CHAPTER-I

INTRODUCTION
 CHAPTER-I

INTRODUCTION OF THE STUDY

Introduction

Performance Appraisal is defined as the process of assessing the performance and progress of an
employee or a group of employees on a given job and his / their potential for future development.
It consists of all formal procedures used in working organizations and potential of employees.
According to Flippo, “Performance Appraisal is the systematic, periodic and an important rating
of an employee’s excellence in matters pertaining to his present job and his potential for a better
job.”

Human Resource Or personnel management, in the sense of getting things done through people,
is an essential part of every manager’s responsibility, but many organizations find it
advantageous to establish a specialist division to provide an expert service dedicated to ensuring
that the human resource function is performed efficiently.

Performance evaluation or appraisal is the process of deciding how employees do their job.
Performance refers to the degree of accomplishment of the task that makeup an individual’s job.
It indicates how well an individual is fulfilling a job requirement often the term is confused with
efforts, which means energy expended and used in a wrong sense. Performance is always
measured in terms of results.

CHARACTERISTICS OF PERFORMANCE APPRAISAL

1. Performance Appraisal is a process.

2. It is the systematic examination of the strengths and weakness of an employee in terms of

his job.
3. It is scientific and objective study. Formal procedures are used in the study.

4. It is an ongoing and continuous process wherein the evaluations are arranged periodically
according to a definite plan.

5. The main purpose of Performance Appraisal is to secure information necessary for

making objective and correct decision an employee.

PROCESS OF PERFORMANCE APPRAISAL

The process of performance appraisal:

1. Establishing performance standards

2. Communicating the Standards

3. Measuring Performance

4. Comparing the actual with the standards

5. Discussing the appraisal

6. Taking Corrective Action

IMPORTANCE OF EMPLOYEE PERFORMANCE APPRAISAL

Importance and Purpose Performance Appraisal has been considered as the most significant an
indispensable tool for an organization, for an organization, for the information it provides is
highly useful in making decisions regarding various personnel aspects such as promotion and
merit increases. Performance measures also link information gathering and decision making
processes which provide a basis for judging the effectiveness of personnel sub- divisions such as
recruiting, selection, training and compensation. Accurate information plays a vital role in the
organization as a whole. They help in finding out the weaknesses in the primary areas.
Formal Performance Appraisal plans are designed to meet three needs, one of the organization
and the other two of the individual namely:

They provide systematic judgments to back up salary increases, transfers, demotions or

terminations.

They are the means of telling a subordinate how he is doing and suggesting needed changes in
his behavior, attitudes, skills or job knowledge. They let him know where he stands with the
Boss.

Superior uses them as a base for coaching and counseling the individual.

On the basis of merit rating or appraisal procedures, the main objectives of Employee Appraisal
are:

1. To enable an organization to maintain an inventory of the number and quality of all

managers and to identify and meet their training needs and aspirations.

2. To determine increment rewards and to provide reliable index for promotions and
transfers to positions of greater responsibility.

3. To suggest ways of improving the employee s performance when he is not found to be up

to the mark during the review period.

4. To identify training and development needs and to evaluate effectiveness of training and
development programmes.

5. To plan career development, human resource planning based potentials.

METHODS OF PERFORMANCE APPRAISAL

The foregoing list of major program pitfalls represents a formidable challenge, even considering
the available battery of appraisal techniques. But attempting to avoid these pitfalls by doing
away with appraisals themselves is like trying to solve the problems of life by committing
suicide. The more logical task is to identify those appraisal practices that are (a) most likely to
achieve a particular objective and (b) least vulnerable to the obstacles already discussed.

Before relating the specific techniques to the goals of performance appraisal stated at the outset
of the article, I shall briefly review each, taking them more or less in an order of increasing
complexity. The best-known techniques will be treated most briefly.

ESSAY APPRAISAL

In its simplest form, this technique asks the rater to write a paragraph or more covering an
individual's strengths, weaknesses, potential, and so on. In most selection situations, particularly
those involving professional, sales, or managerial positions, essay appraisals from former
employers, teachers, or associates carry significant weight.

