is the tendency to rate a
man uniformly high or low in other traits if he is extra-ordinarily high or low in one
particular trait. If a worker has few absences, his supervisor might give him a high rating
in all other areas of work.
3. Horn Effect: The individual’s performance is completely appraised on the basis of a
negative quality or feature perceived. This results in an overall lower rating than may be
warranted. “He is not formally dressed up in the office. He may be casual at work too!”.
4. Excessive Stiffness or Lenience: Depending upon the raters own standards, values and
physical and mental makeup at the time of appraisal, an employee may be rated very
strictly or leniently. Some of the managers are likely to take the line of least resistance
and rate people high, whereas others, by nature, believe in the tyranny of exact
assessment, considering more particularly the drawbacks of the individual and thus
making the assessment excessively severe. The leniency error can render a system
ineffective. If everyone is to be rated high, the system has not done anything to
differentiate among the employees.
5. Central Tendency: Appraisers rate all employees as average performers. That is, it is an
attitude to rate people as neither high nor low and follow the middle path. For example, a
professor, with a view to play it safe, might give a class grade near the equal to B,
regardless of the differences in individual performances.
6. Personal Biases: The way a supervisor feels about each of the individuals working under
him - whether he likes or dislikes them - as a tremendous effect on the rating of their
performances. Personal Bias can stem from various sources as a result of information
obtained from colleagues, considerations of faith and thinking, social and family
background and so on.
7. Spillover Effect: The present performance is evaluated much on the basis of past
performance. “The person who was a good performer in distant past is assured to be okay
at present also”.
8. Regency Effect: Rating is influenced by the most recent behavior ignoring the
commonly demonstrated behaviors during the entire appraisal period.
Conclusion
Appraisals are the means to an employee’s career development. Therefore, effective performance
appraisal methods not only help the employee grow, but also the organization. If the employee is
given feedback regularly and frequently, the organization will be at the receiving end of the
profit too. Performance reviews are important because they help identify and set goals for the
employee, recognize performance over time, guide progress, identify the problem areas or
weaknesses, improve performance and discuss career development in the company. Companies
should give promotions and appraisals frequently because it keeps the employees motivated to
perform better, thereby maximizing the efficiency of the employee, and the productivity of the
company.

References
1. Michael A. (2006) Human Resource Management 10th Edition, London: Kogan page ltd.
2. Noe R.A, Hollenbeck J.R, Gernhart B.,Wright P.M, (2010) Human Resource
Management(gaining a competitive advantage, New York: Mc Graw Hill
3. Saleemi N.A (2009) Personnel management simplified, Nairobi: Saleemi publications ltd.