GRAPHIC RATING SCALE

This technique may not yield the depth of an essay appraisal, but it is more consistent and
reliable. Typically, a graphic scale assesses a person on the quality and quantity of his work (is
he outstanding, above average, average, or unsatisfactory?) and on a variety of other factors that
vary with the job but usually include personal traits like reliability and cooperation. It may also
include specific performance items like oral and written communication.

FIELD REVIEW

The field review is one of several techniques for doing this. A member of the personnel or
central administrative staff meets with small groups of raters from each supervisory unit and
goes over each employee's rating with them to (a) identify areas of inter-rater disagreement,
(b)help the group arrive at a consensus, and (c) determine that each rater conceives the standards
similarly. .
FORCED-CHOICE RATING

Like the field review, this technique was developed to reduce bias and establish objective
standards of comparison between individuals, but it does not involve the intervention of a third
party.

MANAGEMENT BY OBJECTIVES

To avoid, or to deal with, the feeling that they are being judged by unfairly high standards,
employees in some organizations are being asked to set - or help set - their own performance
goals. Within the past five or six years, MBO has become something of a fad and is so familiar
to most managers that I will not dwell on it here.

RANKING METHODS

For comparative purposes, particularly when it is necessary to compare people who work for
different supervisors, individual statements, ratings, or appraisal forms are not particularly
useful. Instead, it is necessary to recognize that comparisons involve an overall subjective
judgment to which a host of additional facts and impressions must somehow be added. There is
no single form or way to do this. The best approach appears to be a ranking technique involving
pooled judgment. The two most effective methods are alternation ranking and paired comparison
ranking.

1. Alternation ranking:

Ranking of employees from best to worst on a trait or traits is another method for evaluating
employees. Since it is usually easier to distinguish between the worst and the best employees
than to rank them, an alternation ranking method is most popular. Here subordinates to be rated
are listed and the names of those not well enough to rank are crossed. Then on a form as shown
below, the employee who is highest on the characteristic being measured and the one who is the
lowest are indicated. Then chose the next highest and the next lowest, alternating between
highest and lowest until all the employees to be rated have been ranked.
2. Paired-comparison ranking:

This technique is probably just as accurate as alternation ranking and might be more so. But with
large numbers of employees it becomes extremely time consuming and cumbersome.

Both ranking techniques, particularly when combined with multiple rankings (i.e., when two or
more people are asked to make independent rankings of the same work group and their lists are
averaged), are among the best available for generating valid order-of-merit rankings for salary
administration purposes.

ASSESSMENT CENTERS

So far, we have been talking about assessing past performance. In any placement decision and in
promotion decisions, some prediction of future performance is necessary.

360 DEGREE FEEDBACKS

Many firms have expanded the idea of upward feedback into what the call 360-degree feedback.
The feedback is generally used for training and development, rather than for pay increases. Most
360 Degree Feedback system contains several common features. Appropriate parties – peers,
supervisors, subordinates and customers, for instance – complete survey, questionnaires on an
individual. 360 degree feedback is also known as the multi-rater feedback, whereby ratings are
not given just by the next manager up in the organizational hierarchy, but also by peers and
subordinates. Appropriates customer ratings are also included, along with the element of self-
appraisal. Once gathered in, the assessment from the various quarters are compared with one
another and the results communicated to the manager concerned.

Another technique that is useful for coaching purposes is, of course, MBO. Like the critical
incident method, it focuses on actual behaviour and actual results, which can be discussed
objectively and constructively, with little or no need for a supervisor to "play God."
ADVANTAGES

Instead of assuming traits, the MBO method concentrates on actual outcomes. If the employee
meets or exceeds the set objectives, then he or she has demonstrated an acceptable level of job
performance. Employees are judged according to real outcomes, and not on their potential for
success, or on someone's subjective opinion of their abilities.

The guiding principle of the MBO approach is that direct results can be observed easily. The
MBO method recognizes the fact that it is difficult to neatly dissect all the complex and varied
elements that go to make up employee performance.

MBO advocates claim that the performance of employees cannot be broken up into so many
constituent parts, but to put all the parts together and the performance may be directly observed
and measured.

DISADVANTAGES

This approach can lead to unrealistic expectations about what can and cannot be reasonably
accomplished. Supervisors and subordinates must have very good "reality checking" skills to use
MBO appraisal methods. They will need these skills during the initial stage of objective setting,
and for the purposes of self-auditing and self-monitoring.

Variable objectives may cause employee confusion. It is also possible that fluid objectives may
be distorted to disguise or justify failures in performance.

BENEFITS OF PERFORMANCE APPRAISALS

• Measures an employee’s performance.

• Helps in clarifying, defining, redefining priorities and objectives.

• Motivates the employee through achievement and feedback.

• Facilitates assessment and agreement of training needs.

• Helps in identification of personal strengths and weaknesses.

• Plays an important role in Personal career and succession planning.

• Clarifies team roles and facilitates team building.

• Plays major role in organizational training needs assessment and analysis.

• Improves understanding and relationship between the employee and the reporting
manager and also helps in resolving confusions and misunderstandings.

• Plays an important tool for communicating the organization’s philosophies, values, aims,
strategies, priorities, etc among its employees.

• Helps in counselling and feedback.

RATING ERRORS IN PERFORMANCE APPRAISALS

Performance appraisals are subject to a wide variety of inaccuracies and biases referred to as
'rating errors'. These errors can seriously affect assessment results. Some of the most common
rating errors are: -

Leniency or severity: - Leniency or severity on the part of the rater makes the assessment
subjective. Subjective assessment defeats the very purpose of performance appraisal. Ratings are
lenient for the following reasons:

a) The rater may feel that anyone under his or her jurisdiction who is rated
unfavourably will reflect poorly on his or her own worthiness.

b) One may feel that a derogatory rating will be revealed to the rate to detriment the
relations between the rater and the ratee.

c) One may rate leniently in order to win promotions for the subordinates and
therefore, indirectly increase his/her hold over him.
Central tendency: - This occurs when employees are incorrectly rated near the average or
middle of the scale. The attitude of the rater is to play safe. This safe playing attitude stems from
certain doubts and anxieties, which the raters have been assessing the rates.

Halo error: - A halo error takes place when one aspect of an individual's performance influences
the evaluation of the entire performance of the individual. The halo error occurs when an
employee who works late constantly might be rated high on productivity and quality of output as
well ax on motivation. Similarly, an attractive or popular personality might be given a high
overall rating. Rating employees separately on each of the performance measures and
encouraging raters to guard against the halo effect are the two ways to reduce the halo effect.

Rater effect: -This includes favouritism, stereotyping, and hostility. Extensively high or low
score are given only to certain individuals or groups based on the rater's attitude towards them
and not on actual outcomes or behaviours; sex, age, race and friendship biases are examples of
this type of error.

Primacy and Regency effects: - The rater's rating is heavily influenced either by behaviour
exhibited by the ratee during his early stage of the review period (primacy) or by the outcomes,
or behaviour exhibited by the ratee near the end of the review period (regency). For example, if a
salesperson captures an important contract/sale just before the completion of the appraisal, the
timing of the incident may inflate his or her standing, even though the overall performance of the
sales person may not have been encouraging. One way of guarding against such an error is to ask
the rater to consider the composite performance of the rate and not to be influenced by one
incident or an achievement.
Performance dimension order: - Two or more dimensions on a performance instrument follow
each other and both describe or rotate to a similar quality. The rater rates the first dimensions
accurately and then rates the second dimension to the first because of the proximity. If the
dimensions had been arranged in a significantly different order, the ratings might have been
different.

Spill-over effect: - This refers lo allowing past performance appraisal rating lo unjustifiably
influence current ratings. Past ratings, good or bad, result in similar rating for current period
although the demonstrated behaviour does not deserve the rating, good or bad.